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MANAGEMENT MUST INNOVATE, OR DIE
By John Collins (slightly abridged)


Ask any employee who runs the firm they work for and they will probably tell you it's the chief executive or some other member of senior management.

What's more, this small group of management patriarchs are using tools of management invented decades ago. Those tools are now poorly suited to the challenges faced in a world where the only constant is change.

As a result, managers need to throw out the traditional paradigm of top-down control and focus entirely on making their staff, and ultimately their organisation, as innovative as possible.

That's the view of Prof Gary Hamel, director of the Management Innovation Lab at the London School of Business and a highly respected management author and consultant.

Hamel believes management faces three key tasks in the current environment: adapting to change; implementing innovative business models and management practices; and ensuring their employees are fully engaged.

"The laws of management are not eternal," Hamel told executives at one of his rare European speaking engagements in Stockholm last month.

"The way we have managed for the last 100 years is now groaning under the strain of a new set of challenges. Why is management in the 21st century so like management in the 20th century?"

Given the fact that mega-successful organisations such as Google typically tear up the management rulebook, Hamel wonders are we seeing the end of management. Not surprisingly his answer is no, but current accepted management practices need to be totally rethought and redesigned.

Based on a study of businesses over the last century, Hamel has concluded that large shifts in competitive advantage are only delivered by major innovations in the practice of management.

Innovations in areas such as product design and operational efficiency can be quickly copied by competitors. A step up from that is business model innovation which is how he characterises Apple's success with the iPod. "That success has very little to do with a physical product," says Hamel. "It has instead to do with some very smart lawyers - the invention of a new digital rights management system and their ability to get the entire music industry to sign up to it."

Hamel likes to draw on examples from other disciplines such as biology, political science and economics rather than management. In Stockholm he suggested that it is military history that can shine a light on why some organisations get a "persistent and asymmetric competitive advantage".

Rather than advances in military technology, it has been changes in management that have allowed certain armies and naval services to become successful for long periods. Hamel's historic examples include the British invention of the regimental structure and Napoleon's ability to mobilise the citizens of France to fight for their own country.

"Most of us as managers, we don't think about management as a technology that is just as open to innovation as anything else in our organisation," he says.

Hamel's speech in Sweden was based on his upcoming book The Future of Management to be published in September this year. In it, he illustrates his theories with examples of well-known businesses he believes are getting it right or wrong.

Hamel suggests that Bill Gates made a major error appointing himself as chief software architect when he stepped down as chief executive."Given that title, what does that tell people about the organisation? If I have an idea for fundamentally new business model or software architecture, whose permission am I going to have to get to invest and experiment with that? It's clear all the new ideas have to go through Bill Gates," says Hamel.

It is as a direct result of this style of management that Microsoft initially dismissed the importance of the internet, the move to software as an ad-supported service and the impact of search engines.

In contrast, Google - one of Hamel's stars - is organised into small autonomous teams that have a minimum of supervision. Engineers are also entitled to spend 20 per cent of their time on projects of their own choosing. This approach has already led to the introduction of new products and services including Google News, Google Suggest, and social networking site Orkut.

"I'm not joking when I say that you need a process that generates thousands of new ideas every year," says Hamel. "The chance of finding that next big idea is an arithmetic probability based on the number of ideas you generate in the first place."

WL Gore, the maker of the Gore-Tex waterproof fabric and other industrial products, is an extreme embodiment of Hamel's new management principles. The company has no hierarchy or corporate titles. Ten per cent of the staff are nominated as leaders by their peers.

One of the firm's principles is that no one can order anyone else to do something and every staff member can spend 10 per cent of their time on a personal project. While it may sound like a recipe for disaster, Gore counts demanding companies like Nike and Procter & Gamble amongst its customers and has had 50 years of increasing earnings.

"Big companies . . . think if you let people choose what they want to work on you are going to have chaos. But it turns out people are pretty smart. They know that companies are there to make products and to satisfy customers, so generally they chose to work on things that add value," says Hamel.

Hamel has written best selling management tomes including Leading the Revolution, which introduced the concept of "core competency", and Competing for the Future.

© 2007 The Irish Times