My interview with Gary Hamel, on the "management revolution"
1
G ARY Hamel’s fa- vourite word must be “revolu- tion”. The title of one of his best- sellers on corpo- rate transforma- tion, where he urges managements to encourage “insur- gents” is Leading The Revolution. One of its chapters is titled “Go Ahead: Revolt!” When he signs his latest book, he in- scribes: “Welcome to the management rev- olution!” For this management guru, who has been rated as the most influential busi- ness thinker by the Wall Street Journal, mere incremental change is not enough at this time in history. He believes we have al- ready moved beyond the “knowledge economy” to what he calls the “creative economy”. For companies, this means change must be deep and dramatic. And it must start at the top. “With all of my heart, I believe that over the next decade, 20 years at most, we will see a revolution in how organisations are led and managed that is as profound as when we went from an agrarian society to an industrial society,” he says, during our conversation at the Four Seasons Ho- tel. “The analogy I use is this: for the aver- age person who was alive in 1900, it would be hard to imagine a company that looked like the Ford Motor company, which took in iron ore at one end and Model T came out at the other end, 500,000 cars a year. There was no basis of human experience which suggested it could be done.” That’s the dimension of the change we’re about to witness, he says. And what it needs, above all, is a revolution in man- agement. A livewire character bustling with ide- as, Dr Hamel was the keynote speaker at the SIM Annual Management Lecture in August. He has a new book out, entitled What Matters Now. One of its main mes- sages is that most current forms of man- agement are at best, hopelessly obsolete and at worst, dangerous. “Management, or the way we lead, was invented 100 years ago to drive the varia- bility out of human activity,” he says. “Be- cause if you want to build an airliner or an automobile or a 20 nanometer chip, you have to do things with amazing precision, exactly the same way, over and over again. So we had to turn human beings into ma- chines. It was an extraordinary accom- plishment in social engineering. We suc- ceeded in doing that. Overall it dramatical- ly improved global prosperity.” “But I don’t think that is the formula – either the process or the organisation – that will create most of the wealth in the future.” For the management of the future, Dr Hamel takes his inspiration from Silicon Valley, California, which has been perhaps the world’s most celebrated hotbed of cor- porate innovation and where he also hap- pens to live, even though he is on the facul- ty of London Business School. He believes the ecosystem of Silicon Valley, and the management methods practised there contain valuable lessons for companies everywhere. “Silicon Valley is basically three mar- kets,” he explains. “It’s a market for ideas, a market for experimental capital and a market for talent. There is no CEO in Sili- con Valley who says ‘next year we will in- vest this much in biotech, this much in the social web, this much in whatever’. The money simply flows to the best ideas. And I think that in the Web economy, tra- ditional top-down organisations are going to have a hell of a hard time. They are just not fast enough, flexible enough or mallea- ble enough.” “The challenge for many organisa- tions,” he suggests, “is that they have to create something that looks more like Sili- con Valley.” He gives an example of one illustrious company (from Seattle, not Silicon Valley) that lost the plot and fell mightily from grace as a result. “Think about Microsoft which was the richest company in the world,” he says. “They had billions of dol- lars in cash. They could have invested in anything. They were spending about 10 times as much on R&D as Apple. And yet they lost.” “They have been late to every major new trend in software in the last 15 years. They were late to the Web, late to Search, late to Software as a Service, late to the Cloud. How, with all that cash, could they manage to miss so much? “The answer is that with all that cash, Microsoft became an enormous bloated bureaucracy where the responsibility for setting strategy and direction was concen- trated at the top, among people who had all their emotional equity invested in the old model.” The old model – which represents prob- ably the majority of companies in the world today – has one fatal flaw, he points out. “I believe that the reason why large cen- tralised organisations will miss the future is that they have given a small number of people at the top the power to hold hos- tage the organisation’s capacity to change to their own personal willingness to adapt and change. “Or to put it another way, the simplest reason organisations fail to see the future is that their leaders fail to write off their own depreciating intellectual capital. They have a view of customers and tech- nology that’s out of date and they know it’s out of date. But they hang on to the past until the future overtakes them.” Dr Hamel concedes however that, espe- cially in rapidly changing industries, many companies face the genuine challenge of having to manage a lucrative legacy busi- ness, while at the same time moving into new areas. “It’s true,” he says. “When you are mak- ing money from your core business, any- thing new is dilutive to your current suc- cess. So why would anyone do that? Think of Intel, which has been a leader in semi- conductors, and yet they have a negligible share in chips for mobile devices. And that’s not even much of a stretch from the one to the other.” But he has a response to the challenges such companies face: “First, you need a leadership that can distinguish between something that might be a fad and something that is a wave of history. Mobile devices, or to take your industry, media, digital media and having consumers control their own me- dia experience are tides of history. You can debate when they will overtake you, but they will at some point. “Or take universities. Traditional uni- versities are built first, around a geographi- cal locus. The idea is ‘people come to us’ and so there is all that investment in bricks and mortar. Well, that doesn’t make so much sense anymore. Two, they are built on the idea that they own their faculty. Well, with a lot of faculty mem- bers, their own brand is bigger than that of their institutions. They could go to an online platform like Prospero, put up their courses for thousands of people all over the world and make the money, if they like. “Third, they have an assumption that they have a monopoly on granting de- grees. That can change. One can imagine in the future an employer saying to a po- tential recruit: ‘I can see you have taken these 20 classes and that I can see your grades and that’s good enough for me.’ Employers may not care so much which university you went to, so long as you are competent.” Dr Hamel believes that corporate lead- ers have a duty to look at emerging trends and to resist denying or discounting them. “You should in fact be amplifying them,” he says. “You should be asking: where is this taking us? Where does this lead? There is a human tendency for denial. As I’ve often said, companies don’t miss the future because it’s unpredictable, they miss the future because it’s uncomforta- ble.” So what specifically should corporate leaders do to “future-proof” their organisa- tions? “One, as a leader, you should take a few weeks a year and go wherever you need to go in the world to get a first-per- son experience of the future. It’s probably not where you are sitting right now. You need to go wherever it is, and see how things are changing.” “Two, if you want to avoid being held hostage by the past, you cannot give the old guard full control over resource alloca- tion. Because they will always want to in- vest in what they know. “Think of it this way: Silicon Valley has thousands of angel investors, hundreds of venture capitalists. What would happen if there was only one venture capital compa- ny in Silicon Valley and it was led by Bill Gates? A lot of the new companies we have today would never exist. “If you look at the recent history of Mi- crosoft, Bill Gates was a sceptic on the Web, on the e-reader, on digital music. In every single case when he had the oppor- tunity to invest early and support it, he didn’t. It’s not so much his fault, because these were new things and maybe he didn’t understand them. The point is that in a lot of large organisations, resource al- location works the same way as it worked in the Soviet Union. People have to fight for resources through several layers of management and then finally, somebody at the top says: ‘We’re going to invest, or we’re not going to invest.” “There should also be no monopoly on the allocation of capital. If I am a young employee and I have a new idea, there should be multiple places I can go to in an organisation to compete for funding. Be- cause if I can only go to one person and that person’s biases are all grounded in the past, the company will always miss the future. What you typical- ly find happening today is that by the time an op- portunity or problem is so big that it becomes ob- vious to the CEO that the company must invest in it, it’s too late. If Intel now goes: ‘Wow, there are going to be a lot more mobile devices in the world than PCs, and they’re going to get smart- er and smarter, and this is really the future,’ – by the time it becomes obvi- ous to the person at the top, the game is over.” And it’s already over for Intel, he suggests: “ARM Holdings has won. They’re the British com- pany that does most of the chip design for these mobile devices.” Lesson Three for fu- ture-minded CEOs, ac- cording to Dr Hamel, is that spending big is not always smart. Low-cost experiments are likely to get better results. “There is of- ten a mistaken assumption that the way you win the future is to bet bigger than everybody else rather than try things more cheaply than everybody else. Google’s CEO Eric Schmidt put it very nicely, he told me once, our goal at Google is to try more things more cheaply than anybody else. Most of them will fail, but a few will work. That’s the mindset to have. If you look at the companies that grew up on the Web, all of them started out dirt-poor. Some had a few thousand dollars from friends and family, or a few hundred thou- sand.” For Dr Hamel, revolutionising man- agement is not just an issue for compa- nies, it’s something governments need to focus on as well. “If you go around the world, you will hear governments say: ‘We need to up- grade skills, we need more venture capital, we need better links between universities and companies, we need better infrastruc- ture, we need to be more conducive to in- ward investment’. What you never hear them say is, we need to have a revolution in how we manage.” “I believe that the single biggest impedi- ment to organisational performance to- day is management itself. It is the top down, hierarchical, disempowering, back- ward looking, incrementalist, inertial tend- ences that are imposed upon organisa- tions. They’re not inherently wrong, they were just designed to solve a different problem of how do we do the same things over and over again with greater efficien- cy, rather than how do we reinvent our- selves, how do we create the kinds of prod- ucts and services that stand out in an era of hyper competition, how do we get peo- ple to bring the gifts of their imagination and creativity to work everyday so we can compete in the creative economy.” Indeed, reinventing management should be a national competitiveness is- sue, he suggests. And the countries that practised it – even if not as a matter of de- liberate government policy – have reaped rich dividends. “There is a reason Britain and the United States led the industrial revolution and were the most pow- erful economies of the 19th and 20th century,” he points out. “It wasn’t be- cause they had nat- ural resources – Britain certainly didn’t. But they were pioneers in so- cial innovation. If you go back and look at all the things that got in- vented in this area: work design, pay for performance, capital budgeting, strategic planning, divisionalisation – almost all of those were invented in Britain and the US, some in Germany and later, some in Japan. I don’t think over the long term, an economy or coun- try can be a superpower if its institutions are run along the lines of management 1.0 rather than management 2.0.” Dr Hamel’s passion for the “manage- ment revolution” has led him to create a Web-portal called the Management Inno- vation Exchange (www.managementex- change.com), which showcases manage- ment innovations from around the world. “We’re using crowd-sourcing to invent new social technologies,” he says. “Any- body can go there and learn from from it. And it’s free.” [email protected] .PHOTO: AZIZ HUSSIN/ST Champion of the management revolution Management guru Gary Hamel talks to Vikram Khanna about why companies need a revolution at the top ‘The simplest reason organisations fail to see the future is that their leaders fail to write off their own depreciating intellectual capital. They have a view of customers and technology that’s out of date and they know it’s out of date. But they hang on to the past until the future overtakes them.’ Gary P Hamel Management expert, educator and author Born: 1954 Ph.D, Ross School of Business, University of Michigan, 1990 Since 1983: Visiting Professor of Strategic and International Management, London Business School Has also served as Visiting Professor of International Business at University of Michigan and Harvard Business School Consulted for companies including: General Electric, Time Warner, Nestle, Shell, Best Buy, Procter & Gamble, 3M, IBM, and Microsoft. Author of books: Competing for the Future (with C.K. Prahalad, 1996); Leading the Revolution (2000); The Future of Management (2007); What Matters Now (2012) CEO, Management Innovation Exchange, an online portal featuring progressive and innovative management practices from around the world 10 the raffles conversation THE BUSINESS TIMES WEEKEND SATURDAY/SUNDAY, OCTOBER 6-7, 2012 THE BUSINESS TIMES WEEKEND SATURDAY/SUNDAY, OCTOBER 6-7, 2012 the raffles conversation 11
-
Upload
vikram-khanna -
Category
Documents
-
view
46 -
download
1
description
"The single biggest impediment to organisational performance is management itself."
Transcript of My interview with Gary Hamel, on the "management revolution"
GARY Hamel’s fa-vourite wordmust be “revolu-tion”. The title ofone of his best-sellers on corpo-rate transforma-tion, where he
urges managements to encourage “insur-gents” is Leading The Revolution. One ofits chapters is titled “Go Ahead: Revolt!”When he signs his latest book, he in-scribes: “Welcome to the management rev-olution!”
For this management guru, who hasbeen rated as the most influential busi-ness thinker by the Wall Street Journal,mere incremental change is not enough atthis time in history. He believes we have al-ready moved beyond the “knowledgeeconomy” to what he calls the “creativeeconomy”. For companies, this meanschange must be deep and dramatic. And itmust start at the top.
“With all of my heart, I believe thatover the next decade, 20 years at most, wewill see a revolution in how organisationsare led and managed that is as profoundas when we went from an agrarian societyto an industrial society,” he says, duringour conversation at the Four Seasons Ho-tel. “The analogy I use is this: for the aver-age person who was alive in 1900, it wouldbe hard to imagine a company that lookedlike the Ford Motor company, which tookin iron ore at one end and Model T cameout at the other end, 500,000 cars a year.There was no basis of human experiencewhich suggested it could be done.”
That’s the dimension of the changewe’re about to witness, he says. And whatit needs, above all, is a revolution in man-agement.
A livewire character bustling with ide-as, Dr Hamel was the keynote speaker atthe SIM Annual Management Lecture inAugust. He has a new book out, entitledWhat Matters Now. One of its main mes-sages is that most current forms of man-agement are at best, hopelessly obsoleteand at worst, dangerous.
“Management, or the way we lead, wasinvented 100 years ago to drive the varia-bility out of human activity,” he says. “Be-cause if you want to build an airliner or anautomobile or a 20 nanometer chip, youhave to do things with amazing precision,exactly the same way, over and over again.So we had to turn human beings into ma-chines. It was an extraordinary accom-plishment in social engineering. We suc-ceeded in doing that. Overall it dramatical-ly improved global prosperity.”
“But I don’t think that is the formula –either the process or the organisation –that will create most of the wealth in thefuture.”
For the management of the future, DrHamel takes his inspiration from SiliconValley, California, which has been perhapsthe world’s most celebrated hotbed of cor-porate innovation and where he also hap-pens to live, even though he is on the facul-ty of London Business School. He believesthe ecosystem of Silicon Valley, and themanagement methods practised therecontain valuable lessons for companieseverywhere.
“Silicon Valley is basically three mar-kets,” he explains. “It’s a market for ideas,a market for experimental capital and a
market for talent. There is no CEO in Sili-
con Valley who says ‘next year we will in-
vest this much in biotech, this much in
the social web, this much in whatever’.
The money simply flows to the best ideas.
And I think that in the Web economy, tra-
ditional top-down organisations are going
to have a hell of a hard time. They are just
not fast enough, flexible enough or mallea-
ble enough.”
“The challenge for many organisa-
tions,” he suggests, “is that they have to
create something that looks more like Sili-
con Valley.”
He gives an example of one illustrious
company (from Seattle, not Silicon Valley)
that lost the plot and fell mightily from
grace as a result. “Think about Microsoft
which was the richest company in the
world,” he says. “They had billions of dol-
lars in cash. They could have invested in
anything. They were spending about 10
times as much on R&D as Apple. And yet
they lost.”
“They have been late to every major
new trend in software in the last 15 years.
They were late to the Web, late to Search,
late to Software as a Service, late to the
Cloud. How, with all that cash, could they
manage to miss so much?
“The answer is that with all that cash,
Microsoft became an enormous bloated
bureaucracy where the responsibility for
setting strategy and direction was concen-
trated at the top, among people who had
all their emotional equity invested in the
old model.”
The old model – which represents prob-
ably the majority of companies in the
world today – has one fatal flaw, he points
out.
“I believe that the reason why large cen-
tralised organisations will miss the future
is that they have given a small number of
people at the top the power to hold hos-
tage the organisation’s capacity to change
to their own personal willingness to adapt
and change.
“Or to put it another way, the simplestreason organisations fail to see the futureis that their leaders fail to write off theirown depreciating intellectual capital.They have a view of customers and tech-nology that’s out of date and they knowit’s out of date. But they hang on to thepast until the future overtakes them.”
Dr Hamel concedes however that, espe-cially in rapidly changing industries, many
companies face the genuine challenge ofhaving to manage a lucrative legacy busi-ness, while at the same time moving intonew areas.
“It’s true,” he says. “When you are mak-ing money from your core business, any-thing new is dilutive to your current suc-cess. So why would anyone do that? Thinkof Intel, which has been a leader in semi-conductors, and yet they have a negligible
share in chips for mobile devices. Andthat’s not even much of a stretch from theone to the other.”
But he has a response to the challengessuch companies face:
“First, you need a leadership that candistinguish between something thatmight be a fad and something that is awave of history. Mobile devices, or to takeyour industry, media, digital media and
having consumers control their own me-dia experience are tides of history. Youcan debate when they will overtake you,but they will at some point.
“Or take universities. Traditional uni-versities are built first, around a geographi-cal locus. The idea is ‘people come to us’and so there is all that investment inbricks and mortar. Well, that doesn’tmake so much sense anymore. Two, theyare built on the idea that they own theirfaculty. Well, with a lot of faculty mem-bers, their own brand is bigger than thatof their institutions. They could go to anonline platform like Prospero, put up theircourses for thousands of people all overthe world and make the money, if theylike.
“Third, they have an assumption thatthey have a monopoly on granting de-grees. That can change. One can imaginein the future an employer saying to a po-tential recruit: ‘I can see you have takenthese 20 classes and that I can see yourgrades and that’s good enough for me.’Employers may not care so much whichuniversity you went to, so long as you arecompetent.”
Dr Hamel believes that corporate lead-ers have a duty to look at emerging trendsand to resist denying or discounting them.“You should in fact be amplifying them,”he says. “You should be asking: where isthis taking us? Where does this lead?There is a human tendency for denial. AsI’ve often said, companies don’t miss thefuture because it’s unpredictable, theymiss the future because it’s uncomforta-ble.”
So what specifically should corporateleaders do to “future-proof” their organisa-tions?
“One, as a leader, you should take afew weeks a year and go wherever youneed to go in the world to get a first-per-son experience of the future. It’s probably
not where you are sitting right now. Youneed to go wherever it is, and see howthings are changing.”
“Two, if you want to avoid being heldhostage by the past, you cannot give theold guard full control over resource alloca-tion. Because they will always want to in-vest in what they know.
“Think of it this way: Silicon Valley hasthousands of angel investors, hundreds ofventure capitalists. What would happen ifthere was only one venture capital compa-ny in Silicon Valley and it was led by BillGates? A lot of the new companies wehave today would never exist.
“If you look at the recent history of Mi-crosoft, Bill Gates was a sceptic on theWeb, on the e-reader, on digital music. Inevery single case when he had the oppor-tunity to invest early and support it, hedidn’t. It’s not so much his fault, becausethese were new things and maybe hedidn’t understand them. The point is thatin a lot of large organisations, resource al-location works the same way as it workedin the Soviet Union. People have to fightfor resources through several layers ofmanagement and then finally, somebodyat the top says: ‘We’re going to invest, orwe’re not going to invest.”
“There should also be no monopoly onthe allocation of capital. If I am a youngemployee and I have a new idea, thereshould be multiple places I can go to in anorganisation to compete for funding. Be-cause if I can only go to one person andthat person’s biases are all grounded inthe past, the company will always miss thefuture. What you typical-ly find happening todayis that by the time an op-portunity or problem isso big that it becomes ob-vious to the CEO that thecompany must invest init, it’s too late. If Intelnow goes: ‘Wow, thereare going to be a lot moremobile devices in theworld than PCs, andthey’re going to get smart-er and smarter, and thisis really the future,’ – bythe time it becomes obvi-ous to the person at thetop, the game is over.”
And it’s already overfor Intel, he suggests:“ARM Holdings has won.They’re the British com-pany that does most ofthe chip design for thesemobile devices.”
Lesson Three for fu-ture-minded CEOs, ac-cording to Dr Hamel, is that spending big
is not always smart. Low-cost experiments
are likely to get better results. “There is of-
ten a mistaken assumption that the way
you win the future is to bet bigger than
everybody else rather than try things more
cheaply than everybody else. Google’s
CEO Eric Schmidt put it very nicely, he
told me once, our goal at Google is to try
more things more cheaply than anybody
else. Most of them will fail, but a few will
work. That’s the mindset to have. If you
look at the companies that grew up on the
Web, all of them started out dirt-poor.
Some had a few thousand dollars from
friends and family, or a few hundred thou-sand.” For Dr Hamel, revolutionising man-agement is not just an issue for compa-nies, it’s something governments need tofocus on as well.
“If you go around the world, you willhear governments say: ‘We need to up-grade skills, we need more venture capital,we need better links between universitiesand companies, we need better infrastruc-ture, we need to be more conducive to in-ward investment’. What you never hearthem say is, we need to have a revolutionin how we manage.”
“I believe that the single biggest impedi-ment to organisational performance to-day is management itself. It is the topdown, hierarchical, disempowering, back-ward looking, incrementalist, inertial tend-ences that are imposed upon organisa-tions. They’re not inherently wrong, theywere just designed to solve a differentproblem of how do we do the same thingsover and over again with greater efficien-cy, rather than how do we reinvent our-selves, how do we create the kinds of prod-ucts and services that stand out in an eraof hyper competition, how do we get peo-ple to bring the gifts of their imaginationand creativity to work everyday so we cancompete in the creative economy.”
Indeed, reinventing managementshould be a national competitiveness is-sue, he suggests. And the countries thatpractised it – even if not as a matter of de-liberate government policy – have reapedrich dividends. “There is a reason Britainand the United States led the industrial
revolution andwere the most pow-erful economies ofthe 19th and 20thcentury,” he pointsout. “It wasn’t be-cause they had nat-ural resources –Britain certainlydidn’t. But theywere pioneers in so-cial innovation. Ifyou go back andlook at all thethings that got in-vented in this area:work design, payfor performance,capital budgeting,strategic planning,divisionalisation –almost all of thosewere invented inBritain and the US,some in Germanyand later, some inJapan. I don’t think
over the long term, an economy or coun-
try can be a superpower if its institutions
are run along the lines of management 1.0
rather than management 2.0.”
Dr Hamel’s passion for the “manage-
ment revolution” has led him to create a
Web-portal called the Management Inno-
vation Exchange (www.managementex-
change.com), which showcases manage-
ment innovations from around the world.
“We’re using crowd-sourcing to invent
new social technologies,” he says. “Any-
body can go there and learn from from it.
And it’s free.”
.PHOTO: AZIZ HUSSIN/ST
Champion of themanagement revolutionManagement guru Gary Hamel talks to Vikram Khanna about why companiesneed a revolution at the top
‘The simplest reasonorganisations fail tosee the future is thattheir leaders fail towrite off their owndepreciatingintellectual capital.They have a view ofcustomers andtechnology that’s outof date and theyknow it’s out of date.But they hang onto the past untilthe futureovertakes them.’
Gary P HamelManagement expert,educator and author
Born: 1954
Ph.D, Ross School of Business,University of Michigan, 1990
Since 1983: Visiting Professor ofStrategic and InternationalManagement, London Business School
Has also served as Visiting Professor ofInternational Business at University ofMichigan and Harvard Business School
Consulted for companies including:General Electric, Time Warner, Nestle,Shell, Best Buy, Procter & Gamble, 3M,IBM, and Microsoft.
Author of books: Competing for theFuture (with C.K. Prahalad, 1996);Leading the Revolution (2000);The Future of Management (2007);What Matters Now (2012)
CEO, Management InnovationExchange, an online portal featuringprogressive and innovativemanagement practices fromaround the world
10 the raffles conversation THE BUSINESS TIMES WEEKEND SATURDAY/SUNDAY, OCTOBER 6-7, 2012 THE BUSINESS TIMES WEEKEND SATURDAY/SUNDAY, OCTOBER 6-7, 2012 the raffles conversation 11
