Evolving innovatively

Companies that have changed the way they manage their businesses in a radical way have created very significant long-term advantage for themselves, which has helped them to outdo their competitors over decades.

by Harvard Business Review, February 2006
Last Updated: 13 May 2016

GE achieved this by imposing management disciplines on to the process of scientific inquiry, resulting in a stream of patents over half a century. Toyota led the world in automotives for so long because it recognised that its front-line workers could be used as problem-solvers and should be given the tools to do so.

Whole Foods created amazing value (161 stores and $3.8bn revenue in just 21 years) by instigating a culture based on 'love' and a sense of community. This was more than just lip service: it really did give autonomy to its employees and power to its teams to manage their own departments - something not often seen, if ever, in other retail outlets. The company also put a cap on its top salaries, so that no one earned more than 14 times the average; 94% stock options were granted to non-executives and bonuses were paid to teams (each of which could access key company data, such as other staff's compensation).

The big question is how can executives unleash further waves of management innovation to push ahead of the competition for years to come. There are four key factors: first, there needs to be an intractable problem that needs solving; second, it requires novel principles; third, it must reduce the organisation's constraints on creative thinking; and, lastly, you need examples and analogies to redefine what is possible.

Examining the areas where there are tough trade-offs could help, or analysing those things that big organisations do badly. Executives need to think about how the world is changing and shape their innovation around the business world that will emerge in the future. But many companies continue with past processes, rather than engage in inventing new ones that might require new resources.

Where do you go for inspiration? Try looking at volunteer organisations that have inspired extraordinary commitment and passion from their people. The answers also lie in challenging orthodoxies. Among the many companies listed, there is one company that has an unorthodox management culture, which encourages people to think differently and develop their own ideas. This is a company that is enjoying some success at the moment: Google.

Source: The why, what and how of management innovation
Gary Hamel
Harvard Business Review, February 2006

Review by Morice Mendoza

Harvard Business Review, February 2006 recommends

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