Books: Be a management innovator

Gary Hamel's agenda for improving the way companies are run is ambitious, but the underlying logic demands to be taken seriously, argues Julian Birkinshaw.

Last Updated: 31 Aug 2010

The Future of Management; Gary Hamel; Harvard Business School Press £15.99.

Gary Hamel has always enjoyed challenging the traditional theories and orthodoxies of the business world. In his 1994 bestseller with CK Prahalad, Competing for the Future, he urged firms to eschew traditional concepts of industry boundaries and competition, and instead craft their own future based on their core competencies. In 2001 he published Leading the Revolution - a call- to-arms for the 'grey-haired revolutionaries' working inside large organisations to push their own ideas and projects through the corporate hierarchy.

His new book, The Future of Management, takes on perhaps the most ingrained orthodoxy of all - the concept of management - and says we need to reinvent it.

Hamel's agenda is ambitious and daunting, but the underlying logic is compelling and deserves to be taken seriously.

The basic argument of the book is that the core practices of management - from capital budgeting, to talent management, to reporting structures - were all invented some 100 years ago to allow the companies of that time to deliver standardised, mass-produced outputs for a rapidly growing market. The underlying principles of hierarchy, bureaucratic control, and pay-for-performance worked well when the objective was efficiency. But, today, companies need to deliver on a broader set of objectives, and they need to be far more creative than their forebears.

So, rather than force-fit our old management practices to the needs of today's companies, Hamel believes we should actually develop a new set, based around new principles such as community, variety and creativity.

Hamel argues, in other words, that management innovation is a greater potential source of competitive advantage, and a superior engine for productivity growth, than traditional notions of product or technological innovation.

Building on historical as well as contemporary examples, he shows how firms have stolen a march on their competitors through the uniqueness of their management model and their dedication to continually improving it. GE and Procter & Gamble are two of the serial management innovators he identifies, and there are entire chapters in the book about the distinctive models developed by Google, WL Gore (the company behind Gore-Tex and a host of other innovative fabrics), and US supermarket chain Whole Foods.

Hamel lays out a basic recipe for becoming a management innovator. As in his earlier book, Leading the Revolution, his target audience is not just top executives. Instead, he argues that any individual can - and should - look for opportunities to experiment with new ways of working. So as well as describing IBM's root-and-branch rethinking of its business development pro- cess, which took two years and involved a dozen senior executives, he also describes the fascinating case of Jeff Severts, a vice-president of consumer marketing at US electronics retailer Best Buy, who, with $50 and a few days of his time, put in place a small experiment in forecasting sales numbers that is still reverberating today.

The Future of Management is a very good read. Hamel writes beautifully - far better than your average management author - and the examples are resonant and contemporary. In fact, it's almost too slick: the metaphors and examples come thick and fast, the arguments are carefully and tightly woven, but it is very hard for the reader to retain the capacity for critical analysis.

The book faces two lines of critique. Some readers will say that management cannot be reinvented - we have hierarchy and bureaucracy for good reasons, the current model works better than any other, and we have - in Francis Fukayama's terms - reached the 'end of history' when it comes to the evolution of management. This is a reasonable challenge, and the fact that many of the examples in the book come from small, internet-age companies adds fuel to the sceptic's concern that large organisations cannot be rewired.

Hamel's answer to this challenge is, in essence, that we created these systems, so we can re-create them. Our current models of capital allocation and performance management are not defined by laws of nature, they are human constructions; so if we have sufficient collective will and a better set of principles, why should we not make the fundamental changes that are needed?

Hamel admits he is an idealist in pursuit of a 'romantic' goal. He simply wants to make the business world a better place, and you don't have to go with him all the way to buy the basic argument that we can improve the quality of management in our large companies.

Other readers may feel that this book is just empty rhetoric - easy to say but very difficult to do. But here Hamel is on fairly solid ground. Unlike many management writers, he has always tried to practise what he preaches. He founded Strategos in the mid-1990s to help companies become business innovators. And now he has founded the Management Innovation Lab (MLab) as a collaborative venture with London Business School, UBS and other partners yet to be named. Its goal is to create 'an inflection point in the evolution of management' by working with companies to create new management practices.

You can question how close he will get to this audacious goal, but don't criticise him for lack of effort.

MT readers can order The Future of Management at the discounted price of £10.99 (plus £2 p&p). Telephone McGraw-Hill on 01628 502700, quoting offer code FM07. Offer ends 31 December 2007

Julian Birkinshaw is a professor at London Business School, and is affiliated to the Management Innovation Lab.

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