management innovation

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Management is a social technology. Its innovation has brought about some of the most profound and lasting innovations in all of business. Management innovation can be defined as a marked departure from traditional management principles, processes, and practices -- a departure from customary organizational forms that significantly alters the way the work of management is performed. See Hamel, 2006 for a definition and examples of management innovation.

Criteria for long lasting value creating management innovation --

  • The innovation is based on a novel principle that challenges management orthodoxy
  • it is systemic, encompassing a range of processes and methods
  • it is part of an ongoing program of invention, where progress compounds over time
  • Analogies from atypical organizations that redefine what's possible

Elements of management innovation --

  • Commitment to a big management problem
  • Novel principles that illuminate new approaches
  • A deconstruction of management orthodoxies
  • Analogies from atypical organizations that redefine what's possible

Hamel's list of significant management innovations (Hamel, 2006) --
These management innovations meet the following criteria: 1) they were radically new at the time, 2) a marked departure from previous management practices, 3) conferred a competitive advantage on the pioneering company, and 4) are lasting, being found in some form in organizations today.

  • Management innovations that shaped modern management --

    1. Scientific Management (time and motion studies), Frederick W. Taylor's Principles of Scientific Management, 1911
    2. Cost accounting and variance analysis
    3. Industrial Research Labs: Bringing management discipline to the chaotic process of scientific discovery. (Innovator, GE, early 1900s). Commercial research laboratories - the industrialization of science.
    4. ROI Analysis and Capital Budgeting Techniques: (Pioneer, DuPont, 1903)
    5. Brand Management: Creating value out of intangible assets. (Innovator, Proctor & Gamble, early 1930s)
    6. Large Scale Project Management (WWII)
    7. Divisionalization (GM)
    8. Leadership Development (GE)
    9. Industry Consortia, multi-company collaborative structures (new technology collaboration, industry standards, etc.)
    10. Radical decentralization (self-organizing) (Gore, Visa, AA, Cisco )
    11. Formalized strategic analysis
    12. Employee-driven problem solving (Toyota)
  • Others --
    • Skunk works
    • Account management
    • Business process reengineering
    • Employee stock ownership plans
  • Too early to tell --
    • Open Source Development: Organizing volunteers world-wide to create and continually improve an operating system. (Innovator, Linux)
    • Knowledge Management
    • Internal Markets

Other management innovations --

  • Chaordic Organization: A near virtual self-organizing organization based on principles to marry cooperation with competition. Combination of multi-company collaboration and self-organization. See chaordic organization. (Innovator, Visa, early 1970s)
  • Risk Management

Where to look for emerging management innovations --

  • Semco - The most extreme example of meeting chaos with chaos is probably Semco, the celebrated Brazilian outfit where there are virtually no job titles, a few executives trade the CEO role every six months, and workers set their own hours and choose their managers by vote.
  • Gore - decentralization and an anti-control ethos seem to characterize a growing number of successful businesses. No one at W.L. Gore has a job title.
  • Whole Foods Market - Any employee of Whole Foods Market can look up anyone else's salary, which sounds like a recipe for internal war. Conventional wisdom says such policies will massively distract an organization, yet in a fast-changing world they seem to have the opposite effect.
  • Google - Mistakes are expected. Googley. Chaos trumps comfy. Figure things out as you go. Structured chaos.
  • BMW - (see article: Management Innovation - BMW)
  • Cemex -- Radical engagement of all members in innovation, ideas, experiments. Reinventing the cement industry.
  • Virgin --
  • Apple -- ??

Management innovation process --
See Hamel, 2006.