Chapitre 1
Reinventing the Corporate DNA: A Revolution in the Making
Have you ever wondered why companies that once dominated their industries suddenly find themselves struggling to survive? Take Kodak, which invented the digital camera in 1975 but failed to adapt as digital photography transformed the market. Or consider Nokia, whose executives couldn't imagine a world where their cell phone dominance would evaporate virtually overnight with the arrival of smartphones. These weren't failures of technology or talent-they were failures of management.
In "The Future of Management," Gary Hamel delivers a wake-up call that has reverberated through boardrooms worldwide. Since its publication, the book has become required reading at Harvard Business School and has influenced management thinking at companies like Microsoft, Google, and Amazon. Hamel, ranked by The Wall Street Journal as one of the world's most influential business thinkers, doesn't just criticize traditional management-he offers a compelling alternative vision. What makes this work particularly powerful is how it anticipated trends we now take for granted: the rise of flat organizations, the importance of purpose-driven work, and the need for companies to innovate continuously or die.
Chapitre 2
The End of Management as We Know It
Imagine tomorrow's most successful company. How will it be organized? What management practices will distinguish the vanguard from the old guard? Most struggle to envision radical changes in management because the practice has evolved at a glacial pace compared to technology and geopolitics. While hierarchies have flattened somewhat, they haven't disappeared. Strategy still gets set at the top, and major decisions still come from people with impressive titles.
Management may have reached what complexity scientist Stuart Kauffman would call a "local peak" in the fitness landscape-having evolved rapidly in the first half of the 20th century, it now reclines contentedly on a modest summit rather than scaling new heights. This isn't to diminish management's achievements-modern management ranks among humanity's most transformative inventions, turning scientific discovery into global prosperity.
Yet every great invention travels from birth to maturity and occasionally to obsolescence. Management's inventive adolescence lies nearly a century behind us-most essential tools were invented by individuals born in the 19th century. They developed standardized jobs, production planning, cost accounting, and the multidivisional organization. But in recent decades, can you identify management innovations of similar scale? Like the gasoline engine, our industrial-age management model may be reaching its limits of improvability.
Modern management has wrestled many formidable problems to the ground-breaking complex tasks into repeatable steps, enforcing adherence to procedures, measuring costs and profits precisely, coordinating thousands of employees, and synchronizing global operations. Yet these successes came at a heavy price. The machinery of modern management gets fractious, opinionated humans to conform to standards but squanders prodigious quantities of imagination and initiative. It brings discipline to operations but imperils adaptability.
In this new century, we must learn to coordinate thousands of individuals without creating burdensome hierarchies, keep tight reins on costs without strangling imagination, and build organizations where discipline and freedom aren't mutually exclusive. We must transcend the seemingly unavoidable trade-offs that have been management's unhappy legacy.
The challenges facing 21st-century businesses are intimidating and unprecedented. Companies must become as strategically adaptable as they are operationally efficient, become fountains of rule-breaking innovation, and learn to inspire employees to give their very best every day. Yet expecting large organizations to be strategically nimble, innovative, or engaging places to work is like expecting a dog to do the tango. Their managerial DNA makes some things easy and others virtually impossible.
Chapitre 3
The Ultimate Competitive Advantage
Why should you and your colleagues take on the challenge of reinventing management? Because management innovation pays. When compared with other forms of innovation, it has unmatched power to create dramatic and enduring shifts in competitive advantage.
Management innovation encompasses anything that substantially alters how management work is carried out or significantly modifies organizational forms to advance organizational goals. It changes how managers do what they do in ways that enhance performance.
Looking at history's most consistently successful companies reveals that management innovation, more than any other factor, propelled them to greatness:
• GE perfected Thomas Edison's industrial research laboratory in the early 1900s, bringing management discipline to scientific discovery and producing a minor invention every 10 days and a major breakthrough every six months.
• DuPont pioneered capital-budgeting techniques in 1903 with return on investment calculations, helping it allocate capital rationally and become an industrial giant.
• Procter & Gamble formalized brand management in the 1930s, creating value from intangible assets, and now boasts 16 billion-dollar brands.
• Toyota's unmatched profitability stems from its ability to engage employees in continuous improvement, with its "Thinking People System" generating over 540,000 improvement ideas from Japanese employees in 2005 alone.
Management innovation yields competitive advantage when one or more of three conditions are met: it's based on a novel principle challenging orthodoxy; it's systemic across multiple processes; or it's part of an ongoing program of rapid-fire invention where progress compounds over time.
Toyota's manufacturing system exemplifies the first condition. American automakers took 20 years to decipher Toyota's advantage because it was based on fundamentally different principles about employee capabilities. While U.S. companies discounted frontline workers' intelligence, Toyota believed they could be problem solvers and innovators when properly trained and equipped.
Innovation comes in multiple forms, but management innovation tops the hierarchy of value creation and competitive defensibility, above operational, product/service, and strategic innovation. Operational innovation rarely delivers decisive long-term advantage because best practices diffuse rapidly. Product innovation, while potentially transformative, faces quick knockoffs without patent protection. Strategic innovation through bold business models can generate billions in value, but these are more easily decoded and counteracted than heretical management systems.
Chapitre 4
An Agenda for Management Innovation
Management innovation has been mostly incremental recently due to a lack of daring in problem selection. Companies rarely tackle truly unprecedented management challenges. As Nobel Prize-winning zoologist Sir Peter Medawar noted, "Dull or piffling problems yield dull or piffling answers."
Three formidable challenges confront companies in this new century:
1. Dramatically accelerating strategic renewal in organizations large and small
2. Making innovation everyone's job, every day
3. Creating a highly engaging work environment that inspires employees
These challenges are to 21st-century organizations what efficiency, scale, and control were to early 20th-century businesses. The most successful companies ahead will be those tackling these capstone challenges.
Within the next decade, every company will face unprecedented change challenges. Few adapt ahead of the curve, resulting in painful restructuring or decline. Three barriers particularly threaten timely renewal: management teams denying the need for strategy reboots, a dearth of compelling alternatives to the status quo, and allocational rigidities that impede talent and capital redeployment.
In a world of shrinking strategy lifecycles, innovation is the only way to renew success and survive bare-knuckle competition. Many protective barriers are collapsing: deregulation, Web-empowered customers, ultra-low-cost competitors, and disintegrating transaction costs are all squeezing margins. Companies face a stark choice: ignite innovation or scrape out a mean existence competing on rock-bottom costs.
Despite this imperative, few companies have made innovation everyone's job, instead relegating it to organizational ghettos like R&D. Three particularly pernicious barriers must be surmounted: creative apartheid (the prejudice that creativity is narrowly distributed), the drag of old mental models, and the elimination of slack (time to dream, reflect, learn, invent, and experiment).
We are amazingly adaptable and creative human beings, yet most of us work for companies that aren't. There seems to be something in modern organizations that depletes our natural resilience and creativity-management principles that foster discipline and order but place little value on artistry and originality.
The human capabilities that contribute to competitive success form a hierarchy. At the bottom is obedience-following rules and directions. Next is diligence-accountability and conscientiousness. Above that sits knowledge and intellect. Higher still is initiative-not waiting to be asked or told. Near the top is creativity-inquisitiveness and the courage to say "Wouldn't it be cool if..." Finally comes passion-the contagious energy that turns intent into accomplishment.
In today's creative economy, the relative value contribution of these capabilities has shifted dramatically. Passion contributes 35%, creativity 25%, initiative 20%, intellect 15%, diligence 5%, and obedience 0%. This doesn't mean rule-following is worthless, but in a world with billions of eager workers, obedience and diligence have become global commodities.
Chapitre 5
Creating a Community of Purpose
Whole Foods has revolutionized the stagnant U.S. supermarket industry with its innovative business model. While traditional grocers have competed with the same basic recipe for decades-stocking factory food, using price promotions, and relying on supplier advertising-Whole Foods built its model around a powerful premise: people will pay premium prices for food that's good for them, good-tasting, and good for the environment.
Whole Foods' unique management approach combines seemingly contradictory values: democracy with discipline, trust with accountability, and community with fierce internal competition. This delicate balance makes their system both uniquely effective and difficult to duplicate.
At Whole Foods, teams rather than stores form the basic organizational unit. These small, empowered work groups enjoy unprecedented autonomy in retailing. New associates must win a two-thirds majority vote from team members after a four-week trial to secure permanent employment. Teams control critical decisions including pricing, ordering, staffing, and in-store promotion. No executives dictate product selection; instead, teams choose what to stock based on local customer preferences.
This radical decentralization is balanced with strict accountability-every four weeks, profit per labor hour is calculated for each team, with bonuses awarded to high performers. Team performance data is transparent across stores, creating healthy competition and motivation to excel.
Whole Foods builds trust through radical transparency. Every associate can access compensation data for all store employees, preventing favoritism and encouraging skill development. The company's "no-secrets" philosophy extends to sensitive operating and financial information-daily store sales, team sales, product costs, and profits are available to any staffer.
Whole Foods deliberately cultivates a community feeling rather than a hierarchy. Its "Declaration of Interdependence" describes the company as "a community working together to create value for other people." Unlike companies where executives merely pay lip service to togetherness, Whole Foods' leadership caps individual compensation at 19 times the company average (compared to 400:1 ratios in typical Fortune 500 companies).
What ultimately binds Whole Foods' 30,000-plus associates is a common cause: reversing food supply industrialization and providing better nutrition. This "capitalism with a conscience" manifests in concrete actions: changing factory farming practices for humane animal treatment, creating in-store "Take Action" centers to educate customers, operating sustainable seafood-processing plants, and making massive renewable energy purchases.
The Whole Foods experience offers three essential lessons for management innovators:
1. Principles matter-Whole Foods built its management system on contrarian principles-love, community, autonomy, egalitarianism, transparency, and mission.
2. The biggest obstacle to management innovation may be what you already believe about management-John Mackey, who never completed college or earned an MBA, wasn't constrained by orthodox business education.
3. Inspired management innovation can help to resolve intractable trade-offs-Whole Foods embodies carefully managed tensions: freedom and responsibility, community and competition, social mission and fat profits.
Chapitre 6
Building an Innovation Democracy
W.L. Gore has conducted a bold experiment in radical management innovation for five decades. With $2.1 billion in annual sales and 8,000 employees across 45 plants worldwide, Gore has consistently behaved like a start-up while producing profits every year since its founding.
After 17 years at DuPont, Bill Gore left in 1958 to build a company devoted to innovation. Energized by his experience in small R&D task groups at DuPont, Gore wondered if an entire company could function as a bureaucracy-free zone. He believed DuPont was underestimating the potential of PTFE (Teflon) due to its traditional business model.
While Gore has a CEO and four major divisions, it operates as flat as a pancake. There are no management layers, no organizational chart, few titles, and no bosses. Bill Gore conceived of the company as a "lattice" rather than a hierarchical ladder. This architecture connects every individual directly to everyone else, with information flowing in all directions without intermediaries.
Terms like "boss," "executive," and "manager" are effectively banned at Gore. Instead, about 10% of associates carry the simple designation "leader"-earned when peers judge them to be such. Leaders gain influence by demonstrating ability to get things done and excel as team builders. CEO Terri Kelly was selected when associates were asked to pick someone they'd be willing to follow.
New recruits at Gore are hired into broad roles rather than narrowly defined jobs. Each newcomer is assigned a "sponsor"-a veteran who helps them navigate the organization and find their niche. New hires typically circulate among several teams, essentially auditioning for parts.
Gore fuels innovation through "dabble time"-a half-day weekly that employees can devote to initiatives of their choosing. Most of Gore's breakthroughs started as dabble-time projects, including the discovery of expanded PTFE (Gore-Tex) by Bill's son Robert in 1969.
Bill Gore distinguished sharply between commitment and compliance, believing that "all commitments are self-commitments." Associates negotiate responsibilities with peers rather than receiving assignments. Tasks can't be assigned, only accepted, but since rewards are based on team contributions, associates are incentivized to commit more rather than less.
Within Gore, the pressure to contribute is both exhilarating and exhausting. Associates receive comprehensive annual peer reviews from at least 20 colleagues, with data shared with a compensation committee. Each associate is ranked against every member of their business unit, determining relative compensation. Seniority yields no dividends-the formula is unblinking: contribute more, earn more.
Despite being a $2 billion company, Gore maintains intimacy by maximizing face-to-face interaction. No facility is allowed to grow beyond 200 people-Bill Gore believed that as units grew larger, associates felt less connected and less motivated. In his words, once a unit reaches a particular size, "we decided" becomes "they decided."
Chapitre 7
Aiming for an Evolutionary Advantage
Google, the Mountain View, California-based search giant, handles over 65% of U.S. Internet searches and two-thirds of global web searches. What makes Google unique is less its Web-centric business model than its brink-of-chaos management approach.
Key components include a wafer-thin hierarchy, dense lateral communication networks, outsized rewards for outsized ideas, team-focused product development, and a corporate credo challenging every employee to put users first. Google's founders have worked hard to recreate within Google the fertile innovation climate of Silicon Valley itself.
Google has developed an explicit formula for ensuring innovation doesn't get shortchanged, known as "70-20-10." This policy allocates 70% of engineering resources to enhancing the base business, 20% to services significantly extending the core, and 10% to fringe ideas.
From the beginning, Page and Brin set out to create a company where they'd like to hang out-a place filled with clever overachievers energized by challenging problems. Google's management model mirrors an elite engineering school: small work units, lots of experimentation, vigorous peer feedback, and a mission to improve the world.
Google's leaders believe one exceptional technologist is many times more valuable than an average engineer, so they insist on hiring only the brightest-those on the right-hand end of the bell curve. They fear that letting one "bozo" in will lead to more, as B-level people tend to hire unthreatening B-level colleagues or even C-grade employees.
Google is organized like the Internet itself: democratic, tightly connected, and flat. The average manager in Google's product development has over 50 direct reports, with some exceeding 100-control is more peer-to-peer than manager-to-minion.
Half of Google's employees work in small teams averaging three engineers each. Even large projects like Gmail are broken into teams of three or four, each working on specific enhancements. Team leadership rotates based on project requirements, and engineers typically work on multiple teams.
Google's 70-20-10 policy grants engineers freedom to devote up to 20% of their time to non-core initiatives-sanctioning the unsanctioned. This helps Google continually refresh its strategic options while retaining top talent. The payoff? In one period, more than half the company's new product launches traced back to 20% projects.
Google understands that evolutionary adaptation comes from relentless experimentation, not grand plans. Their "just-try-it" philosophy applies to even the most ambitious projects. When considering digitizing the world's libraries, Page and Mayer rigged a makeshift experiment with plywood and clamps to photograph a 300-page book. With Mayer flipping pages and Page taking digital snapshots, they turned ink into pixels in just 40 minutes.
Chapitre 8
Escaping the Shackles
How do you get started with management innovation when your company is deeply conventional? You need a methodology for breakthrough management thinking that includes: uncovering and challenging long-standing orthodoxies, discovering new management principles, and drawing insights from "positive deviants"-organizations with eccentric yet effective practices.
To innovate, you must confront the unexamined beliefs that tether you to the management status quo. We are all hostages to our axiomatic beliefs, yet mostly oblivious to our captivity. Like Barry Marshall and Robin Warren, who challenged medical orthodoxy about ulcers despite establishment resistance, management innovators must think like outsiders.
To create space for management innovation, systematically deconstruct the management orthodoxies blinding you to new possibilities. Gather colleagues and have them write beliefs about a key management issue on sticky notes. Group similar beliefs together-it's these commonly held assumptions that require the greatest scrutiny.
When examining management orthodoxies, keep digging beneath surface explanations. Persistent questioning eventually uncovers fundamental truths: too much authority vested in too few people means senior executives can hold an organization's capacity to change hostage to their own willingness to change.
To understand how companies like Whole Foods, Gore and Google manage to radically empower employees while delivering consistent results, distinguish between the what and how of discipline. Everyone agrees discipline is essential, but traditional control mechanisms (tight supervision, detailed role definitions, frequent reviews) put a short leash on initiative and creativity.
When challenging entrenched beliefs, ask whose interests they serve. The reflexive belief that employee freedom threatens discipline benefits managers-more freedom means less supervision, less authority, and perhaps fewer managers. It's hardly surprising that most managers believe you can't manage without managers.
The deeper you dig into management orthodoxy, the bigger the opportunity for radical innovation. When you go deep, you uncover beliefs that haven't been examined in generations-beliefs no one else dares question. This gives you a big advantage as a management innovator.
Chapitre 9
Embracing New Principles
You can't reinvent management for the 21st century without new management principles-big ideas with the power to inspire dramatic changes in tradition-bound practices. Few executives have examined the foundational principles underlying their management views. The practices of modern management have been built around core principles: standardization, specialization, hierarchy, alignment, planning and control, and extrinsic rewards.
While these industrial age principles have contributed to economic prosperity, they're insufficient for creating highly adaptable organizations. Specialization limits cross-boundary learning. Standardization can lead to unhealthy conformance. Alignment can discourage pursuing "out-of-scope" opportunities. Planning-and-control rituals can desensitize executives to unprecedented discontinuities.
To reinvent management principles, we must analyze things that already exhibit the qualities we want in our organizations-things that are adaptable, innovative, and highly engaging. Life, markets, democracies, religious faith, and vibrant cities all set benchmarks for adaptability that far exceed most companies.
Life is remarkably resilient, flourishing despite catastrophic events throughout Earth's history. Its capacity for adaptation rests on simple design rules: variety and selection. Life constantly produces genetic variety through mutation, reproduction, and gene flow-ensuring against the unexpected. For organizations, this means experimentation beats planning, pre-adaptation is essential, not all mutations are mistakes, selection shouldn't be controlled by SVPs, and broader gene pools produce better outcomes.
While evolution sorts mutations, markets divert resources from low-value to high-value uses. Markets achieve allocational efficiency by ensuring underperforming companies lose capital to productive firms. They excel at collating data into prices, divining the "wisdom of the crowd" rather than relying on a few.
Over the past two centuries, no autocratic regime has matched the resilience of great democracies. While democratic processes may seem slow, autocracies depend entirely on the wisdom of a single individual or small cadre. In autocratic systems, there are few mechanisms for bottom-up renewal, so change comes in belated, convulsive spasms through revolutions.
Democracy functions as a set of accountability mechanisms where power flows up and accountability flows down. Politicians are chosen by and accountable to their constituents, forcing them to consider diverse viewpoints. In the corporate world, this pattern is reversed: employees are accountable upward while authority trickles down from the board.
Chapitre 10
Learning from the Fringe
To build a management advantage, we must look beyond conventional "best practice" to uncommon places, as uncommon insights usually come from unexpected sources. Mary Parker Follett, perhaps the 20th century's most prescient management thinker, developed revolutionary ideas about servant leadership, diversity, and self-organizing teams not from studying corporate practices but from organizing community centers in Boston neighborhoods.
To discover the future of management, we must seek out "positive deviants"-organizations that defy conventional practice. Like scientific anomalies that reveal new truths, these outliers are often dismissed because they don't fit our mental categories.
To hunt for management mutants, start by identifying a specific management problem, then look for offbeat organizations with novel solutions or useful analogies. Let's focus on six key challenges: creating a democracy of ideas, amplifying human imagination, dynamically reallocating resources, aggregating collective wisdom, minimizing the drag of old mental models, and giving everyone the chance to opt in.
In most companies, position in the hierarchy correlates with influence, but wisdom, foresight and imagination are only weakly linked to organizational rank. Why then do senior executives' views receive higher credibility than those of frontline employees? A true democracy of ideas would let employees freely share opinions, prevent gatekeepers from quashing ideas, and foster open, uncensored debate about strategy and policy.
Creativity is a primal human urge, through which we assert our humanity and individuality. Historically, only a tiny fraction of people possessed the economic means to pursue creative passions, but digital technology is now democratizing creative tools and emancipating human imagination. Your company is filled with these creative individuals, but what have you done to help them become business innovators?
How can companies correct their tendency to overinvest in the past at the expense of the future? While many CEOs establish venture funds, incubators, and slush funds for uncertain projects, these centralized approaches fall short of the vibrant market for experimental capital that exists in Silicon Valley.
Chapitre 11
Becoming a Management Innovator
While most companies have reinvented business processes like logistics and customer fulfillment, few have devoted similar energy to reinventing management itself. Notable exceptions include GE's efforts to redesign core management processes around organic growth, P&G's opening of its R&D pipeline to outside ideas, and Whirlpool's decade-long redesign of management processes to catalyze innovation.
For established companies, spawning new businesses is a daunting challenge. IBM tackled this problem when chairman Lou Gerstner discovered the company consistently failed to convert its technological prowess into new businesses. A task force uncovered systemic issues: managers focused too much on near-term profitability, feared uncertainty, burdened startups with unrealistic expectations, and withheld top talent from risky ventures.
The solution emerged as the "Emerging Business Opportunities" (EBO) process-a comprehensive system for identifying, staffing, funding, and tracking new business initiatives. IBM appointed John Thompson as growth czar, who orchestrated conversations to identify initial business candidates. Within five years, IBM launched 25 new businesses, with 22 delivering $15 billion in annual revenues by 2005.
Management innovation isn't limited to those with executive authority. Jeff Severts, a vice president at Best Buy, launched a transformative experiment for just $50 without requiring approvals. As head of consumer marketing, Severts found himself blamed whenever sales underperformed forecasts. Investigating the company's forecasting process, he discovered merchant teams often missed projections by as much as 10 percent even looking just 30 days ahead.
Rather than attempting a massive system overhaul that would face resistance, Severts took an experimental approach after hearing James Surowiecki speak about "The Wisdom of Crowds." He hypothesized that large groups of nominally informed individuals might outperform experts at forecasting. His first test invited several hundred employees to estimate gift card sales for the following month, offering a $50 gift card prize. The crowd's average estimate was off by less than 0.5%, while the expert team's forecast was off by 5%.
Chapitre 12
Building the Future of Management
Any management experiment that yields counterintuitive results is valuable, serving as a crowbar to pry up the floorboards of management orthodoxy. Yet isolated initiatives and one-time projects are no substitute for a sustained, companywide campaign of breakthrough management innovation.
While there's no well-thumbed manual for becoming a serial management innovator, it's possible to sketch a blueprint for making management innovation a systematic capability rather than an aberration. The essential building blocks begin with the courage to lead-tackling problems others are too timid to address.
To cure organizational "diseases," we must uncover their root causes, not just treat symptoms. When a CEO asked me how to make his company more resilient, I convened cross-company discussion groups to analyze examples of "strategic inertia." We teased out over 100 "enemies of adaptability," ultimately distilled to systemic barriers like lack of "genetic diversity" among senior executives and restrictive operating procedures that prevented first-line associates from responding to changing circumstances.
In many companies, major staff groups employ thousands, yet few feel personally responsible for building a "management advantage." Most focus on compliance and efficiency. To create fast-paced management innovation capability, CEOs must hold internal process owners responsible for breakthrough innovation.
Perhaps the most important thing you can do is give "ordinary" employees and lower-level managers the opportunity to "hack" management processes. Create forums where anyone can suggest alternatives to the status quo-as simple as opening threaded conversations around provocative questions like "What management practice does most to drive great people out of our company?"
The future of management can be glimpsed in the social revolution gathering pace on the Web. The Internet is the most adaptable, innovative, and engaging thing humans have ever created-in many ways, it is the new technology of management.
The goal isn't to predict the future of management, but to help you invent it. The technology of management must be reinvented-the only question is who will do the reinventing.
For the first time since the industrial age began, the only way to build a company fit for the future is to build one that's fit for human beings as well. This is your opportunity-to build a 21st century management model that truly elicits, honors, and cherishes human initiative, creativity, and passion. These tender, essential ingredients for business success in this new millennium will help you build an organization that is fully human and fully prepared for the extraordinary opportunities ahead.
