Everyone knows that management must get better. Steadily declining productivity, low levels of staff engagement, workplace disillusion among GenZ, growing inequality, repeated financial crashes, and an inability to get to grips with global challenges like climate change are just some of the issues.
A contest in 2012 organized by HBR and McKinsey set out to “overcome the limits of conventional management and create Management 2.0.” Now that new efforts are emerging in 2023 to seek afresh ‘management 2.0’, it is instructive to examine why the progress in reimagining management over the last decade were so limited and where the future of management might truly lie.
1. Management 2.0 Is More Than A Set Of Case Studies.
The 2012 HBR/McKinsey contest to discover “management 2.0” is instructive. After collecting 140 different ideas, the organizers declared two “winners: a tomato-processing firm, The Morning Star Company, and an oil company Statoil (now Equinor) along with several “special mentions”: Rite-Solutions, Genentech, DaviPlata, and Ashoka. The sponsors did not attempt to identify any common management patterns that made this collection of firms the best. Consequently, no coherent theory of an enhanced discipline of management emerged.
2. Management 2.0 Is More Than A Set Of Processes
What should be included in Management 2.0? In June 2023, management guru Gary Hamel spoke for many when he defined management as “simply the tools, the methods, processes, and structures that we use as human beings to do together what we couldn’t do alone.“
And indeed, the idea that management is a set of methods and processes has a long history, beginning with Adam Smith’s pin factory (1776), Frederick Taylor’s concept of “scientific management” (1911), the efforts of the Ford and Carnegie Foundations (1950s) to instill “scientific processes” in the teaching and research of business schools, and the business process re-engineering movement (1990s onward). It is still reflected in business school textbooks, the World Management Survey, and ISO standards of innovation management.
Processes—objectively observable activities that interact to produce a result—are of course central to management. When properly identified and implemented, processes form the basis for successfully scaling a firm’s activities. Most of the economic gains of the 20th century flowed from the deployment of management processes.
Yet processes tend to be backward-looking and may fail to provide solutions in a rapidly changing context that requires doing something new and different.
Second, processes are inherently repetitive and likely to be dispiriting to those executing them, as satirized in Charlie Chaplin’s movie Modern Times.
Third, the assumption that management is simply a set of processes can be taken to imply dismissal of the subjective dimensions of management that are key to manage a rapidly changing world: mindsets, mental models, values, attitudes, narratives, passions, purposes, assumptions, and culture. (Figures 3,4,5 below)
3. Management 2.0 Is More Than A Single Dimension
Much of today’s abundant management literature consists of single-dimension ideas that aim to set management aright. These schemas or frameworks often come with catchy metaphors or labels, like The Crux, or Loonshots, or Blue Ocean Strategy or the Business Model Canvas. These efforts are often well-meant. But they run the risk of distracting attention from all the other complex multiple dimensions of managing an organization. Such ideas often have little chance of success unless and until the other dimensions of management are also addressed.
4. Management 2.0 Is More Than Evidence-based Management
In 2006, the HBR article of business school professors Pfeffer and Sutton noted that the practice of management could profit from evidence-based practices, like the health sector. Yet evidence-based management, while providing useful insights, has not yet transformed management. One reason is that the complex multi-dimensional world of management ecosystems is less amenable to such simple health sector remedies, like penicillin.
Moreover, in a rapidly changing world, what worked yesterday, may not work tomorrow. It’s not that evidence is irrelevant. It’s just not enough. There is a need for abductive reasoning and consideration of Roger Martin’s key question explained in A New Way To Think (2022) what else would have to be true for this idea to work?
And which evidence is admissible? When evidence-based management is limited—explicitly or implicitly—to the concept of management as a set of processes, it may miss the huge role that subjective factors like mindsets and culture play in generating results.
5. Management 2.0 is More Than Prioritizing Happiness
Another possibility for management 2.0 is to embrace alternative goals. Mark Esposito, in his article, “Embracing a Human Centric Economy,” suggests “a paradigm shift for a better future… a shift towards a more human-centric economy that prioritizes people’s well-being and fulfillment over pure economic growth. “There is a need for a shift our focus from GDP growth to measures of well-being and happiness. Bhutan, with its Gross National Happiness Index, serves as a pioneering example of a nation prioritizing the well-being of its citizens over material wealth.” Yet the question remains whether Bhutan, one of the least developed countries in the world, offers a plausible model for the entire world. Making happiness the only goal risks missing the point that without economic growth almost everyone is unhappy.
6. Management 2.0 Must Accept Software Firms As Real Companies
The sponsors of the 2012 M Prize could have learned from Marc Andreessen’s 2011 WSJ article “Why Software Is Eating The World.” It documented how financial markets were undervaluing technology firms and how technology was fast becoming an essential ingredient in every sector of “the real economy.”
While digital technology is now central to all sectors, the news—still unwelcome to traditionalists—is that digital technology has to be managed differently. Andreessen’s predictions of “many more industries to be disrupted by software, with new world-beating Silicon Valley companies doing the disruption in more cases than not,” turned out to be prescient, even before AI.
7. Management 2.0 Must Embrace Subjective Mindsets and Culture
In thinking about management 2.0, it is thus timely to consider Peter Drucker’s insight that “the future has already arrived but is not yet seen by most.” The most successful firms today—the most valuable and fastest growing public companies in the world—are combining all of the above ideas.
A. Different Mindsets
First, the most valuable and fastest growing public firms tend to be run by people with strikingly different mindsets from the traditional process-driven firms and these mindsets that are now emerging in every sector (Figure 3).
B. New Processes To Support The Mindsets
At the same time, these firms have tended to re-imagine their processes so as to reflect and support the different mindsets. Many processes have had to be retired. As the firms grew and scaled, traditional processes of budgeting, HR, sales and marketing also had to be rethought (Figure 4).
C. New Assumptions To Create A New Culture
Finally, these firms tended to find that the barely conscious assumptions (or culture) of the firm were critical handicaps to innovation. These assumptions had to be identified and eliminated like a set of potentially harmful viruses (Figure 5).
Three Driving Forces
These three characteristics—one, mindsets, two, processes that reflect and support the mindsets; and three, the underlying assumptions of culture that had to be brought in line with the mindsets and processes—are three forces that tend to drive the most valuable and fastest growing firms on the planet.
Of the three driving forces, the first—the different mindset—is the most important because it determines everything else. The second is also crucial because the processes enable a firm to scale. But the third, ferreting out, and celebrating, the assumptions of a reimagined culture—is the most difficult. It operates at a barely conscious level, but it is the element that holds the other two forces together.
All of the leading firms are flawed in various ways, yet performing better than traditionally-run firms in the eyes of the stock market—the Grim Reaper of public companies. If these trends continue, many traditionally-run firms may not survive. That is why the combination of these three elements currently represents the strongest hypothesis yet for Management 2.0.
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