Disrupting the Management Model and the Role of Distributed Decision Making

Cleaning out some boxes recently, I came across old photographs. It was not the photographs themselves from 1980 that caught my attention. It was the envelop they were in. For baby boomers like me, you’ll recall those ubiquitous yellow envelops. The memories of waiting patiently to get the film developed. Then hours spent filling albums.

The story of Kodak is a good way to reflect on the management model and how it is being disrupted (1). In 1980, the seeds of Kodak’s demise were already in place (2). It had invented the digital camera, but addicted to revenue from its traditional business model, it ignored why customers wanted photographs. Kodak filed for bankruptcy in 2012.

There are of course many other examples. All illustrate a failure of the management model.

What comes to mind when you think about your management model? I am sure you want to be more efficient in everything you do. Maybe that’s driving your emphasis on lean (3). The organization chart and hierarchy might come to mind.  What about the processes in place to control the business, such as budgeting, the endless procedures and policies? Above all else, achieving your quarterly numbers and the predictably of those numbers is paramount, especially if you are a public company.

These concepts we all take for granted constitute the traditional management model. How companies are managed has been around since the beginning of the 20th century. Prior to about 1890, 90% of the population in America was involved in agriculture. Manufacturing consisted of self-employed artisans, maybe involving 2-3 people. That all changed as the industrial revolution unfolded and the need to manage large organizations to efficiently manufacture mass-produced products. Thus was born the management model as we know it.

It is clear that the traditional management model, built for the industrial age, is under attack. It will not survive, and organizations that continue to rely on its basic tenets will likewise not continue to exist over the long term. The traditional management model was built for a time when change happened more slowly.

What is causing this disruption? In my opinion, the internet and the digital revolution is the primary cause. It has obviously impacted every aspect of our economy and society in general. As a result we live in a time of exponential change, of hyper-competition, of lowered barriers of entry due to technology. Knowledge has now become a commodity. Ideas and people flow seamlessly around the globe. And finally, a social awareness of our limited resources and the impact of our organizations on employees and society is changing our understanding of the purpose of our organizations. Do they exist just to make a profit, or is there some higher purpose?

How will the management model need to change in order for your company to be more adaptable and prosper long-term? First, you need to shift your focus on the source of competitive advantage. Products and business models can be easily duplicated today. The management model and culture, however, can be a source of true, sustainable competitive advantage. You should be spending as much if not more time on how you will change your management model and culture as you do on new products, innovation and improving efficiency.

Second, a key insight is to use the internet as a model of distributed decision making to replace the traditional hierarchy.

A centralized decision making model works well when change happens slowly. A distributed decision making model is very adaptable in fast moving environments, but the process can be more chaotic.

There are some good examples of how this has been applied. W.L. Gore is a classic example. Started by a DuPont engineer in the late 1950’s, they are one of the largest private companies. What makes them unique is their management model and culture. They push decisions far down into the organization, and hierarchy is de-emphasized. The open-source software Linux is another example, where there is really no formal organization and leadership is only based on the network’s willingness to follow them.

But there are challenges to a purely distributed decision making model. For one, it requires the CEO and senior management to give up some of their power. For those of the baby boomer generation currently running many companies that is easier said than done. The hierarchy and the “chain of command”, so important in the traditional management model is in embedded in their corporate DNA. And moving from a hierarchy to make decisions to a completely free-wheeling distributed decision making model will likely lead to chaos in established firms.

A recent book by Chris Fussell entitled One Mission: How Leaders Build a Team of Teams, might offer a solution (4). While the book focuses on how to foster teams, it actually applies nicely to the challenge of how to build a hybrid management model that keeps the traditional hierarchy, but overlays a way to cut through the clutter of the traditional “silos” and encourage faster decision making in a complex, dynamic environment: like the global business environment. It recognizes the importance of the informal organization.

Chris Fussell was the aide-de-camp to General Stanley McCrystal during a time in Iraq when the U.S. was struggling with how to combat an adaptable, fast-moving insurgency. One concept was to use daily “forums” that brought together key “nodes” in the organization to cut across the silos and get people together who had information someone else needed. The cadence of these will be determined by how fast your environment is changing.

The concept is illustrated below. You note a traditional hierarchy. Overlaid on that are specific nodes in red circles. The daily forums would bring these people together to talk about the conditions on the ground. In addition, McCrystal modeled a cultural change, pushing decision making further down into the organization. Making decisions faster was crucial and it allowed the military in Iraq to respond to threats more quickly.

While this concept is illustrated in a military context, can you see where it could apply to your business environment? Are you not experiencing the need to be more adaptable? How are you going to do that? This might be a place to start. But as with any significant change effort, it will require leadership from the CEO and senior management. And willingness to give up some of their power.

How are you going to disrupt your management model? Change is never easy. Wait long enough, and change will come. It will just not be the way you envision.

Notes:

  1. Gary Hamel has written extensively on the subject of disruption of the management model, including: Gary Hamel, The Future of Management (Boston, MA: Harvard Business School Publishing, 2007)
  2. Steve Brachmann. The Rise and Fall of the Company That Invented Digital Cameras. IPWatchdog, November 1, 2014.
  3. See this article for my thoughts on how the lean methodologies are abused: Abusing Lean Methodologies
  4. Chris Fussell, One Mission:How Leaders Build a Team of Teams (New York, NY: Penguin, 2017.

New Product Visions helps companies improve their innovation management practices. We focus on processes, organization, management engagement and culture. Services include consulting, workshops, and MyInnovationCoach training.

 

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