Digital Age Makes “Management As Usual” Untenable
If we go back to basics: digital transformation means, for business, to create more value for existing or potential customers by leveraging digital technologies. Let’s see it through 3 different lenses: operating model, business model and management model. Operating model includes changing logistics, manufacturing, finances, HR procedures etc. Business model supposes changing customers value proposition, products & services, distribution channels etc. Very often, it is neither the operating model nor the business model that constraints the company overall digital performance but rather the management model. Managers thinking and practices are stuck at being good at static efficiencies (operations, exploitation) rather than dynamic efficiencies (innovation, explorations). But digital age makes “management as usual” untenable.
Operational efficiency (how to grow outputs, usually financial outputs, per inputs) is backboned by a hierarchical production driven model which emphasizes volume and scale, short term improvement, refinement, routinization, control and cost reduction, standardization, specialization, planning and use of extrinsic rewards to shape human behavior. All these principles are focusing on the same problem: how to maximize reliability in large scale organizations. In others words: operational efficiency allows a good exploitation which includes Command & Control management. It is based on a pretty simple contractual mindset about employment. The employer provides salary and benefits in exchange for the employees time and effort. It’s a basic, transactional value exchange between two parties. Human resources systems are designed to ensure employees’ compliance with this contract of work. in this context, as Gary Hamel* put it, Command & Control praises the following talents ranking ladder: 1. Obedient 2. Diligence 3. Knowledge and intellect 4. Initiative 5. Creativity 6. Passion
This view of management has faded away with an attempt to promote a more humanistic outlook. But this attempt is still related to financial measures of performance. People are supposed to maximize the shareholder value. But how can one get excited about making money for people they have never met? The answer is of course : “one can’t”. The solution has been then, to concentrate power in the hands of a single individual: The CEO, alone responsible for the entire performance of the company. That is the heart - and brain - of the Command & Control. The shareholders have empowered CEOs to disempower everyone else. In other words, Taylor survives through financial returns. Problem is, boards and C suite don’t create value. Rather, managers and teams and their capacity to work together determine now how much value gets created. This truth is getting even more obvious with digital. When the goal is to create organizations that are highly adoptable: Command & Control principles are to be questioned, to say the least.
Work is not only a contract. In this digital era, work is also a relationship because collaboration is vital to address current challenges. Increasingly, companies are finding themselves enmeshed in “value webs” and “ecosystems” (platform capitalism anyone?). Each mission of the manager is reinforced by applications and artificial intelligence. Which means that each of them is enriched and gives rise to more uncertainty because it brews more information. Companies must nurture lifelong learning and intellectual curiosity as the most precious talents because knowledge will become obsolete more than twice in a lifetime. In this environment, companies needs both exploitation AND exploration. The danger lies in tilting too far in either direction. The explorers (aka digital managers) can easily fond into exploiters (classic Command & Control managers). But the exploiters cannot easily fond into explorers. In the end, by entropy, we need more of explorers. They are asked to innovate on a daily basis, that is to say to propose ideas, to take risks and to co create solutions with the users, their teams, the stakeholders without necessarily replicating what they know how to do it. In the “operational efficiency only” era, executives were focused on using machines to automate specific workflow processes. Traditionally, these processes were linear, stepwise, sequential, standardized, repeatable and measurable. Over the years, they have been optimized. But performance gains from that approach have recently been leveling off, as companies ring the last bits of efficiencies from this mechanistic automation. Now, to continue reaping the full potential of artificial intelligence, companies have begun to embrace a new view of business processes as more fluid and adaptive. In essence, they are moving beyond rigid lines toward the idea of organic teams that partner humans with advanced artificial intelligence systems. This digital context requires leaders to support the transformation of the mindset of their managers, from a codified management to an open one. The digital manager is a much more talented manager (I do not speak only of skills, easily obsolete) than the manager of the previous century. He must master both business skills, traditional managerial skills and the ability to project them into this uncertain and disruptive world of data. Exploration refers to experimentation in hopes of finding alternatives that improve on old ones. It thrives on serendipity, risk taking, novelty, free association, even madness, loose discipline and relaxed control. Taking again Hamel’s talents ranking ladder: 1. Passion 2. Creativity 3. Initiative 4. Intellect 5. Diligence 6. Obedience
This transformational change needs managers to unlearn years of habits. This change is deemed a profound change as it requires a matching in inner shift of peoples values, aspirations and behaviors to go with the outer shift in processes, strategies, practices and system. The organization does not just do something new, it builds its capacity for doing things in a new way. In other words, it builds capacity aka agility for ongoing change. Intellectual humility from everybody is needed because this is the ability to acknowledge that what we know is sharply limited. Then we are more apt to see that the world is always changing and that future will diverge from the present, hence recognizing the power of exploration!
* Gary Hamel, The Future Of Management, Harvard Business Book Press, 2007.