The Entrepreneur's Mentor

The Future of Management

Gary Hamel's books have always been fascinating and relevant, but perhaps none more than his most recent, The Future of Management. He argues strongly that management innovation will deliver big payoffs in the future for businesses which adopt it.

Hamel defines management innovation as "anything that substantially alters the way in which the work of management is carried out, or significantly modifies customary organizational forms, and by so doing, advances organizational goals. Put simply, management innovation changes the way managers do what they do, and does so in a way that enhances organizational performance."

Management innovation encompasses value-creating changes to organizational structures and roles. New ways of connecting business units or departments or new ways to form alliances or strategic relationships with suppliers or customers can be management innovations.

Management innovation goes right after management processes, which include strategic planning, budgeting, project management, hiring and retention, training and development, employee assessment and review, internal communications and knowledge management.

Hamel urges that management innovation yields the most positive results and the greatest competitive advantage when one or more of three conditions exist. They are:

1. the innovation is based on a novel management principle challenging a sacred cow type orthodoxy.
2. the innovation is systemic, spreading through a gamut of processes.
3. the innovation is part of an ongoing creative burst in which progress can compound over time.

The book is, quite simply, brilliant. And it is consistent with previous Hamel.To win in the future we need to give up the past. Start your innovation initiative with a problem that is important (consequential). The problem needs to be one that will motivate action on everyone's part. Hamel says it should be "inspiring, essential and laudable."

So, instead of just encouraging everyone to be creative in coming up with solutions to their individual issues, there should be a systemic look at our processes to see if they are obstacles to achievement.

Managers can be invested in the past. Their entire careers can be based on the way things have always be done. They assume there is wisdom behind those choices. And there may well have been at one time. But the world has changed and continues to change and many of those tenets of the past have become irrelevant, or worse have become obstacles to success.

I have had some personal experience both as a business owner and a consultant in this area. My employees have always been far more expert than I in the subject matter of my businesses. On numerous occasions I have asked why we do something a certain way, and they have adamantly argues that it is the only way to do it and it has always been done that way. Forcing them to look at other alternatives was always a painful but illuminating process.

And as a consultant, it is easy to ask "innocent' questions about process and to listen to the responses, which typically range from confident to defensive.

Remember, people have a great stake in the way things are and they will defend their turf with great vigor. What a great challenge to orient your company toward the future and point it away from the past. It is a high stakes game. It can pay great rewards.

Hamel points the way. I am sure I will blog further on this book as it is an important one. But, in the meantime ask whether your management processes are preparing you for the future, or even working in the present. You might be surprised about what you find.

Critical Thinking, Part 2

Critical thinking is multi-layered, multi-dimensional. It is not simply considering more than one solution to a problem before making a decision. It is also looking at the problem through multiple lenses.

What is our vision and mission? Which solution is most consistent with them? Will get us closer to them? Which one will help us achieve our goals, or at least getting closer to achieving our goals?

What organizational values come into play in this decision? Which solution is most consistent with our values?

What behaviors will be exhibited under each alternative? And what do those behaviors say about us as an organization?

What about short term vs long term? Which interest do we pursue?

What about when different solutions each support competing priorities?

Every year hospitals look at their relatively small bottom line (relative to revenues anyway) and have to decide how to allocate those funds. Do we get an MRI machine or spend on a new cardiac treatment center? Do we hire more nurses or bulk up our emergency department? How do we decide?

One filter may be to look at things strategically and not tactically. Which alternative, if any, best fits our strategic plan?

Which will have the most positive impact on our culture?

Decision makers are not just going through alternative solutions and picking one. They need to run them through a checklist of filters; look at them from different angles and make decisions based on the most relevant factors.

Nobody said it was going to be easy. And after all that, you still may not be right. But your chances are better using a solid decision making framework.

Critical Thinking

One of the key competencies required of business leaders is critical thinking. Everybody has it to some degree. Utilizing it to the right degree is very important in business success.

Many entrepreneurs are solutions oriented. They see a problem. They attack it. They solve it. They move on. Sounds good, right? Efficient? Not exactly. That behavior is only good if the quick solution is based on experience, analysis, strong intuition or near certainty.

Coming up with "A" solution is not the same as coming up with the best solution. Critical thinking is using the filters listed above to consider a number of solutions and then making a decision in a timely manner. Before any decision is made, the "decider" (thank you George Bush for that word) needs to think about the possible consequences, both plus and minus, of that course of action.

Is the reward worth the risk?

Suppose that you are pitching a piece of business to an important potential customer at a critical time for your business. You and two of your high level colleagues are meeting with a key decision maker. He says "Honestly, your proposal is very similar to that of two other companies, maybe a tad better. I could choose any one of the three of you and not be faulted. If you were to give me some 'personal incentive' to choose you, the business is yours. Take a moment to consider that." With that, he leaves the room.

Your two colleagues immediately jump to the question of what and how much the payoff should be. They already see the solution. Give this guy some sort of kickback.

Stages of Entrepreneurial Growth

Entrepreneurialism is a state of mind. We know that. It is what pushes people to start businesses or alter the course of existing businesses. It is what fuels ideas and turns them into evolutionary or revolutionary products and services

It is what makes legends out of Bill Gates, Steve Jobs. Michael Dell, Sergei Brin and many others.

But, stop and think for a moment. At some point each of the above had to shift gears and recognize that they had to become more organized as they became more complex. They had to bring in professional managers to help them build the necessary organization around their entrepreneurial ideas and ideals.

For all of the great ones we hear about, there are many times that number we don't. One of the reasons for that is a failure to recognize that an idea must becomes a more concrete business. Structure must be built around in, not to forge it in stone and make it stagnant, but to support it and give it a foundation for growth.

If an idea takes off in a small company, there should be a plan in place to add systems, process and structure. Those words may set off alarm bells in some, but take them seriously. Those that don't can easily drown in their own success. Infrastructure is needed to facilitate growth

When you start getting hundreds of orders for your widget, you will need someone to fill them, because you can't do it all yourself. You will need some procedures on how to handle fulfillment, how to track it, how to match inventory to orders. And as you get bigger still, the procedures will have to be passed on to more and more people and to the people who manage them, etc. Before you know it, you have a corporate structure in shipping alone.

That structure will need to grow in procurement, manufacturing, order processing, accounting, human resources, sales, marketing, etc. And then all of these areas will have to have lines of communication, reporting and accountability.

I have always urged early stage entrepreneurs to envision their structure early on. It can always change later. But I make them do an organizational chart, even if all of the boxes have their name in them. At least they get the sens of how the organization should work.

As they hire more people, they can remove their name from boxes and put in those of the new hires.

Structural changes should be evolutionary- gradual additions, subtle shifts, well-rehearsed next moves.

Preparing for growth and handling it professionally are keys to organizational success. When I was growing businesses in the 1990s, I found books by Eric Flamholtz helpful in putting things in perspective. Of particular use was his volume Growing Pains: Transforming from an Entrepreneurship to a Professionally Managed Firm. I know that not everybody is a big reader, but this one volume can be a big help in guiding entrepreneurs through tough transitions.

And if you don't want to read but need help nonetheless, there are always consultants such as myself, who work with companies to assist them through the tough stages.

Don't ignore the need to become structured and more professional. That doesn't have to mean bureaucratic; it doesn't have to be negative at all. Done right, this transformation continues to cherish the entrepreneurial spirit, to nurture it and to give it long, sustained life.