Management Ideas and Actions: Ideas are one thing in management, but putting them into action is something else

Managers love ideas - especially big ones. Or so you might conclude from the output of academics, other management writers, seminar organisers, consultants and the rest of the managerial support industry. Few of the supporters, though, ever question how much impact their idea-peddling has on the great majority of practising managers - or even on the minority who determine the fate of major organisations.

How many managers, for example, have been directly influenced in their actions - day-to-day, month-to-month, even year-to-year - by the Six Forces theory on strategy formation? Or the 'core competences' concept? Or the idea of disruptive technologies? Or the description of 'emotional intelligence'? The ideas have made the fame, respectively, of Michael Porter; the duo (now disbanded) of C.K. Prahalad and Gary Hamel; Clayton Christensen; and Daniel Goleman. But have the ideas made anything else for anybody else?

The first point to stress is that all four theories are based on observations of purported fact. The resulting insights are not necessarily earth-shattering. Porter identified six forces which appeared to be dominating strategic action. Prahalad and Hamel concluded that what you do particularly well is the determining basis of organisational success. But Christensen noted that concentrating effectively on what you've done well in the past debars you from competing successfully in new ways. And Goleman saw that how people feel has more influence on their actions than how they think.

SHATTERING PARADIGMS
Stand up anyone who thought differently on any of these points. Also, stand up anyone who has knowingly applied any of the ideas in practice. Yet all of them are identified in the Harvard Business Review as 'truly big, paradigm-shattering ideas' that 'don't just advance the conversation; they permanently alter it'. Even if that's true of these truly big concepts, altering conversation and altering action are very different activities. Remember, too, that the 'paradigm-shatterers' begin with description. The thinkers are writing about what is before 'what should be'.

'Should be' is another concept in itself - the idea that managers, by acting differently, can alter the fortunes of organisations in successful ways. But choosing the difference means difficult choices. To take the HBR list, how do you reconcile the development of core competences with the encouragement of disruptive technologies that may fracture that core? Christensen comes up with a convincing solution: you spin off the new disruptive enterprises from the main corporate body. There are precious few examples, though, of companies sacrificing their whole cores in favour of something new.

When asked for an example of such mighty transformation, Hamel, speaking at a public seminar, nominated Monsanto. But the company's decision to switch all its emphasis to bio-science led straight into the public relations horrors of the fight over genetically modified foods. The company lost both its reputation and its independence. Generally, transformation is rarely achieved because managers don't truly want themselves or their organisations to be transformed.

PROVOCATIVE CONCEPTS
That being so, transformational ideas have little chance of translation into deeds. The HBR editors inadvertently illustrate the difficulty by highlighting 'five provocative concepts that are shaping management now'. While something less than paradigm-shattering, all the five do challenge earlier concepts once thought to constitute 'breakthrough ideas'. Here are the old ideas with the new challenges:

1. Every company establishes a 'business model' which determines its strategies and tactics...BUT nobody has really defined 'business model' - and the new thinking is to concentrate on the basics and on 'simple rules' that 'govern key processes'.
2. Companies must reinvent themselves or die...BUT reinvention (or the 'radical change imperative') can destroy what is truly valuable without creating anything of equal value.
3. Effective leaders follow a distinct pattern of transferrable, strong personality traits...BUT ego is less important for effectiveness than the 'authenticity' of the leader.
4. Managing people as individuals is the key to corporate achievement...BUT connections between people matter more for effectiveness than individual nurture.
5. Physical science is determining the speed and force of technological change (viz, the Internet and all its works)...BUT the current century looks like being the era of biology.

Blinding glimpses of the obvious abound in this list. First, every company actually does have a business model. The phrase probably stems from information technology. You can 'model' any business process or set of processes - right up to the national or even the global economy. At its simplest definition, the business model establishes the relationship between how a company earns its revenues and how it generates its costs. Compaq, for example, had a highly successful model that rested on selling highly engineered products at high prices, just below those of market-leading IBM. The model generated gross margins of 50% from sales limited to part of the market and to dealer-only distribution.

This paradise was shattered by competition from other, lower-priced IBM clones. New management adopted a new model: Compaq would supply the whole market through wider channels at lower prices, which aimed at all competitors: thus halving gross margins, but targeting much greater volumes to match and then surpass its former record levels of sales and profits. Model Two left the huge success of Model One far behind as Compaq soared past IBM to become the world leader in PCs.

The relationship between margins, volumes and profits is simple, basic and easily modelled - with pen and paper, never mind a computer. You can quickly model how much volume has to rise to justify a price cut, for example. Compaq's changed management had the courage to act on this logic. In the process, they radically transformed the company. The baby was not thrown out with the bathwater - because every change had a specific business purpose in view and was carefully monitored to ensure that the purpose was well and truly served.

ILLUSORY CHALLENGES
So two of the HBR challenges prove to be illusory. What about the next two - 'leadership' and 'people relationships'? For a start, they plainly belong together. The leader, whether or not driven by a vast ego, can only lead through causing and directing relationships. The leader cannot lead by force of personality alone: nor will effective communication do the trick solo. You can no more have effective leadership that doesn't communicate effectively than you can have effective communication that doesn't spring from personality.

Nor, except in very rare and remote circumstances (like a researcher marooned in a mountain-top lab) can you have an individual who works in isolation - or whose work stands alone, without any need for contributions from others. The HBR specifically makes this point. So why does the Review think that 'social connectedness' is a 'new focus'? What's the difference between 'fostering stronger connections among people' and the age-old emphasis on teamwork - and team leadership? What is meant by 'social networks and the norms of reciprocity and trustworthiness that arise from them' if it doesn't include people working in teams?

The quote above comes from a 1995 tome, Bowling Alone, written by sociologist Robert Putnam, which has been followed by several authors looking at management in terms of 'emotional intelligence'. Once again, these ideas put new clothes on old and familiar concepts. Take 'emotional intelligence'. Who ever thought that effective management was an exercise in intellect alone, or that intellect was the principal determinant of managerial and business success?

To return to Compaq, Eckhard Pfeiffer, the German saviour, may or may not have been brighter than Rod Canion, the founding CEO. But Pfeiffer wasn't blinded, like Canion, by emotional attachment to Compaq's first success. When his own moment of truth arrived, as the company came under threat from direct-selling and its fateful purchase of Digital Equipment, Pfeiffer got stuck in his own emotional trap - and fell in turn.

THE COMMON THREAT
The lesson from these episodes is that all successful managers face a similar threat: that a time will come when, for whatever reason, they have outlived their usefulness. If they are identified with a failed business model, a counter-productive change programme, over-dominant leadership, or dissension at the top, the solution is strictly clear: change the leader. That's what BMW did when its ventures into a broader product range, buying Rover and Land Rover, paid no market dividends, but cost huge losses. The Bavarian company dropped its leader, and returned to a model built around excellence and concentration on executive cars - and won quadrupled profits as its reward.

As an idea, removing people identified with failed policies and execution is hardly new: if it 'shatters' a paradigm, that's only because the reluctance of boards of directors to act in time has become a paradigm. BT, for example, only fell into losses, a passed dividend, halved share price, and massive debts because of top management failures dating back years. Yet the chairman, Sir Iain Vallance, was only replaced on the eve of the dividend shock: and, still more oddly, the chief executive, Sir Peter Bonfield, was left in situ.

Business, obviously, is not 'driven by smart ideas', but by deeds - clever, foolish and neutral. The big books and interesting articles don't actually direct events, but flow from them. In the practical world of business, managers are coping with hard facts that result from changes outside their control - like these:

• Business isn't as usual anymore. Management needs to develop the company's direction and purpose anew on a continuous basis.
• Fulfilling that purpose requires concentration on a well-defined market - and rules out diversified and uncoordinated interests. Technologies and markets have become so volatile that innovative attack is the best, maybe the only form of defence: and that means innovative corporate organisation.
• People are asserting their individuality more throughout society: you need to use that individuality to innovate and to animate the new corporate forms.
• Those forms are becoming much less rigid because of the need for many more inter-relationships, crossing boundaries inside and outside the firm.

FUSION OF OPPOSITES
Note how these five developments mesh with each other. You don't need to read tomes (Putnam's Bowling Alone runs to 544 pages) to recognise that they are realities of your managerial existence. But don't be like Canion, Pfeiffer, Valance and Bonfield. Don't turn your back on the realities, but suit your actions to the real requirements. That means starting with intense examination of your business model (which exists whether you know it or not) and asking whether it still meets your objectives. If not, revise or replace the model and make all consequent changes as necessary. But never forget that management is essentially paradoxical - it's the fusion of opposites.

Thus, the HBR quotes a banal definition of winners by Michael Porter: they 'display the discipline and focus necessary to establish a distinctive competitive positioning and then stick with it, no matter which way the winds blow'. A mere paragraph later, the editors observe contrarily that 'none of this means that companies should become rigid: flexibility still matters'. Your guide out of this management maze is to remember that one simple theory matters most. Stick with what works well. When it doesn't work any more, change it - for something that works even better.