Managers are being told from all sides, including the authors of Thinking Managers, that their world is being turned upside down, that revolution is in progress. This is no passing coup d'etat, either, like the corporate raids of the Eighties. The revolution is seismic, and companies and management will never be the same again. Yet the managers at the epicentre of this earthquake seem oddly detached. Talking to them, speaking to their conferences, studying their companies - you don't see much reflection of the management mayhem described in the media.
There's a parallel with the electronic revolution, which is, of course, basic to the predicted remaking of management and commerce. The media were far quicker than managers to cotton on to the enormous implications of the Internet for every aspect of corporate activity. If you look at magazines like Fortune or Business Week today, the 'electronic' coverage is now dominant - occupying a far higher proportion of the space than the still tiny share that e-commerce holds of world trade.
CREATIVE COMPANIES
A special issue of BW, published in August, devoted 87 pages to 'The 21st Century Corporation' - meaning the e-business. The argument is that the balance of power has shifted permanently to creative companies that are best at turning ideas into reality and whose decisive capital is intellectual, not physical. 'To thrive in this new century', writes John A. Byrne, 'companies are going to need a whole new set of rules'. Are you and your organization poised to thrive? If you can answer the following 18 questions with a true 'Yes', the 21st Century will be your Happy Hunting Ground:
1. Is your company organized as a web or network, and not as a pyramid?
2. Is its focus external, not internal?
3. Is management style flexible rather than structured?
4. Does the company draw its strength from change, and not from stability?
5. Does its structure consist of interdependent entities, not self-sufficient units?
6. Are its key resources 'bits' of information, not physical assets?
7. Are operations 'virtually' integrated, not vertically integrated?
8. Are products mass-customized, rather than mass-produced?
9. Is the company's reach global, not just domestic?
10. Are financial reports real-time, not quarterly?
11. Are inventories measured in hours, not months?
12. Is strategy created bottom-up, and not top-down?
13. Is leadership inspirational, not dogmatic?
14. Are workers treated as both employees and free agents?
15. Are job expectations built roundpersonal growth, not security?
16. Are people motivated to build the business, and not only to compete?
17. Does the company look for and obtain revolutionary gains, and not just incrementalimprovements?
18. Is quality a no-compromise, total 'must', not merely the best that can be afforded?
There may be some 18-yes companies around, but I have yet to meet one. The problem is not only that the weight of the firm's history pulls in the opposite direction, but that human nature is often inimical to the new order. For example, leaders love to lay down the law: it's easier and quicker than inspiring a consensus to which all levels contribute. At the receiving end, letting somebody else take the major decisions lets you off the hook. Then, most people are uneasy in unstructured situations; in a hierarchical pyramid, at least you know where you are.
STABILITY v CHANGE
For much the same reason, stability reassures and change is worrying. In fact, people are so wedded to established ways that relatively few companies have made the purely technical changes that would save costs and improve management quality without causing any major disturbance or investment spending. Examples are real-time financial reporting; reducing inventories by just-in-time and other methods; or using the full potential of the Internet to network the company internally and externally.
What stops managers from picking these easy plums? Their strange inertia is well-known to consultants, whose problem (to change the metaphor) is not leading the horse to water, but getting him to drink. Inertia springs from a deep, sceptical conservatism that has some foundation in current realities. The scepticism is well-expressed in BW by Andy Grove, the guiding light of Intel and thus one of the information revolution's great pioneers. He takes a definitely sober view of the degree of change involved for management:
'I've lived through 40 years of management, and people haven't changed in those 40 years, so I'm a little sceptical. Our fundamental organizations haven't changed on paper. On the fringes, there is more looseness in the organization. But more hasn't changed than has. Things have changed, but the left brain [the technology side] says they should be galloping. The right brain [a manager's brain] says there have only been slow, gradual changes in the way we operate organizations.'
EVOLUTIONARY WAVES
In historical terms, Grove is correct. Great changes come about in long, slow evolutionary waves, even if the changes are marked by ferocious revolution from time to time. Thus the French, Maoist and American revolutions can all be seen as steps in the long progress of mankind from political and economic slavery to personal independence and democracy. All the same, there was no comfort for Marie Antoinette, Chiang Kai-Shek or George III in knowing that their disasters were only incidents in the long march of history.
Managers who relax before the challenges of the 21st century risk similar fates. Being lulled by a Grove-like belief in continuity can bring total disaster in discontinuous times. For that view, there is no better advocate than Andy Grove himself. His excellent book, Only the Paranoid Survive, is built round his theory that vastly powerful '10X' forces produce 'strategic inflection points' that companies ignore at their deadly peril - like all the mainframe computer firms which failed to see the 10X implications of the microprocessor (the key to Intel's and Grove's stupendous success).
Maybe there are more similarities than differences in the ways that Unisys, Digital, IBM, etc. were managed before and after disaster struck. But the degree of change and decay in their fortunes (even IBM's) was so catastrophic that the continuities dwindle into insignificance. Moreover, the continuous elements in management may not persist because of their inherent relevance, but because of the very reluctance to change which makes companies miss the 10X forces and strategic inflection points in product technology. In other words, it's a self-fulfilling prophecy; if you don't believe that there's a need for radical change in management, you don't change - thus proving your own point.
The magazine's other interviewee, John Chambers of Cisco, clashes head-on with Grove on this critical issue. In his view the Internet 'is about survival' and is 'essential to the future of any company'. An example is management accounting. Chambers 'can now close my books in 24 hours. I've known for a month what my earnings are for this weekend. I know my expenses, my profitability, my gross margins, my components'. The conservative response could be 'so what?' After all, the basic principles of management accountancy are the same now as they were 40 years ago, to cite Grove's career span. In fact, the new facility is by no means revolutionary only for management accounting; rather, it is revolutionary for management, period.
Because Cisco's data is in real-time web format, 'every one of my employees can make decisions that might have come all the way to the president...Quicker decision-making at lower levels will translate into higher profit margins'. Chambers reckons that he and his chief financial officer will be saved from making 50 to 100 decisions a quarter. By any criterion, this is a major step forward in the technology of management. This is the vital point that Grove misses: 10X forces and inflection points apply in managing human beings, not only in managing technology; that's true even though the humans do not change.
INDIVIDUAL BRAINS
Individual brains, as Grove says, don't and won't work any faster. But many brains working together are much more effective than a single brain working alone, no matter how powerful the lone mind. The Internet allows real-time collaboration across all frontiers, with consequences that will only become fully apparent over time. That last word - time - is another critical factor. If managers can get the information they need much faster, they have more time in which to analyse the data, to think constructively on the basis of their new (and old) knowledge, and to act.
Management is by no means the only area in which non-product technology is having a revolutionary impact. The technology of production is being transformed by the ability to disseminate information at high speed and to control product variations - making possible the mass customization referred to above. That merges with the technology of service, where CRM (customer relations management) will become essential for survival, if you believe Chambers: 'Customer priorities will change so rapidly and what [customers] will pay a premium for will commoditize so rapidly that if you don't have your finger on the pulse, you're going to be in trouble'.
CRM is only one example of the revolution in the technology of service that, along with the revolutions in speed, production, product and global marketing, is confronting managers everywhere with a simple choice: between joining the revolution or being overrun by its consequences. How can a static business compete with rivals whose productivity is rising by 20 to 40% a year, as Chambers predicts? How can the rivals to Corning Glass stay in business unless they match its reduction of procurement costs by 95%?
FINANCIAL GAINS
In financial as well as competitive terms, the orders of magnitude are staggering. Dell Computer now enjoys negative working capital. That is, the customers pay Dell direct for their computers before the suppliers need to be paid. Because customers specify exactly what products they want, Dell also manufactures only what it sells: no write-offs, and no unsold stocks - which helps to produce an inventory turn of 60 times a year. That figure was only six times six years ago, which stresses another absolutely critical point: change is happening very fast.
This acceleration is ignored by conservative followers of Grove's line. He gives a riveting account of the 1980s, when his company, almost destroyed by Japanese competition in memory chips, abandoned them and concentrated on microprocessors. It took several years for Intel to face the harsh facts, as 'meetings and more meetings, bickerings and arguments' resulted 'in nothing but conflicting proposals'. Even after the exit decision had been made, it took another year to sell the strategy internally and complete the switch - and a year to return to profit.
Would an Intel be allowed so much time today? That is highly doubtful. But it wouldn't need so much, either. With digitized management, everybody would have been in full, simultaneous possession of all the facts, including customer attitudes. The debates would have taken place primarily over the intranet, and the switch would have been implemented much faster, and with fatter, earlier returns. Andy Grove was a truly great manager in his day. But a new day has dawned - and only new ideas and thinking will win that day.
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