“The Why, What, and How of Management Innovation”
Harvard Business Review
The first paragraph was just too alluring to ignore: “Over the past 100 years,
management innovation, more than any other kind of innovation, has allowed companies to
cross new performance thresholds.” It beckoned the reader to continue. Was this the magic
article of articles that would finally settle the issue and provide the perfect formula to instill
creativity and innovation in the most insipid of organizations?
A lot of writings on leadership, management, innovation, and creativity talk about
the importance of such an environment. However, this article highlighted an important
concept: the effectiveness of management innovations are tightly intertwined with its
governance or decision-making powers within an organization.
The overall contention of “The Why, What, and How of Management Innovation”
by Gary Hamel, is that management systems, not processes, are what drive innovations in an
organization. Instead of relying on an institutional R & D division with long-established
processes for innovation, an organization must be able to provide an environment to
continually examine and improve processes, to the point of reinvention, if necessary. Of
course, not every redefined process can successfully breed innovation. In fact, the author
states that with every idea that delivers competitive advantage, there are many others that
stumble. They key (and biggest challenge), however, is an environment that continually
breeds truly novel ideas.
The article uses real-world examples to illustrate how industry-transcending
organizational innovations in management and processes can be. Some examples cited:
General Electric - Industrial research laboratory resulting in more patents
than any other company in America and a management focus that countless
companies have attempted to replicate
DuPont – capital budgeting and return on investment calculations to make it
one of the most formidable industrial organizations in the country.
Proctor & Gample – A brand management strategy that has established an
empire that includes 16 brands that have produced more than $1 billion in
Visa – Built a unique financial network that fulfilled a need caused by the
overwhelming popularity of credit cards. The company now includes more
that 21,000 financial institutions, and roughly 1.3 billion cardholders.
The author defines Management Innovation as the following:
A marked departure from traditional management principles, processes, and
practices or a departure from customary organizational forms that significantly
alters the way the work of management is performed.
He then outlines three conditions, one or more of which must be met to create long-lasting
industry advantage: the innovation is based on a new concept that challenges the norm, it is
universal in nature (encompassing a range of processes and methods), and is part of an
ongoing development initiative.
That concept reinforces the concept that has been discussed throughout the course
starting with Gordon MacKenzie’s “Hairball” book. This article offers pragmatic,
applicable steps in exploring innovative management opportunities. The article supports the
contention that leaders of an organization must go from being chief strategists to being
skilled facilitators in order to effectively establish an innovative culture. In other words, the
fundamental basis for creativity is a bit contradictory in nature because it requires those who
have the decision-making authority (e.g. CEOs, Executive Teams) to relinquish that very
authority. What is fascinating in all of these discussions is the examination of who actually
bears the decision-making power and to what degree that power is extended.
In a typical business setting, governance and strategic decision-making is highly
centralized. Even among the companies stated above, a high level of centralized power still
exists despite its successes. However, it is increasingly common in the current business
environment that organizations have not only accepted more widespread governance, but
embraced it. Whole Foods Markets, as highlighted in this and many other articles, has
enjoyed tremendous success and notoriety through its decentralized power structure.
However, such a dramatic shift in an organization is most commonly occurs when an
organization faces immense challenges or crises which usually includes a newly established
executive or re-engineering. It may be that those situations are the only ones that can
facilitate real management innovations.
At the conclusion of the article, the author offers valuable suggestions to accurately
assess an organization’s existing management processes. He then suggests exploring low-
risk, quick-win trials. Lastly, the objective is to have a portfolio of experiments that can
foster innovative ideas.
In my professional employment, I have the unique opportunity to participate on what
is called a “Transformation Team”. It is charged with addressing any issues relating to
major organizational changes in the Department of Technology Services. I distributed this
article to the group members and asked them to brainstorm potential ideas to help address a
growing concern among executive managers. The relationship of the CIO (also the
Executive Director of the Department) and frontline employees. The CIO works regularly
with high-level managers and directors, but in the 18 months he has been installed with the
State of Utah, he has had little interaction with line staff. Here are some of the ideas that
A weekly forum
Online discussion board
Exceutive Assistant for a day
Executive Management Lunch with employee of the month
The greatest opportunity is the novelty of processes that never before existed and the
fallibility expected by stakeholders, giving the organization room to explore, assess, and
innovate – room for creativity in government!
“The Why, What, and How of Management Innovation”