Businesses are changing faster and faster. To overcome that we need to broaden our concept of innovation – innovations about new ways of working. Innovation is the exploitation of new ideas, it can be a new idea for a widget. It can be a new idea for an iPhone or it can be a new idea for a budgeting system.
Take the historical example of last hundred years of evolution of the car industry. And we can see, roughly speaking, three generations of leaders. The first generation of leadership was Ford Motor Company. Ford was the company that first popularized the car. They created a Model-T Ford, a car that people could afford. They did it by essentially innovating the assembly line. It really democratized the car. And that put Ford into a prominent place.
In the 1930s, the big change was that General Motors took over the leadership of the car industry with an innovation in the organizational structure of the company – the multidivisional form. They have specific units, each of which focuses on one particular market – Buick, Cadillac, Chevrolet and so forth. General Motors tapped into many more different segments of the market than Ford who had a much narrow focus. He kept control of the money, but he decentralized decision making on individual business areas to his various lieutenants around the company.
In the 1980s, Toyota became the leader of the car industry – they were trying to build quality into the products that they were selling. And they realized that, to do that, you did not need separate departments. What you needed was to get the workers on the line to take responsibility for quality. So they did not just treat their workers on the line as automatons. They treated them as human beings, with the ability and judgement to stop the line, to identify problems, and then to use their training to help to figure out how to improve things. Toyota reckoned that they could get a return on investing in the problem solving skills of their employees. And that was a very different principle than the principle that General Motors and Ford had used up to that point. So their innovation was in quality management, which was about changing the basis of relationship between the line workers and the managers.
We have one industry, three era’s. In each era leadership comes down to innovations in the management principles and practices of the company rather than any particular product or service. It is, therefore possible for a businesses to invest in management innovation and develop sustainable competitive advantage.
Moving to the present day, the most powerful game changer is the internet – it actually democratizes information flow, in ways that go against the traditional classical, hierarchical approach. We can communicate with the people in a lateral way of getting work done. The starting point about management innovation today, is really about how the internet makes it possible, to do things differently.
Morning Star which, is a tomato processing plant, we’ve got Valve which is a gaming company. Zappos, which is an online shoe company owned by Amazon, and we’ve also got a company called Topcoder, a software development company in Boston. What do these businesses have in common is that they are deliberately and explicitly trying to get rid of traditional kind of management roles, they are trying to create methods whereby employees take responsibility for product. They are to invert that pyramid and put the responsibility for getting things done in the hands of the employees.
WL Gore, one example, is that people don’t have job titles. People have the role of trying to become effective at helping Gore to do whatever it wants to do – “we don’t put people into roles, we give them opportunity to add value where they can most be constructive”. The second example, is Vineet Naiar, former Chief Executive of HCL Technologies where he is explicitly looking for ways of helping his employees to do their jobs better by servicing them effectively.
The point is that we need to become more experimental and innovative in how the businesses work. What we can say for sure though, is that if our experiments are even half successful – they are opening the door to other businesses to continue and expand them.