Hamel on Management Innovation

Gary Hamel’s latest article in Harvard Business Review, “The Why, What, and How of Management Innovation” (purchase required) is a useful but puzzling piece.  It’s really two articles in one – and there's an underlying tension between the two articles.

The HBR article broadly deals with the topic of management innovation and it helps to expand our view of innovation. As he notes at the outset, many companies understand product innovation and process innovation, but few companies focus on the form of innovation that matters the most: management innovation.  Hamel observes that:

While operational innovation focuses on a company’s business processes (procurement, logistics, customer support, and so on), management innovation targets a company’s management processes.

So far, so good. But here’s the tension that pervades Hamel’s article(s): are we focused on breakthrough management innovation or continuous management innovation?

At one level, Hamel falls prey to the American executive’s obsession with breakthrough innovation. Witness his definition of management innovation:

A management innovation can be defined as 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.

Hamel’s stories at the outset, focusing on DuPont, Procter & Gamble, Visa and Linux all tend to reinforce this search for breakthroughs - fundamentally new ways of organizing and managing a business that support the success of the company for decades. This is his “first” article and it represents his primary focus in the HBR piece.

At another level, though, there is a “second” article that is struggling to break free. Hamel seems to really be trying to articulate a set of management principles to support continuous management innovation rather than breakthrough management innovation. On the first page of his article, Hamel complains that “few companies have a well-honed process for continuous management innovation.” Unfortunately, this second article gets buried in the HBR piece.

Both articles are interesting.  Hamel does a nice job of articulating a framework for coming up with “bold management breakthroughs”:

• Commitment to a big management problem – here he proposes three leading questions:

"First, what are the tough trade-offs that your company never seems to get right? . . . Second, what are big organizations bad at? . . . Third, what are the emerging challenges the future has in store for your company?"

• Novel principles that illuminate new approaches – here he offers two questions:

"What things exhibit the attributes or capabilities that you’d like to build into your organization? And what is it that imbues those exemplars with their enviable qualities?"

• A deconstruction of management orthodoxies – here he recommends testing every management belief with two questions:

"First, is the belief toxic to the ultimate goal you’re trying to achieve? Second, can you imagine an alternative to the reality the belief reflects?"

• Analogies from atypical organization that redefine what’s possible

Now, these are great ways to get executives to think creatively about new approaches to management processes but, on their own, they are unlikely to lead to much more than some creative workshops.  Hamel doesn’t really tackle the most challenging aspect of management innovation – moving from creative ideas to sustained and broad-based impact – especially in large, traditional enterprises. His final section “Get the Rubber on the Road” is particularly unsatisfying and conventional – detailed management process maps, low risk trials and portfolios of initiatives.

Lurking beneath this first article is the second article.  Hamel repeatedly comes back to a deeper question: what are the management principles required to support continuous management innovation?  He never uses this term, but think of it as meta-innovation principles.

The HBR piece offers some insight on this. For example:

These management principles – variety, competition, allocation flexibility, devolution and activism – stand in marked contrast to those we’ve inherited from the early decades of the Industrial Revolution. That doesn’t make the old principles wrong, but they are inadequate if the goal is continuous, preemptive strategic renewal.

Or:

Create a market for judgment that harnesses the wisdom of a broad cross-section of employees to set the odds on a project’s anticipated returns.

Since this is not the primary focus of the HBR piece, Hamel does a much less systematic job of exploring this topic. In the end, though, this may be the most significant breakthrough management innovation of all.  Rather than focusing on one breakthrough, why not focus on crafting a reinforcing set of management processes and practices that enable continuous management innovation?

Hamel would deny that there is any inconsistency between the topics of breakthrough management innovation and continuous management innovation.  In fact, he suggests that one (but only one of several) of the ways for a breakthrough management innovation to deliver long-lasting advantage is for it to be “part of an ongoing program of invention, where progress compounds over time.”

Hamel is certainly right as a purely logical exercise. The two forms of innovation are not inconsistent and, if done right, can be powerfully reinforcing.  Yet, in practice, I find that American management is much too focused on breakthrough innovation and seriously neglects the much broader opportunity for continuous innovation. Hamel’s article reflects this broader bias.

As I read the article, I was also struck by how enterprise-centric Hamel’s view of management innovation is.  Virtually all of the examples he cites of management innovation are confined to innovation in management processes within the enterprise.  My own sense is that most of the interesting management innovations that are emerging today involve new approaches to management across enterprises.  Once again, Hamel’s article reflects the bias of a lot of Western executives of large enterprises who are focused much too inwardly when seeking to be innovative.

While executives in the 20th century concentrated on perfecting scalable management within the enterprise, the 21st century riches may belong to those executives who focus on developing scalable management techniques across enterprises.

One more thing. Hamel reveals a surprisingly narrow and ethnocentric view of where innovation is occurring.  Virtually all of his examples are American companies and he offers this amazing observation:

It’s tough to build eye-popping differentiation out of lower-order human capabilities like obedience, diligence, and raw intelligence – things that are themselves becoming global commodities, available for next to nothing in places like Guangzhou, Bangalore, and Manila.”

Now, he just named three of the places where some of the most significant management innovation in the world is going on today. The management innovation being pioneered in these areas is precisely the kind of continuous management innovation that he claims is so important.  In some cases, like certain entrepreneurial companies in China, it is built upon a breakthrough management innovation – global process network management.  Rather than focusing on breakthrough management innovations within the enterprise, Hamel could benefit from understanding the continuous management innovations across enterprises that are emerging in Asia.

Comments

[Tom Simon]

John I have been an avid follower of your writings and those of John Seely Brown. I also was an early pioneer of online community building, going back to work with Howard Rheingold on the Well, Electric Minds and Brainstorms, and later as Director of R&D for Caucus Systems. I was also an architect of the original Open Text Virtual Teams portal.

In 1997 while on a project for Xerox I tried to introduce a colloborative workflow system that integrated social networking with business process interaction and online learning. This led to the development of www.iprismglobal.com and www.greenportal.org. Most of my work since then has been in the UK where there seems to be more acceptance to the transparent horizontal management necessary for true online collaboration.

In reading above about the need for innovative management by western executives, I must tell you it is no easy task to convince them. The horizontal, transparent nature of successful online collaboration is in opposition to the hierarchial style that assures compensation and rewards stay at the top... my expereince is that you cannot build a productive process network without full participation of the executives who control decsion making and budgets. Have you addressed this in your writings or face to face consulting?

[carla]

Hagel great thoughts!!!

Prabir,

You make some excellent points. I would say that you are too quick to judge Walmart. They are a learning as they go. I would also say that the US has very little to do with the shape Chinese cities are taking. While you may rely upon a United fight attendents for your insights, I would urge you to think more critcally.

The real insight that Hagel is offering is that innovation is emergent and cannot be neatly pre-packaged as radical. He is asking us to challenge the recieved view that great strategy is planned and packaged ahead of time by a bunch of smart top executives. Thus going back to Walmart and China's cities I would like to suggest that both represent initial hypotheses that initaite action. The next step when encountering resistance from the environment is the test of innovation.

Let's not judge a company or nation by its first step in a new direction but rather how it reacts to resistance.

[Gautam Ghosh]

Hi John

Couldn't agree with you more. Innovation blocks have a lot to do with mental models and Gary Hamel is revealing his mental models as you have quoted !

regards,
Gautam

[Prabir Sen]

Recently, I was in Beijing and I ralized that some of the old ancient heritages of China are being destroyed to initiate new constructions for 2008 olympiad. On my return, one of the crew member of the United Airlines expressed a deep concern on how Beijing will look more like one of the American cities. And she said, "this is what we americans do. We go to other countries make other cities like our own." It reminded me my visit to Seoul right after the olympic. And Barcelona, Sydney, and Athens - cities with history and heritage turned into mundane commercialized westernized city. Over the years, I have been to many parts of the world - from Dallas to Dubai and from Shanghai to Sydney. One can recognize the replicas of american cities - same old flyovers, high rises, McDonald, Chillis and Appelbee's.

Four cities are distincly different from these mundane commericalized western influence - San Francisco, London, Paris and Mumbai. What makes them different? I guess their creativity and creative people. Historically, various communities from all over the world came to these cities for innovations. Innovations in design, engineering, technology and governance. They created new designs and contemporary principles on top of old traditions. I have been traveling to China way to often to recognize the similar pattern in Shanghai.

Gary Hamel's views are not significantly drifted from his book 'Leading the revolution' where he said, "in a fast-changing world with unpredictable demand cycles, startegic flexibility can generate higher profits..." and he propogated a similar concept of business service network.

Vijay Govindarajan and Chris Trimble in their book '10 Rules for Strategic Innovators: From Idea to Execution' highlighted three major challenges in building powerful innovative business models: forgetting yesterday's successful processes and practices; borrowing selected resources from the core business; and learning how the new business can succeed.

Couple of years back when Wal-Mart went to Europe with the "western way or high-way" strategy, it failed miserably. And, years after when it was entering China, it took a completely different, very unlike Wal-Mart, strategy in order to work with the people of China repecting their cultural and heritage of the land. Almost identical to the strategy British used to govern India for 200 years with only hundred thousand troops. Management of innovation worked then. And, it worked now.

Well, all these are WHAT of strategy now focuses on innovation and change. The knowledge of the "HOW" is still nascent. The western executives need some of the "HOWs" so that they recognize and realize the return on innovation.