The Golden Age Of Management Is Now

http://www.forbes.com/sites/stevedenning/2013/08/05/the-golden-age-of-
management/

We live in a golden age of management. This finding will surprise those who have arrived at a
low opinion of management today. Nevertheless, in due course, this era will come to e seen as
one in which the essentials of !"
st
#entury management were articulated and put into practice in
a comprehensive way for the first time.
When I spea$ of a golden age of management, I am oviously not referring to the dreary
ureaucratic practices that are pervasive in ig institutions and taught in usiness schools, still
less to the shady ut profitale aritrage schemes of the financial sector. I am referring to
management in the roader sense that it has in common with all forms of action that induce
fulfilling human e%periences and outcomes.
This management has the creative capacity to wor$ with average ingredients and produce what is
not only e%traordinarily profitale ut also magical and enchanted. It goes eyond enriching the
few and generates prosperity for many. It has large aspirations that flow from an impassioned
and optimistic view of the future.
This management re&ects the traditional sharp dichotomy etween those activities that are
commercial, calculating, manipulative, insufferaly dull and tolerated only ecause they are
thought to e either useful or lucrative, and those activities that actively generate genuine human
pleasure, such as dance, poetry, music, art and drama. This management aims to e oth
financially and spiritually profitale, y generating widespread delight , &oy, and happiness. It
see$s to inspire oth those who do wor$ and those for whom wor$ is done. It aspires to uplift the
human spirit and unleash the creativity latent in every human eing while also achieving more
disciplined e%ecution than traditional management. It is as passionately romantic as it is
relentlessly operational, specific and practical.
Our era will thus, in time, come to e seen as one in which management underwent a paradigm
shift. As 'on Tapscott told me recently, (this is not a time for tin$ering) this is a time of
fundamental change.* This will e seen as a time when the shelf+life of the once self+evident
truths of !,
th
#entury management finally e%pired, to e replaced y a set of principles that lay
the asis for a #reative -conomy that can generate widespread and enduring economic well+
eing.
This constellation of principles has een articulated in a canon of management literature that
comprises at least !. recently pulished oo$s, and that is growing y the day. These oo$s
descrie ten simultaneous shifts now under way)
". /rom ma%imi0ing shareholder value to profitale customer delight.
!. /rom sustainale competitive advantage to continuous strategic adaptation.
1. /rom a pre+occupation with efficiency to co+creating value with sta$eholders.
.. /rom uni+directional value chains to multi+directional value networ$s.
2. /rom steep hierarchies to shared responsiilities.
3. /rom control and ureaucracy to disciplined innovation.
4. /rom economic value to values that grow the firm.
5. /rom command to conversation.
6. /rom managing the machine to stewardship of sta$eholders.
",. /rom episodic improvements to a paradigm shift in management.
The accent of this lengthy article is on comprehensiveness. That7s ecause we need to have all
the pieces of the emerging #reative -conomy together in one place, so that we can see how they
might e implemented. We need to get eyond the $ind of piecemeal thin$ing, still endemic in
usiness consulting, that see$s to heal dysfunctions in one part of the firm, while ignoring the
underlying disease that is metastasi0ing elsewhere.
1. From maximizing shareholder value to customer delight
The management revolution flows from a recognition that the pervasive pursuit of short+term
profits since the "64,s has not led to long+term shareholder value or the enduring etterment of
society. We now $now that it has generated widespread (ad profits*, undercut firms7
sustainaility, destroyed whole industries and undermined the capacity of entire sectors to
compete internationally.
With the shift in power in the mar$etplace from seller to uyer, there is a long+overdue emrace
of 8eter 'ruc$er7s insight that the only valid purpose of a firm is to create a customer
9Management, "641, p.3":. It has ta$en us forty years to grasp the full implications of 'uc$er7s
insight and to figure out what it ta$es to implement it.
#reating value for customers leads to long+term shareholder value. As a result, this radically
different way of managing is significantly more profitale than the old. Organi0ations that have;
for the most part;emraced the new paradigm, such as Apple <AA8=>, Ama0on <AM?N>,
@alesforce <#AM>, and Whole /oods Mar$ets <W/M>, are moving the production frontier of
what is possile. -ven firms not led y their founders, such as Burerry <=@-) BABC>, Dnilever
<DN> and E#=Technologies <E#=T-#E> appear to e heading in this direction. As a result, a
new $ind of economyFthe #reative -conomyFis emerging. The shift in managerial principles
is fundamental.
Gust as the necessity of eating for living doesn7t ma$e eating the purpose of life, so the necessity
of profits for survival doesn7t ma$e profits the goal of the firm. Heeping profits in proper
perspective is a vital aspect of the new management.
8atric
$ Gen$ins arguesFmista$enlyFin the /inancial Times that (shareholder value is li$ely to endure
as a powerful idea <ecause> it gives managers something against which they can e measured.
Other managerial responsiilities ; to employees, customers or the community ; are numerically
less precise.*
#ontinuing to use a measure when it is $nown to have disastrous conseIuences ma$es no sense,
particularly when generally agreed measures for measuring sta$eholder delight are availale and
are eing widely deployed. @ector wide data is now availale that enales firms to understand
oth asolute and relative progress is achieving customer delight.
2. From sustainable competitive advantage to continuous strategic adaptation
In the emerging #reative -conomy, competitive advantage is increasingly transient. As e%plained
y Aita McGrath in her oo$, The End Of Competitive Advantage 9!,"1:, disruption can come
from anywhere. It7s not &ust cheap sustitutes for products that capture low+end customers and
gradually move upmar$et to pic$ off higher+end customers. Now entire product linesFwhole
mar$etsFcan e destroyed almost overnight as customers defect in droves y (ig ang
disruption(. /or e%ample, when Apple entered the smartphone mar$et in !,,4, No$ia7s dominant
mar$et position was devastated almost immediately.
3. From efficiency to co-creating value
Aonald #oase won the Noel 8ri0e in -conomics for his "614 articlee%plaining why firms e%ist.
The article as$ed) given that (production could e carried on without any organi0ation at all*,
and given that (the price mechanism should give the most efficient result,* why do firms e%istJ
The answer was that firms e%ist ecause they reduce transaction costs, such as search and
information costs, argaining costs, $eeping trade secrets, and policing and enforcement costs.
At least one of the starting assumptions of the article was flawed. Although it is true for simple
commodities that (production could e carried on without any organi0ation at all*, it is untrue
that comple% products and services such as airliners, smart phones or multi+disciplinary
professional services (could e carried on without any organi0ation at all.* Those products and
services reIuire collaoration for their very e%istence. The reason that such organi0ations e%ist is
that they provide value to customers that could not e produced without an organi0ation.
As the economy steadily shifts from commodities to comple% differentiated or personali0ed
products and services, and as power in the mar$etplace shifts from seller to uyer, the
importance of adding value to customers relative to greater internal efficiency has increased. As a
result, firms li$e Apple, Ama0on, @alesforce and Whole /oods Mar$ets give more attention to
competing on the asis of value they are adding to customers than to simply how efficient they
are.
4. From uni-directional value chains to multi-directional value networs
At the very core of traditional management thin$ing is the uni+directional value chain y which
the firm delivers value to customers. The concept was descried in Michael 8orter7s
oo$, Competitive Advantage 9"652:.

#reating and sustaining superior performance is seen as
coming principally from ma$ing the uni+directional value chain more efficient.
In an interview with Brian =eavy in a forthcoming issue of Strategy & Leadership, Ken$at
Aamaswamy says that in future (value increasingly will e co+created interactively y firms and
customers, rather than merely e%changed etween them. This challenges two deeply emedded
traditional assumptions aout strategy and value creation) that firms create value and then
e%change it with consumers in the mar$etplace and that the value created resides primarily in the
product or service provided.*
To accomplish this transition, firms must change from an inside+out mindset implicit in the value
chain 9(We ma$e it and you ta$e it*: to an outside+in mindset 9(We see$ to understand your
prolems and will surprise and delight you y solving them*:. As Aan&ay Gulati notes
in Reorganize for Resilience9!,",:, the shift goes eyond strengthening customer service) it
means orienting employees and partners to the goal of delivering more value to customers
sooner, and aligning all decision+ma$ing with this goal. #ustomers and partners ecome active
participants in the creation of value. The result is a set of multi+directional networ$s and eco+
systems.
The thin$ing ehind the uni+directional value chain is a relic of an era in which organi0ations
could succeed y pushing products and services at customers. In the #reative -conomy, the
company7s value chain is merely one facet of a more comple% multi+directional networ$, where
value is created through interaction with customers and partners. -%amples are Apple7s App
store, which constitutes a platform that moili0es several hundred thousand developers who
interact directly with customers and Ni$e8lus which simultaneously creates value for runners
and Ni$e.
!. From steep hierarchy to shared responsibilities
Traditional management draws a sharp distinction oth etween leaders and managers and
etween managers and wor$ers.
The distinction etween leaders and managers flows from Araham ?ale0ni$7s "644 Harvard
!siness Revie" article, (Managers and =eaders) Are They 'ifferentJ* That article argued that
managers have different s$ill sets and attitudes. Three aspects were said to e $ey. /irst,
(managers focus attention on procedure and not on sustance.* @econd, managers (communicate
to suordinates indirectly y signals,* rather than clearly stating a position. Third, (managers
play for time.* Amid the conflicting rules and procedures of a ureaucracy, managers have no
way of $nowing what the right answer is. @elf+protective routines are used, up and down the
hierarchy.
Thus in traditional management, leadership and management responsiilities were ifurcated.
=eaders were said to inspire people, spar$ change and strengthen the culture, while managers
organi0e, control wor$, measure outputs and get things done. In theory, the two roles
complement each other. In practice, the distinction has often led to organi0ations in conflict with
themselves, with leaders inspiring those doing the wor$, spar$ing change and strengthening the
culture, while managers are actively undermining everything the leaders are doing y their
ureaucratic processes.
In the #reative -conomy, the 'ilert+style concept of management articulated y ?alesni$ is
re&ected. Managers do not (focus only on procedure*, (communicate y signals* or (play for
time.* In the #reative -conomy, managers need to e leaders and leaders must also manage.
Managers must e ale to inspire others across organi0ational oundaries while leaders must
have domain e%pertise and e ale and willing to get their hands dirty to get things done.
Moreover, in the #reative -conomy, wor$ is increasingly done in self+organi0ing teams,
networ$s and ecosystems, where the distinction etween managers and wor$ers also egins to
dissolve. Memers of self+organi0ing teams share leadership and management responsiilities,
for e%ample at the #alifornian tomato processing company, Morning @tar. All employees not
only do wor$, ut also set o&ectives, control and supervise their own wor$, find new ways to
create value, and measure progress towards o&ectives. -veryone has a clear line of sight to the
customer for whom value is eing created. @imilarly partners contriute value directly to
customers on platforms orchestrated y the organi0ation.
". From control to enablement
To deal with a more dynamic mar$etplace in which power has shifted from seller to uyer,
organi0ations are changing from centrali0ed control to a decentrali0ed system of enalement.
In the traditional economy, wor$ is coordinated through the rules, plans and reports of
ureaucracy. Targets are set and controlled y managers. The hierarchy is an information
processing system. When the firm has a prolem) it gets a group of people to wor$ on it. The
result of this wor$ ecomes a proposal that is consolidated and moved up the chain of managers
for a series of reviews and approvals. In a slow+changing mar$etplace, people higher up have
more information, $nowledge and e%perienceL this &ustifies their decision authority. In a world of
gradual change, e%perience is a huge advantage. 8eople lower down in the hierarchy have limited
information and are usually loo$ing at the world from a narrow perspective. .
But the world changed. /irst, as a result of the We, access to information is practically
universal. @econd, in a fast changing world, e%perience that predisposes leaders to pursue
(usiness as usual* is often a handicap. Third, in $nowledge wor$, the people doing the wor$ are
often etter placed to ma$e decisions aout how to solve prolems, determine tradeoffs etween
Iuality and Iuantity, set targets and assess progress. Much of the &ustification for centrali0ing
decision+ma$ing at the top of the hierarchy has dissolved.
As a result, $nowledge wor$ is increasingly done y self+organi0ing and self+managing teams,
networ$s and ecosystems operating oth inside and outside the organi0ation. Wor$ is coordinated
through processes $nown (dynamic lin$ing.* Its principal elements are) wor$ is done in short
cyclesL intelligence is gathered as to what might delight the customerL those doing the wor$
decide what can e accomplished in the cycleL impediments to achieving goals are systematically
removedL progress is measured y direct customer feedac$ at the end of each cycle.
'ynamic lin$ing enales continuous innovation to meet the shifting needs of clients while also
achieving disciplined e%ecutionFsomething that hierarchical ureaucracy could never achieve.
In traditional management, efforts to enhance innovation through the use of teams often led to
episodic improvements, ut also undisciplined e%ecution, and so the organi0ation tend to lapse
ac$ into hierarchical ureaucracy as the default mode of management.
In the traditional economy, e%ecutive compensation is having disastrous usiness conseIuences,
including a serious mis+allocation of capital and talent, repeated governance crises, rising income
ineIuality and an overall decline of the D@ economy. By contrast, in radical management at its
est, the focus is on intrinsic incentives, not money.
#. From economic value to values that grow the firm
In the #reative -conomy, there is a shift from a preoccupation with traditional approaches to
economic valueFimproved efficiency, economies of scale and cost+cuttingFto a roader focus
on the values that will grow the usiness y generating innovation and customer delight. The
values of radical transparency, continuous innovation and sustainaility ecome the primary
values of the firm.
A prominent e%ample is Whole /oods Mar$ets, where the dedication to innovating with
sta$eholders to achieve profitale environmental sustainaility is supported y radical
transparency) the company shares so much information with its employees that the @ecurities and
-%change #ommission has designated all employeesFnow around 3,,,,,Fas (insiders* for
stoc$+trading purposes.
$. From command to conversation
None of the aove shifts will e sustained if management communicates in the traditional mode
of top+down commands that fail to ac$nowledge that employees are oth sta$eholders and part of
the innovation ecosystem. Nor will customers e delighted if communications with the
organi0ation consist of unresponsive one+way commands. Nor will other usinesses e li$ely to
collaorate on the firm7s platforms unless they perceive the relationship as a genuine partnership.
As a result, communications tend to e peer+to+peer conversations, listening attentively and
responding openly, with authentic stories, metaphors and open+ended Iuestions.
%. From managing process to stewardship of staeholders
Whereas traditional management often see$s to manipulate employees, partners and customers
y whatever means necessary to achieve profits, radical management treats employees, partners
and customers with respect as independent, thin$ing, feeling sta$eholders who share the common
goal of adding value to customers. Aadical management and the #reative -conomy reflect a
move away from managing people on spreadsheets as (resources* to e pushed from one pro&ect
to another, or from onshore to offshore to outsourcer, and a concentration on customer needs and
Iuality of delivery against those needs.

1&. From episodic improvement to paradigm shift
The depth and readth of the changes descried aove amount to a (#opernican Aevolution* in
management. As Goseph Bragdon wrote in #rofit for Life 9!,,3:) (We are finally wa$ing to the
fact corporations are not the center of our economic universe, with people and Nature oriting
around them. In fact the opposite is true.*
The changes emody a fundamentally different way of understanding how the usiness
environment wor$s and how to e effective in it. It is a paradigm shift from the !,
th
#entury
view that customers can e manipulated into avidly purchasing the output of the value chain of
the organi0ationFto the recognition that today the organi0ation can only survive y continuously
satisfying the changing needs of the customer.
The new paradigm is a coherent constellation of principles, practices, attitudes, values and
eliefs, not an unconnected undle of management gadgets, processes or technologies.
Brea$throughs occur not from individual process or technology changes ut rather when the
goals, principles, practices, values and attitudes &oin together to form an interacting and
consistent set of organi0ational competencies.
Many of the individual principles, processes, practices and technologies of the paradigm shift
have e%isted for some time, including customer focus, teams, empowerment, Agile, @crum,
hori0ontal communications and so on. But in traditional management, those elements have een
playing a minor or temporary role as e%ceptions, or complements, to the asic way of doing
things. Now these elements have moved to center stage and represent the necessary components
of the (new normal.*
Whereas in the past, hierarchical ureaucracy was the default model of management, to which all
organi0ations tended to revert. Now that dynamic is reversing, with hierarchical ureaucracy
eing an approach to e deployed only in e%ceptional circumstances, such as a financial
emergency. But increasingly, the (new normal* of competition will increasingly e the radical
management paradigm of leadership and management.
Asor
ing all the changes and acIuiring the s$ills and attitudes necessary to implement them, will not
e easy or Iuic$. To achieve the transition, leaders need to raise their game. They need to e
leading the way towards a different way of running organi0ations. It will no longer e enough to
get things done (within the system* or (despite the system.* =eadersFwherever they are located
Fneed to e (transforming the system*.
One prolem they need to face is that for many years now, change management has often een
adopted piecemeal. Many of the leading consultants are specialists and thus companies uy their
services for leadership training, e%ecutive communications, team uilding, IT social platforms,
customer relationship management, customer loyalty, Agile training and organi0ational
development. What they really need is a over+arching vision for replacing the ten osolete
management ideas discussed here and then emracing the ten drivers of the #reative -conomy.
/ortunately, we now have a canon of management literature descriing the transformation. These
!. oo$s are fleshing out the canon. The new management paradigm is a large idea and different
ta$es on it can help us get our minds around it.
'espite differences in terminology, emphasis and coverage, the commonalities in these oo$s are
more significant than the differences. In fact, the differences etween them are minor compared
to the gulf etween, on the one hand, the way most large organi0ations are actually led and
managed today and, on the other, the way these oo$s say they ought to e led and managed.
While drawing on the wisdom of history, these oo$s are not thin copies of what has een said
many times efore. They come to terms with the truth of our times. Their passion helps us
recover a sense of wonder in the wor$place, enaling us to loo$ at the world afresh and see how
truly inspiring creative wor$ and delighted customers can e.
'ppendix( )otes on the origin of the *reative +conomy
Aichard /lorida credits Business Wee$ with introducing the concept of the #reative -conomy in
August !,,,. /lorida e%panded on the theme in his oo$, The Rise Of The Creative Class 9!,,!:
(Today7s economy,* he wrote, (is fundamentally a #reative -conomy.* Although, as 8eter
'ruc$er had argued, the asic resource is $nowledge, ahead of the traditional resources of capital
or laor, it is, wrote /lorida, creativityF(the creation of useful new forms out of that
$nowledge* that will e the $ey driver of the !"
st
#entury economy. (None of this is totally new)
humans of course have engaged in creative activities since antiIuity. What we are doing now is
mainstreaming those activitiesL uilding an entire infrastructure around them.*
In his oo$, The Creative Economy 9!,,": Gohn Eow$ins wrote aout fifteen (creative
industries* that had emerged. 'on Tapscott discussed the growing scope and potential of these
phenomena from an economic perspective in his oo$s, $i%inomics 9!,,3:
and Macro$i%inomics 9!,",:.
As the #reative -conomy thrived, despite the massive financial crisis of !,,6, with the startling
emergence of hugely profitale firms li$e Apple, Ama0on and @alesforce, traditional
organi0ations were increasingly unale to cope with a rapidly changing mar$etplace in which
power has shifted from seller to uyer.
As Gary Eamel wrote in his landmar$ article in Earvard Business Aeview,Moon Shots for
Management, (-Iuipping organi0ations to tac$le the future would reIuire a management
revolution no less momentous than the one that spawned modern industry.* As 'on Tapscott
said, we are (at a punctuation point in human history where the industrial age and institutions
have finally come to their logical conclusion.*
Over time, it has ecome apparent that the #reative -conomy is more than a class of creative
wor$ers or a set of creative industries. It constitutes an ongoing transformation of the entire
modern economy and society, eventually affecting every person and every organi0ation.
In effect, there are now three economies on very different tra&ectories. The Traditional -conomy,
while still the largest, is in steep and fundamental decline. The /inancial @ector has achieved
profitaility through practices that have caused increasingly serious financial crises) it needs to
e reined in and reconnected to the real economy. Meanwhile, the #reative -conomy is the
genuinely flourishing real economy of the future.
MMMMMMMMMMMMMMMMMMMMMMMM
@teve 'enning7s most recent oo$ is) The =eader7s Guide to Aadical Management 9Gossey+Bass,
!,",:.