Tuesday, July 28, 2009

Thought Leadership in Management : Current Drought and Future Potential

The theory and practice of management have been enriched over the past several decades by several thought leaders. It is a matter of dismay, however, that the last two decades have suffered from a dearth of fresh management thinking. Michael Porter’s theory of competitive strategy of the early 1980s still remains as the last game changing paradigm in managerial thought and practice. This paper reviews the past contributions and future imperatives.

Some of the best contributions ever

Modern management began in the late 1800s and early 1900s as an offshoot of economics on one hand and as an adjunct to industrial and social revolutions on the other. Several experts have proposed tools, techniques, theories and practices that not only were a function of the times but also endured to grow and adapt with the times.

Frank Gilbreth, Henry Gantt, Frederick Taylor, Joseph Juran, Shigeo Shingo, Agner Erlang, Henri Fayol, Herbert Simon, Walter Shewhart, Chester Barnard, Walter Scott, Ronald Fisher, Oliver Sheldon, Elton Mayo, Genichi Taguchi, Mary Follett, Russell Ackoff, Edward Deming, Peter Drucker, Armand Feigenbaum, Philip Crosby, David Ogilvy, Theodore Levitt, Henry Markovitz, Chris Argyris, Alfred Chandler, Richard Waterman, Rensis Likert, Douglas McGregor, Henry Mintzberg, Merton Miller, Franco Modigliani, Lawrence Peter, Philip Kotler, C K Prahalad, Michael Porter, Kenichi Ohmae, Tom Peters. Eliyahu Goldratt, Stephen Covey, Masahi Imai, Michael Hammer, Gary Hamel, Robert Kaplan, Pankaj Ghemawat and Sumantra Ghoshal are some of the eminent scholars and practitioners of management who provided path-breaking concepts. These experts came from diverse domains covering psychology, sociology, accounting, engineering, finance and economics, to name a few. Some were / are doctorates and served as professors in reputed universities such as Harvard, MIT and Wharton while others carried with them the wisdom of expertise and experience. They also came from different geographies of the world. Contributions of some of these are discussed below with the proviso that those not reviewed herein do not necessarily represent any less leading edge thoughts than the ones discussed below.

Frederick Taylor (1856-1915) was perhaps the first ever thought leader of management who pioneered the concepts of efficiency movement and productivity improvement. Acknowledged as the father of scientific management, Taylor brought precision and rationale to managerial processes, and laid the foundations for a whole new management science called industrial engineering.

Henry Ford (1863-1947), the founder of the Ford Motor Company pioneered the concept of modern assembly line as a tool of mass production. His introduction of Model T automobile revolutionized the transportation industry with concepts of standardization, cost leadership and customer reach. Ford was perhaps the only business leader who relied on inventions and management to create huge wealth, without his company employing any major accounting or auditing practices.

Alfred Sloan (1875-1966), the famed chief of General Motors was perhaps the antithesis of Ford. He grew General Motors as a global leader in automobiles, pioneering the concepts of product and customer differentiation, planned obsolescence and accounting driven management. He was also instrumental in establishing the concepts of market segmentation and product branding.

Abraham Maslow (1908-1970), the creative psychologist brought a new humanistic face to psychology to understand and define the basic motivators of human living and performance. His framework of the “5 need hierarchy” remains to date the fundamental foundation of managerial theories of motivation. Maslow created the psychological basis for human resources management to come on its own in an organizational setting.

Douglas McGregor (1906-1964), the management professor ushered in a radical transformation in the practice of people management with his Theory X and Theory Y. That people do not seek to avoid work but rather are intrinsically self-motivated to perform and that people could be motivated to perform not by autocratic control but by actualization opportunity were the pioneering changes in managerial mindset proposed by him. McGregor provided a practical and sustainable execution framework for Maslow’s need hierarchy.

Peter Drucker (1909-2005), one of the most prolific management writers, explored how humans are organized across all sections of the society, whether business, government or not-for-profit. He could predict and guide dramatic changes in management of economies, industries and organizations. His emphasis on lifelong learning and coinage of the term “knowledge worker” reflect the superior role he accorded to knowledge as a driver of growth. His multitude of books and countless scholarly and popular papers are a lasting contribution to management.

Henry Mintzberg, born in 1939, has been famous for his critical review of established organizational dogmas and hyped-up managerial styles. His theory of organizational forms threw new light on how organizations can be configured for performance. He is one of the few exponents of a process driven managerial culture in organizations. He made an incisive attempt at separating style and substance, especially with reference to strategic planning.

Kenichi Ohmae, born in 1943, belongs to a rare breed of Japanese management experts who made an impact on the global management space. A pioneer of “3C’s Model”, Ohmae is an authority on strategic management practice, which has a measure of universality covering multiple industrial sectors. With his academic depth and practical insight he defined a new paradigm of knowledge driven management consultancy.

Rensis Likert (1903-1981), proposed four systems of management applicable in industrial settings and commended a participative style of management. Likert developed and validated several hypotheses of relationship between employee management and corporate performance, linking individual attributes such as loyalty, attitude, motivation, etc. to variables of organizational achievement such as productivity, cost and earnings. His Likert Scale and Linking Pin Model are enduring contributions to studies of organizational structure and supervision.

Taiichi Ohno (1912-1990), the perceptive engineer of Toyota is considered to be the developer of the world-famous Toyota Production System. Perhaps, no system of operations management had as profound influence on industrial management as Ohno’s TPS had. It represented not only Toyota’s competitive advantage in global automobile manufacture but quickly became Japan’s national comparative advantage, which even today is unmatched by any nation. Ohno’s principles of “Just In Time” extended outside manufacture into virtually all facets of industrial management.

William Deming (1900-1993) was one of the foremost experts in quality control and quality management. He was respected for his quality management methodologies by the Japanese. His principles of business and quality management, and his teachings of statistical process control and other techniques to the Japanese companies contributed in no small measure to the eventual dominance of the Japanese in global quality standards. He earned an enduring place in history not only for his expertise in applying statistics for quality improvement, but also for his principles of management focused on quality.

Joseph Juran (1904-2008) was an evangelist for quality and quality management who fused the best of oriental and western quality and management practices. Juran’s trilogy of quality planning, quality control and quality improvement and his advocacy of cross-functional participation in quality were unique for the times. His application and adaptation of Pareto Principle (“vital few and useful many”) to quality management, his focus on human and cultural issues in quality improvement and his amalgamation of Japanese quality circle concepts in his quality teachings enabled him to assume a broader role in quality management in Japan, USA as well as other countries.

Theodore Levitt (1925-2006), was an epitome of marketing vision and creativity. Rarely did a single thesis influence the course of the discussion in the domains of marketing and business strategy as did his paper on marketing myopia. His was perhaps the first clarion call for the CEOs to view their businesses in broader rather than narrower contexts and redefine their product-market strategies to spur growth. Levitt was insightful, provocative, practical and pragmatic, offering a unique synthesis of academic and industrial perspectives.

Alfred Chandler (1918-2007), the eminent business historian researched and wrote extensively on the scale, scope, strategy and structure of modern corporations. Chandler’s identification of the large industrial firm as the focus and driver of economic growth and his thesis on how structure follows strategy of a firm are solid foundations of the modern theory of firm. His proposition of managerial processes rather than the market forces as the prime component of industrial revolution was perhaps the precursor for the later day management thoughts on corporation as an entity of competencies and competitive strategies.

Robert Kaplan (born 1940), the co-creator with David Norton, of the Balanced Score Card (BSC) provided a mechanism to connect a company’s current actions to its long term goals. The BSC has helped the industry captains with a methodology to empower as well as control its senior executives by means of several indicators that balance the short term and the long term. The BSC methodology seeks to convert even seemingly qualitative goals and activities into measurable deliverables and efforts, integrating individual and functional or business unit performance into corporate performance.

C K Prahalad (born 1941) belongs to the new generation of management gurus who focused attention on the corporation as an entity. Known globally as one of the most incisive and influential management thinkers, Prahalad propounded the theory of core competencies. His later research focused on emerging countries and how fortune could be found at the bottom of the pyramid by deploying innovative products and services, and by relying on corporate constructs that reach every segment of the population.

Michael Porter (born 1947) literally took the world of strategic management by storm with his path-breaking theories of competitive advantage and comparative advantage. His distilled analysis of the five forces of competition, generic competitive strategies, strategic grouping, entry barriers and mobility barriers and value chain management have helped business strategists and industry chiefs position their companies in a competitive manner for sustainable growth. No other management thinker has probably propounded strategy as a key driver of corporate, industry or even national performance as Porter has done.

Eliyahu Goldratt (born 1948), created new paradigms in project management and capacity scheduling by deploying unique systemic approaches and software solutions. Goldratt’s theory of constraints and critical chain project management techniques are designed to unlock value from a company’s assets, overcoming and correcting traditional employee and corporate practices that sub-optimize goal setting and execution in organizations. Few management thinkers and practitioners have been as iconoclastic and aggressive as Goldratt has been in propagation of production and operations management techniques that avowedly seek to convert turnover into profit for organizations.

Michael Hammer (1946-2008), the creator of the theory of business process reengineering was a highly influential thinker who believed that corporations ought to reinvent and reengineer themselves to stay competitive. He proposed that the way a business organizes itself structurally and the manner in which it conducts its business processes would strongly influence the efficiency and effectiveness of its business. While he focused on the operating nuts and bolts of business, Hammer’s uniqueness was in his emphasis on business processes rather than individual tasks.

An evolutionary spectrum of theories

A review of the works and contributions of the above thought leaders points out a few major thought paradigms.

As industries began to evolve around organization of people and industrial structures began to emerge, initial focus was on employee as the fulcrum of productivity. However, as economics and industries began to globalize, and as the larger multinational corporations and conglomerates began to dominate, with their share of successes as well as failures, management thoughts started focusing on survival and growth of firms in the face of intense competitive pressures.

The first stream focused on Taylorisim which focused on getting the best out of an individual through time and motion studies and scientific principles of management. The overriding influence was one of rigorous control of an employee and the work practices to optimize the man-machine interface.

The second stream (eg., Maslow, McGregor and Likert) aimed at understanding the organization behavioural factors of employee motivation and developed paradigms that controlled an employee less but motivated him more.

The third stream focused on viewing the industrial operations as a technology-practice driven system and maximizing the efficiency and effectiveness of the system as a whole. Contributions by Hendry Ford and Taiichi Ohno fall under this category.

A set of management thinkers such as Alfred Sloan and Alfred Chandler saw the firm as a mega corporation with relevant structure, strategy and system that would drive growth.

Quality exponents such as Deming and Juran instead focused on product and process quality as the key determinant of corporate success. Japan’s global success clearly validated their focus on quality as a driver of competitive performance.

In a more contemporary era, management gurus such as Prahalad and Porter saw firms as embodiments of unique sets of strategies and competencies that provide competitive advantage and differentiation. The period also saw the revival of the efficiency movement in different hues of reengineering and project management (for eg., by Goldratt at shop floor level and by Kaplan at business unit level). Including the contributions made by other scholars such as Hammer, Goldratt and Kaplan, this later generation of management thinkers proposed management theories that focused on energizing a corporate entity for superior performance.

Techno-management as the next frontier

The relative dearth of breakthrough theories in management beyond Porter’s competitive strategy of the 1980s raises several questions. Has the era of cutting edge management thinkers come to a close all too soon? Have the management thinkers moved over to the relatively more cozy and remunerative areas of management consultancy? Are the thinkers busier with setting up organizations structured around their past theories rather than continuing with their innovative pathways? Or, are the management scholars overwhelmed by the scope and rapidity with which technology is redefining the sustainability of firms and industries?

The answer to the drought in management thinking may eventually be found in the waves of creativity and innovation that have been sweeping the technological landscape. However, while management is seemingly upstaged by technology, it also provides the opportunity for management thinkers to develop new fusion models of technology and management, which the author would like to call as “techno-management”.

The technological trends influencing the industrial and economic scene may be categorized under one or all of the following phenomena: (i) convergence of functionalities, (ii) miniaturization of form factor, (iii) maximization of product performance, (iv) greening of technologies and (v) dominance of the Internet. As a result, product-market segments are in a continuous churn and rejig, with exponential expansion in product categories, market segments and value points.

Arising from these technological changes, the pace of product development has already accelerated over the last 10 years. Just one breakthrough product concept ends up triggering a slew of differentiated clones, each seeking to achieve dominance over the pioneering concept, as also over the rest of clones. Nowhere is this evident as in the mobile phone industry where one iPhone has triggered hundreds of touch phones with multiple features in competition.

Convergence of functionalities as a phenomenon is applicable to, and transcends, multiple product platforms. For example, a mobile phone is no longer a mere phone; it is a complete audio-video device combining in it the functionalities of a music system, data storage system, smart office system, video and camera system, web browsing system and a global positioning system. So is a laptop, moving from a position of data processor into a smart office system, video conference system and even a 3G enabled caller phone system.

Complementing convergence, the form factor design dramatically alters the visual appeal and handling of different products providing the much needed product diversity and differentiation even within the convergence of functionalities. Evolution of laptops into netbooks and extension of cellular phones into smart phones are two examples.

Miniaturization, an essential component of form factor redesign, is also accompanied by maximization of performance. The processor speeds and memory capacities in various electronic devices have increased nearly 10 fold in just as many years even as the devices and equipments became smaller and lighter. From conventional televisions to flat panels to ultra-slim panels, form factors drove creation of new market segments. Response times in flat panel LCD TVs, for example improved from 10 ms to 1 ms while the contract ratios jumped from 2000:1 to as high as 200,000:1. Computer RAM capacities moved up from 256 MB to as much as 5 GB even as hard disk capacity jumped from 50 GB to 500 GB (and even to 2 TB more recently). Power to weight ratios of diesel engines, EMFs of motors, delivery heights of pumps, tractive ability of rail engines, thrust capacity of rocket and missile launchers, to quote other examples, have all moved up significantly.

The ubiquitous electronic chip, ever smaller and faster, has become an essential component of every technological and management innovation that is focused on functional convergence, form design and product performance.

Even as devices and equipment change dramatically in form, performance and functionality, the material components of devices and equipment, and the feedstock materials that help operate are set to undergo fundamental changes. From recyclable plastics and metals to bio and alternative fuels, the entire material consumption and usage paradigm would undergo transformational changes. Cross-connectivity between industries as distant as agriculture and automobiles illustrates the metamorphosis that could occur in the materials domain. The ultimate objective, in the context of climate change and global warming would be to make the planet an ecologically harmonious eco-system that is as life-preserving as it is lifestyle providing.

The Internet, against this background, is shaping into an exponentially expanding source of information and decision-making. The Internet is likely to enhance pressure on innovation with several facets of information hitherto considered proprietary becoming open source information. The Internet will also become increasingly a search space for guidance and decisions rather than for data or information. The Internet would free valuable physical space hitherto dedicated for data computing and storage, with the expansion of “cloud computing”. Several social and industrial activities may be deeply affected as innovative Internet applications provide the added advantage of physical feel to the virtual handling of data and information in the Internet (eg., readability in page-flip type book form).

Given the magnitude of technological changes, a new generation of management thinkers has to emerge who would weave creative management approaches around the booming technological innovation. The focus of techno-management thinking will be a structural transformation of firms and industries based on massive changes in technologies.

Techno-management needs to prepare the firms for the impending technological changes, in several cases prompting the firms to lead the changes to stay competitive. Organizational structures and strategies must be in a state of dynamic equilibrium with changing product-market profiles. The product and process value chains must be defined across multiple industrial sectors to cope with the changing cross-industrial alignments. The author hypothesizes that the new breed of management thinkers will be pioneers in scientific and technological forecasting who can foresee new businesses riding on the wings of hitherto unforeseen technological changes.

Posted by Dr CB Rao on July 28, 2009


Kiran said...

Firstly, thank you for the blog.

‘Techno-Management’ aptly describes the fusion of technology and management. In many ways it looks & sounds (literally) like the change brought by ‘Techno’ to the music landscape.

Though there is no dearth of new breed of management thinkers, I believe the focus should be more on executioners. With the confluence of changes that happening at a rapid clip, it is very easy for companies / management to loose focus on objectives i.e. bring in a solution to a market place that address specific problem rather than caught up in technological upheaval.

Once the solution is in place a new facet of execution comes into play, which needs expertise in diverse domains covering psychology, sociology, engineering, finance and economics, so as to build an eco-system around the product / solution. Partnering with the end user i.e. customer and constantly taking their feedback and morphing the product and taking it to the next level.

Author quoted ‘I Phone’ as an example; To start with, it is not a ground breaking solution in itself i.e. a device to make and receive calls over wireless networks. But when the very same solution put in the context of one stop shop for the audio/video/gaming/data needs and blending with App-Store, the options are endless and it became a phenomenon by itself.

Appreciate your thoughts and comments on breed of next gen managerial executioners

M S Reddy said...

I fully agree with the “Techno Management” concept going to be the future and the current generations should get ready for the challenge. Predicting the future of management is not easy, but it is interesting to speculate. As the author mentioned about the IPhone, telecommunications industry in India, a decade ago, it was almost a miracle to get a telephone connection and see it working. If we project these realities a few decades into the future – say, to the year 2020, RFID chips will become ubiquitous, providing unprecedented information about manufacturing processes and consumer behaviour. Meanwhile, as specialisation becomes the order of the day, vertically integrated companies may be supplanted by networked constellations of business partners.
Just how might these new partnerships work?
Outsourcing everything – A firm may focus on its core competencies and nothing more, for e.g. a firm may focus on product management and marketing while design and manufacturing may be farmed out to a constellation of partner firms and vice versa. Smart factories – Contract manufacturers around the world may work from web-based computer aided design drawings, adaptive tools, and self-reconfiguring assembly machines. These technologies allow factories to profitably produce small component runs for niche markets.
Talking inventory – Tiny RFID tags attached to parts and components ensure that suppliers have just enough inventories to fill orders.
An industrial army of robots – Adaptive manufacturing robots scan component RFIDs to figure out which model to assemble. Coordinated by intelligent production control software, the robots develop assembly routines automatically.
What’s in the box – Smart tags and special container satellite transmitter allow every item being shipped to be monitored by buyers with detailed information about the location of container and the condition of each product inside.
Have it your way – Each unit is tailored to local tastes, with final paint, styling, and design touches added at local distribution centres. Customization machines are programmed to add splashy colours, special logos, and silk screen images to the exterior of each unit.
Main street chain store – “Regional experience” stores designed to attract shoppers who are nostalgic for mom-and-pop retailing use RFID tags and inventory management algorithms to help these small stores quickly adapt to changing customer demand.
Personalized recommendations – Shopping carts detect RFID tags to identify products placed within. Subtotals are shown on the LCD screen as a recommendation engine suggests additional items based on current selection and past buying habits.
Sign here, please – The shopping cart beams the merchandise total to a transaction station, and the customer signs the screen to pay. Identity is verified by tracking the pressure, vector, and velocity of the signature script.
But how far the technology can sustain with the gap in generations. In the current scenario where the most of the top managers are of the older generation and the young budding managers look out to bring in the technologies, bridging the gap is a great challenge. With the current available technologies what percent of the organisations are investing towards the techno management? Yes, the western world is very much fascinated about the technology fastly moving towards implementing the form of PAT (Process Analytical Technology) etc., what about the countries like India and China where the human is cheaper than a machine (technology). Still today in this modern world we find the traditional Indian way of working in most of the organisations. The change management is the toughest task in today’s Indian context. Unless until the Techno Management is strongly supported through Change Management there is a wholesome of doubt the organisations sustain the global competition. There are numerous examples where the organisations have not sustained the growth due to the lack of Change Management at the strategic level.

Narayanan said...

Excellent review of past schools of thought and suggestions for future although in my view there has always been a component of "techno-management" perhaps ever since the industrial revolution. While management will continue to play a role in future, what will separate the winners from losers is the the ability of the organization's "critical mass" to straddle both ends of tech vs management spectrum, perhaps best articulated by Hartmut Esslinger who quipped "“Designers must think like business people and create like artists. They must understand the business model, its goals, and its financial capabilities, limitations, and expectations.”

Unknown said...

Thank you for this great post!!!

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