From Taylor to governance innovation

“In Taylor’s view, the task of factory management was to determine the best way for the worker to do the job, to provide the proper tools and training, and to provide incentives for good performance. He broke each job down into its individual motions, analyzed these to determine which were essential, and timed the workers with a stopwatch”. As described in this definition from Britannica, management was already seen in 1911 as one of the best way to improve organization's performances.

Nevertheless, the way Taylor based his theory on scientific vision of people management. And one could say that in management innovation, we need more innovation than management.

Indeed, innovation in management techniques can create long-lasting advantages and generate significant changes in competitive markets. In the past century, corporate innovation has enabled companies to cross new performance thresholds more than any other form of innovation.

However, it is surprising to see that only few companies have complete processes for continuous corporate innovation. Most companies have formal methodologies for product development, R&D or finance engineering, but very few of them have clear and robust management principles. In recent years, every organization on earth has thought about ways to reshape its business processes. So, how strange it is that so few companies have made similar efforts on governance innovation.

Why is it important?

When corporate innovation meets one or more of the following three conditions, it produces lasting advantages: innovation is based on new principles that challenge the orthodoxy of management; it is systematic and covers several processes and methods; Team members believe in it and are personally ready to involve themselves.

Indeed, the more unconventional the model, the longer it will take for competitors to respond. In some cases, head scratches can even last for decades, which is obviously extremely satisfying for any innovator! However, not every corporate innovation can create a competitive advantage. Any form of innovation follows the power law: for every truly radical idea that can bring a huge competitive advantage, dozens of other ideas will prove to be of low value. But is it really an excuse to not launch innovation processes? At the end of the day, innovation is always a logic game; the more you do, the better your chances of reaping great returns.

What is it exactly?

Corporate innovation can be defined as a clear exit from traditional management principles and theories, or a turning way from classic governance that significantly change the way management works. In short, corporate innovation has changed the way managers work.

In large firms, the only possibility to durably change the way managers are operating is to reinvent the processes and principles. Management processes such as strategic planning, operational finance, project management, human resources, operations management, internal communication, and knowledge management are the means to transform management principles into daily practice. They have established the methods and habits of managers. Operational innovation focuses on the company's business processes (purchasing, logistics, customer support, etc.), while corporate innovation focuses on the company's management process.

In most cases, what is missing in corporate innovation is a practical method. As with other types of innovation, the biggest difficulty is to come up with truly novel ideas. Unfortunately, we all know that generating truly disruptive ideas isn’t that easy. That is why creativity and unorthodox thinking are essential. Solving major problems also requires perseverance, resilience, and imagination. However, to maximize the opportunity for management breakthroughs, you need to start with a problem that has both consequences and excitement.

If you have not encountered such a problem, then the following three main problems will stimulate your imagination:

First, what are the difficult trade-offs that your company can never seem to solve? Governance innovation is usually driven by the desire to go beyond this trade-off, which seems irreconcilable.

Second, what do large organizations do best? This problem should cause a long list of incompetence. Large companies are not very good at change before they have to make changes or react to agile upstarts. Most people fail when it comes to unleashing the imagination of frontline employees, creating an inspiring work environment, or ensuring that the full development of the bureaucracy does not stifle the fire of innovation. Let yourself imagine what a company can't do and compare it with what you and your colleagues can do.

Third, what new challenges will your company face in the future? Just look at the future: we are living in a fast-moving world. Customers are constantly changing their mind. Large companies are always bigger and new ones are appearing daily. Services are always more important. Competition is always harder. These discontinuities will require corporate innovation and business model innovation. If you look around, you will see tomorrow’s problems, and your company should start solving them today. Suppose your goal is to make the company as agile as the change itself. In a VUCA world, continuous strategic updates are the only guarantee to avoid irrelevance. In addition, it is now agreed that all those management principles inherited from the industrial age will reduce your company's adaptability, rather than enhance it.

Although specialization has all its advantages, it limits cross-border learning that generates breakthrough ideas.

The search for higher standardization often leads to a negative impact on compliance. New and weird behaviors are regarded as dangerous deviations from the norm. Well-designed planning and control systems convince executives that the environment is more predictable than reality. The excessive emphasis on monetary rewards leads managers to underestimate the power of voluntary service and self-organization as a mechanism for adjusting individual efforts. Respect for hierarchy and positional power often strengthens outdated belief systems. These management principles are in stark contrast to those we inherited from decades before the industrial revolution. Doing so will not make the old principles wrong, but if the goal is continuous and preemptive strategic renewal, then these principles are not enough.

This is the difficulty: it is difficult to create surprising differences from low-level human abilities (such as obedience, diligence, and raw intelligence), and these things themselves have become global commodities. The problem is that bureaucratic organizations have little room for passion, ingenuity, and self-direction. The invention of the bureaucracy was in an era when humans were regarded as semi-programmable robots. The bureaucracy sets an upper limit on what positions an individual is allowed to hold. If you want to build an organization that can release the human spirit, then you will need some management principles that are absolutely non-bureaucratic. Where do you find an organization where people go all out? You can start with some non-governmental organizations, free-form companies or innovative social organizations. Each of these organizations is more like a community than a hierarchy. People are attracted to a sense of common purpose, not to the community out of economic need. In the community, the opportunity to contribute is not limited by the job description. Control is more based on the same level than based on the boss. Emotional satisfaction, not monetary gain, can drive commitment. For all these reasons, the community is an enhancer of human capabilities.

Deconstruct your management orthodoxy

To fully understand the power of the new management principles, you must relax the precedent's control over your imagination. Although you think that some certainty is scientific certainty, it is probably not. Although admitting this is painful, many aspects of management wisdom are undoubtedly disguised as unquestionable truths. How do you discover management orthodoxy? Gather a group of colleagues and ask them what they think about some key management issues (such as change, leadership or employee engagement). Once everyone's ideas are on the table, identify those common ideas.

For example, if the problem is a strategic change, you may find that most of your colleagues think:

  • The change must start from the top;

  • A crisis is needed to trigger change.

  • Changing large companies requires strong leaders;

  • To lead change, you need a very clear agenda;

  • People are mostly opposed to change;

  • Make any change, there will always be winners and losers;

  • You must enable people to make changes safely;

  • The organization can only respond to so many changes.

From experience, these beliefs seem to be true enough, but as a management innovator, you must be able to distinguish between what is ostensibly correct and what is eternally correct. Yes, big change plans usually require the support of an impassioned CEO. Yes, right-angle changes in strategic direction are usually caused by revenue collapse. Yes, almost every story about the company's renewal is an epic turn, and the new CEO serves as the company's savior. But is this the only way the world works? For simple reasons, in most companies, some senior managers are decisive in changing the strategic direction. Therefore, a helpless management team, unwilling to succumb to yesterday's certainty, can take the entire organization's ability to embrace the future as a hostage. As a management innovator, you must make every management belief face two problems. First, is belief harmful to the ultimate goal you want to achieve? Second, can you imagine alternatives to the reality reflected in your beliefs?

Take the typical assumption that the CEO is responsible for strategy. Although this seems to be a reasonable point of view, it may lead employees to believe that they think they are powerless to influence the company's strategic direction or reshape the company's business model are the implementers of the strategy rather than the creators. However, if the goal is to speed up the pace of strategy updates or fully stimulate the imagination and passion of each employee, then a CEO-centered view of strategy formulation is at best unhelpful, and at worst dangerous. Few companies conduct systematic work to broadly distribute responsibility for strategic innovation. Its experience shows that the traditional view of the CEO as a chief strategist is just: a convention.

This is not entirely wrong, but it is still a long way from being completely right. And, when you put other management principles under the bright spot of a severe test, you may find that many of them are equally vulnerable. With the collapse of ancient certainty, the space for corporate innovation is also growing. The servant's leadership. The power of diversity. Self-organizing team. How far can you push the company's autonomy and self-direction? Are there some simple rules that can give full play to local initiative and provide focus and discipline at the same time? Are there any meritorious goals that can inspire voluntary service? In order to make these principles a reality, you need to understand exactly how the company’s existing management processes exacerbate the major problems you want to solve.

Final Results? Your company's return on human capital investment is negligible. An in-depth and systematic review of your company’s management processes will reveal opportunities to reshape them in ways that further achieve your bold goals. Most organizations around the world are based on a few time-tested management principles. In light of this, it is not surprising that the differences between a company's core management processes such as corporate finance, operations management, and leadership development are small. So far, the management of the 21st century is not much different from the management of the 20th century. The opportunity lies in it. You can wait for your competitors to stumble upon the next major management breakthrough, or you can immediately become a management innovator. In this world full of new management challenges, you need to be more creative and less traditional than all previous management pioneers. If you succeed, then your legacy in corporate innovation will be no less than their brilliance.

Thibaut Griboval