Change Management: On the Cusp of a Revolution?

Stephen DeAngelis

April 5, 2012

Last month, the Financial Times published an article about management guru Gary Hamel. The article reports that Hamel “should be an embittered, disillusioned cynic” since it appears that business executives have paid little attention to his ideas over the past several decades. [“Still on the cusp of a revolution,” by Andrew Hill, 4 March 2012] To be fair, Hill points out that Hamel hasn’t been completely ignored. “His trademark idea of ‘core competencies’ – developed with the late C.K. Prahalad – certainly helped change the shape of companies in the 1990s, as they outsourced non-core operations.” Even though Hill seems to believe that the last couple of decades have proven to be barren ground for Hamel, he reports that, rather than being embittered and disillusioned, Hamel “retains the fervour of a man who believes the world is poised for a breakthrough.”

Hamel told Hill that trying to get organizations to change is hard — really hard. That’s because organizations are built for stability not change. “We all know our organisations are pretty much crap when it comes to change,” he told Hill. “They were never built to change. They were built for stability, to eke out a little more efficiency and a little more productivity year by year by year.” But Hamel believes that is all about to change. Hill continues:

“[Hamel’s] new book, What Matters Now, puts emphasis firmly on the ‘now’. In person, the dapper Mr Hamel is so insistent that we are on the cusp of the business transformations he has long predicted, that he is ‘willing to bet anybody a case of champagne’ that ‘we are going to see a greater revolution in how companies are run and managed over the next decade than we’ve seen over the last 100 years’.”

Hill notes that Hamel has been pushing ideas like “dismantling of hierarchies, the value of diverse teams and the need for senior executives to listen to younger employees.” I believe that organizational form should match organizational function. That means that, in some circumstances, dismantling hierarchies could be a big mistake. On the other hand, when it comes to innovation and creativity, I’m a big fan of diverse teams and open-mindedness. Hill notes that “most [organizations] still operate top-down structures under single leaders, producing similar things in similar ways to their ancestors.” Hamel apparently thinks that is wrong-headed and about to change. Hill explains:

“There are a number of reasons why [Hamel] believes change is now inevitable. First, ‘companies are up against a set of unprecedented challenges that are going to demand unprecedented solutions’. Second, knowledge has become a commodity, freeing companies to be more creative and flexible. Third, a new digital generation believes every idea should ‘compete on an equal footing’: ‘They believe that what really should matter is your contribution, not your credentials.’ Finally, social media are subverting traditional management. Mr Hamel says managers first used the internet to ‘inform’ their teams (‘Here’s the policy, here’s the price.’) Now they are using it to ‘involve’ staff, connecting all parts of the organisation and sharing best practices. The next step will be to ‘invert’ the hierarchy. ‘Now we have the new tools, we have ways of aggregating human wisdom that we just didn’t have [before]. And so what happened in Egypt, what happened in Tunisia – versions of this are happening in every company,’ he declares.”

Although I agree with many of the claims Hamel makes, I stop short of endorsing a hydra-headed organization where it’s unclear who is raising capital and keeping the train on track. Yes, we are entering the era of Big Data, ubiquitous connectivity, and super-empowered individuals. At the same time, I don’t believe we are entering an era where anarchy is going to lead to progress. Hill calls some of Hamel’s soapbox oratory “Hamelian hyperbole” that involves “well-crafted bullet-points.” I think that Hamel can be forgiven for those foibles. After all, he makes his living on the speaking circuit where hyperbole and bullet points are necessary to get an audience’s attention and to ensure additional bookings. Read Hamel’s books and you’ll find a first-rate mind behind the writing. Hill agrees that “Hamel is no mere motivational speaker.” He continues:

“For nearly 20 years, [Hamel] has lived in northern California. He says he feels at home near Silicon Valley, the crucible of technological innovation. At times – in his call, for instance, for more managers to use words like love, beauty, trust and justice – he admits he may sound like a ‘Baptist preacher or someone who sat in the hot tub too long’. But he has also been associated with London Business School since 1983 and talks with fondness of the 10 years he lived in the city. In fact, Mr Hamel combines a Californian urge to heat ideas until they nearly boil over with some of the sceptical Londoner’s need to apply a wet blanket. It is a winning combination. He speaks with a revolutionary’s certainty, but he frets about how to resolve the uncertainties and contradictions of modern management.”

Hill believes that once you get past the fervency and rhetoric, Hamel offers some ideas that are firmly grounded in reality. He notes that Hamel “extols the internet’s transformational potential” while at the same time admonishing “‘web boosters’ for ignoring the way traditional management can ‘solve the problem of control at scale’.” Hamel understands the virtues of crowdsourcing, but also states, “Go look at an Intel ‘fab’ line making 28-nanometer chips. You tell me how we’re going to crowdsource that? How does the smart mob pull that thing off? You have to manage hundreds, maybe thousands of variables to microscopic tolerances, right?” In the end, Hamel is a proponent of management not anarchy. “This is why management was the most important invention of the last century,” he told Hill. “Nothing, not the combustion engine, not the steam turbine, was as important … because without management, none of those other things are affordable.”

Nevertheless, Hamel is obviously unhappy with the state of management and has been for some time. He told Hill that “the challenge now is to find a way of combining the radical possibilities of what he calls ‘Management 2.0’ with the need for structure to keep businesses running.” Hill continues:

“Appropriately, Mr Hamel is using online tools to pursue this quest to ‘reinvent’ management. They include the Management Innovation Exchange, where anyone can submit new ways of running businesses, which are then debated online. He continues to seek out examples of radical management in action. The most recent is Morning Star, a Californian group that has become the world’s largest tomato processor despite – or, he suggests, because of – the fact it is ‘self-managed’. Along with better-known case studies in non-hierarchical management, like W.L. Gore, of Gore-Tex fabric fame, the company has pride of place in the new book, which attempts to answer the question of how the experience of relatively small outliers might be applied to much larger groups. He summarises the answer: ‘Number one, start with new principles; number two, be ambitious; number three, experiment like hell.'”

Hamel knows that change is not easy and is often challenged. If an organization’s management style needs changing, all of the factors in the “change formula” need to be present. The change formula is often expressed as D x V x P > C — where D = Dissatisfaction with the current state; V = Clear vision for change; P = Process for getting it done; and C = Cost of change. If any of those factors equal zero, then the change process is likely to be unnecessary, challenged, or derailed. If there is no dissatisfaction with the current state, then there will be no felt need for change (i.e., lots of opposition). If there is no clear vision concerning the change, a lot of anxiety and confusion will result (i.e., lots of opposition). If there is no clear process for achieving change, the result will be frustration and probably outright rejection. In all of those cases, the cost of change is likely to be greater than the value derived from change. If all of the factors fall in place, however, then Hamel’s recommendations are valuable to consider.

Hill reports that Hamel is more of an evolutionist than a revolutionary. Hamel says that the changes he envisions taking place over the next decade will more like “the transformation of a caterpillar into a butterfly” than the storming of the gates of the Bastille. The changes that are wrought, however, will be no less profound. “Retrospectively,” he says, “[it] looks like a revolution.” Hill continues:

“One thing is clear, he says: ‘The whole notion of leadership [is] discredited … We have organisations that demand far too much of the few, and far too little of the many, so we disenfranchise most employees.’ While he may be optimistic about the system’s capacity for change, Mr Hamel is also angry about the failings of management coaches and educators. ‘We are not discontented enough with how much organisations really truly suck and we haven’t been very ambitious in trying to make them different,’ he says. An unnamed LBS colleague recently told him business academics were less like engineers and more like theoretical physicists, which ‘made me want to jump off a bridge’.”

Hamel told Hill that in business schools people “don’t see themselves as inventors; you don’t have that sense of almost sacred mission.” Hamel is optimistic, however, “that perhaps – just perhaps – that time is now.” In most colleges and business schools, “entrepreneurship has only emerged as an interdisciplinary field of study over the past 10 years. [“Innovation and creativity move to the heart of the curriculum,” by Anjli Raval, Financial Times, 6 February 2012] Raval reports, “Spurred by a surge in students across the US wanting to be technology entrepreneurs, schools have tailored their entrepreneurship initiatives accordingly.” Hamel, I believe, would argue that is not enough. He may be right. I suspect that the kind of organizational and management change that Hamel is seeking will only emerge after a sufficient body of evidence exists that such change creates a business environment better than the one that now exists. That means that Hamel will have to convince a lot more companies to experiment with his ideas.