Expand and exploit diversity.
Diversity is not only essential for the survival of a species, it is also a prerequisite for long-term corporate viability. Organizations that don’t embrace, encourage, and exploit a diversity of experiences, values, and capabilities will be unable to generate a rich variety of ideas, options, and experiments—the essential ingredients of strategic renewal. Future management systems must value diversity, disagreement, and divergence at least as highly as they do conformance, consensus, and cohesion.
Reinvent strategy making as an emergent process.
In a turbulent world, prediction is difficult and long-range planning of limited value. Management processes that seek to arrive at the “one best strategy” through top-down, analytical methods must give way to models based on the biological principles of variety (generate lots of options), selection (use low-cost experiments to rapidly test critical assumptions), and retention (pour resources into the strategies that are gaining the most traction in the marketplace). In the future, top management won’t make strategy but will work to create the conditions in which new strategies can emerge and evolve.
De-structure and disaggregate the organization.
To intercept opportunities that come and go at lightning speed, organizations must be able to quickly reconfigure capabilities, infrastructure, and resources. Unfortunately, in many organizations, rigid unit boundaries, functional silos, and political fiefdoms hamper the rapid realignment of skills and assets. Large organizational units that encompass hundreds or thousands of employees pose another danger, as they often lead to groupthink on a grand scale. To become more adaptable, companies must reorganize themselves into smaller units and create fluid, project-based structures.
Dramatically reduce the pull of the past.
Management processes often contain subtle biases that favor continuity over change. Planning processes reinforce out-of-date views of customers and competitors, for instance; budgeting processes make it difficult for speculative ideas to get seed funding; incentive systems provide larger rewards for caretaker managers than for internal entrepreneurs; measurement systems understate the value of creating new strategic options; and recruitment processes overvalue analytical skills and undervalue conceptual skills. While continuity is important, these subtle, baked-in preferences for the status quo must be exposed, examined, and, if necessary, excised.
Share the work of setting direction.
As the pace of change accelerates and the business environment becomes more complex, it will be increasingly difficult for any small group of senior executives to chart the path of corporate renewal. That’s why the responsibility for defining direction must be broadly shared. In addition, only a participatory process can engender wholehearted commitment to proactive change. Foresight and insight, rather than power and position, must determine share of voice in setting corporate direction.
Develop holistic performance measures.
Existing measurement systems have many flaws. They tend to overemphasize the achievement of some goals, like hitting short-term profit targets, while undervaluing other important objectives, like building new growth platforms. They often take no account of the subtle, yet critical factors that drive competitive success, like the value of customer-driven innovation. To overcome these limitations, companies will need to create more holistic measurement systems.
Stretch executive time frames and perspectives.
Compensation and incentive systems often truncate executive time horizons and skew perspectives. For instance, research suggests that most executives wouldn’t fund a viable new initiative if doing so reduced current earnings. Building new incentive systems that focus executive attention on creating long-term stakeholder value must be a critical priority for management innovation.
Create a democracy of information.
Managerial power has traditionally depended on controlling information. Yet increasingly, value creation takes place at the interface between first-level employees and customers. Those on the front lines must be informed and empowered so they can do the right thing for customers without having to ask permission.
Resilience also depends on information transparency. In volatile environments, employees need the freedom to act quickly and the data to act intelligently. If they have to refer decisions upward, adaptability suffers. That’s why the costs of information hoarding are becoming untenable. To make timely decisions that reflect the best interests of the entire company, grassroots employees need to be some of the best-informed individuals within the organization. Companies, therefore, must build information systems that give every employee a 3-D view of critical performance metrics and key priorities.