Gary Hamel, at the World Business Forum Photographer: Craig Ruttle/Bloomberg
First, the bad news.
- The problem of lack of resilience has gotten worse. Since 2003, enormous amounts of wealth have been lost as the pace of disruption accelerates. The marketplace has become faster paced and increasingly complex to such an extent that traditionally managed bureaucratic firms simply can’t keep up. As a result, the life expectancy of public firms –once 75 years–continues to decline and is now less than 15 years.
- Disruption is increasingly coming from unexpected directions outside the industry, not from known competitors. The picture of once-stable intra-industry competition is no more. Now disruption can come from anywhere.
- Startups used to be annoying “ankle biters” that represented no real threat to established firms: now they are often better funded than the incumbents.
- The legendary search for sustainable competitive advantage is proving increasingly futile: competitive advantage is mostly temporary. Firms must go on innovating merely to survive.
- To add to management’s woes, activist investors have joined forces with institutional investors to extract value from existing firms, often forcing a management preoccupation with short-run returns over long-term investment and sustainability.
Similar challenges are also occurring in the public sector. For example, as Steve Blank points out, an intelligence agency may be tasked, every year, to implement a set of activities. Yet every year their capabilities degrade (as new, unplanned threats emerge, trade-craft and tools become obsolete, and security breaches occur), even if they brilliantly execute their current mission. Moreover, leaders don’t always realize that they not only have to execute their current mission: they also have to create new capabilities for security threats over the horizon.
The Good News
But there’s also good news. Thus, the Hamel/Välikangas HBR article in 2003 was not a how-to guide, but rather “a clarion call for rethinking the principles and premises of management, so as to contrast and complement organizational hierarchy with a sense of initiative and community building.”
Since 2003, for those with eyes to see, such a rethinking of the principles and underlying assumptions of management has now occurred. From the experience of thousands of organizations, we now know what is involved in creating organizations that can anticipate and adapt rapidly to unexpected change, not only making their existing products better faster and cheaper, but also creating new businesses for whole new groups of customers.
There in in effect an unstoppable management revolution under way. New ways of managing are enabling firms to connect everyone and everything, everywhere, all the time. These firms are becoming capable of delivering instant, intimate, frictionless value on a large scale. They are creating a world in which people, insights, and money interact quickly, easily and cheaply. For those firms that have mastered these elements, the revolution is uplifting and beautiful. For organizations that haven’t, it is dark and threatening.
A clear sign that the revolution has already taken place is the fact that the five largest firms in the world by market capitalization are no longer the lumbering industrial giants of the 20tth Century like Exxon or General Electric, but instead, firms practicing for the most part the new management principles: Amazon, Apple, Facebook, Google and Microsoft.
The Management Revolution Now Under Way
The management revolution now under way is about working smarter, not harder, and achieving more value from less work, with much greater adaptability. It began emerging many decades ago but took off in a major way in the software development industry in the last 15 years. Sparking dramatic improvements in quality, innovation, and speed to delivering value, the Agile movement is now spreading quickly, throughout all parts and all kinds of organizations. It enables a team, a unit, and an entire organization to nimbly adapt and upgrade products and services to meet rapidly changing technology and end-user needs and create new businesses.
The new way of managing includes three “laws”: the Law of the Customer, the Law of the Small Team and the Law of the Network. Fundamental to everything is a recognition that the new way of managing is not a process but a mindset; in which the entire organization embraces the new principles. This is about “being Agile,” not just "doing Agile."
Yet while the capability to improve existing products and services (“Operational Agility”) is important, and indeed vital to survive, it’s not enough for a firm to thrive. Major financial gains are more likely to come from “Strategic Agility”, i.e. generating innovations that create entirely new markets and that turn non-customers into customers. Instead of being slightly better than everybody else in a crowded and established field, a firm practicing Strategic Agility creates new markets and dominates them. The profit margins are bigger, and the value to society is often larger. Achieving Strategic Agility, involves mastering a playbook for systematically generating market-creating innovations and the necessary shift in culture that is required.
Understanding Disruption
In retrospect, we can now understand more clearly the phenomenon of disruption identified by Clayton Christensen. Paradoxically, it was argued that smart companies and their executives failed to deal with even well-known threats of disruption by implementing good management.
Clayton Christensen, Oct. 11, 2016. Photo: Christopher Goodney/Bloomberg
“Market-leading companies,” as analyst Alan Murray wrote in the Wall Street Journal, “have missed game-changing transformations in industry after industry—computers (mainframes to PCs), telephony (landline to mobile), photography (film to digital), stock markets (floor to online)—not because of ‘bad’ management, but because they followed the dictates of ‘good’ management.”
In effect, the “good management” that these firms were practicing wasn’t good management at all. It was management that had become anachronistic. It was management that simply didn’t work anymore. A new kind of management had to be invented. Thus, the age of Agile was born.
And read also:
Achieving The Holy Grail of Strategic Agility
Four Keys To Achieving Strategic Agility
Steve Denning’s new book is The Age of Agile (AMACOM, 2018)
">Much has happened since the landmark Harvard Business Review 2003 article, “The Quest for Resilience,” by Gary Hamel and Liisa Välikangas. It defined “resilience as a capacity to undergo deep change without or prior to a crisis” and pointed to the systemic failure of most large firms to be resilient. Since then, there’s been good news and bad news.
Gary Hamel, at the World Business Forum Photographer: Craig Ruttle/Bloomberg
First, the bad news.
- The problem of lack of resilience has gotten worse. Since 2003, enormous amounts of wealth have been lost as the pace of disruption accelerates. The marketplace has become faster paced and increasingly complex to such an extent that traditionally managed bureaucratic firms simply can’t keep up. As a result, the life expectancy of public firms –once 75 years–continues to decline and is now less than 15 years.
- Disruption is increasingly coming from unexpected directions outside the industry, not from known competitors. The picture of once-stable intra-industry competition is no more. Now disruption can come from anywhere.
- Startups used to be annoying “ankle biters” that represented no real threat to established firms: now they are often better funded than the incumbents.
- The legendary search for sustainable competitive advantage is proving increasingly futile: competitive advantage is mostly temporary. Firms must go on innovating merely to survive.
- To add to management’s woes, activist investors have joined forces with institutional investors to extract value from existing firms, often forcing a management preoccupation with short-run returns over long-term investment and sustainability.
Similar challenges are also occurring in the public sector. For example, as Steve Blank points out, an intelligence agency may be tasked, every year, to implement a set of activities. Yet every year their capabilities degrade (as new, unplanned threats emerge, trade-craft and tools become obsolete, and security breaches occur), even if they brilliantly execute their current mission. Moreover, leaders don’t always realize that they not only have to execute their current mission: they also have to create new capabilities for security threats over the horizon.
The Good News
But there’s also good news. Thus, the Hamel/Välikangas HBR article in 2003 was not a how-to guide, but rather “a clarion call for rethinking the principles and premises of management, so as to contrast and complement organizational hierarchy with a sense of initiative and community building.”
Since 2003, for those with eyes to see, such a rethinking of the principles and underlying assumptions of management has now occurred. From the experience of thousands of organizations, we now know what is involved in creating organizations that can anticipate and adapt rapidly to unexpected change, not only making their existing products better faster and cheaper, but also creating new businesses for whole new groups of customers.
There in in effect an unstoppable management revolution under way. New ways of managing are enabling firms to connect everyone and everything, everywhere, all the time. These firms are becoming capable of delivering instant, intimate, frictionless value on a large scale. They are creating a world in which people, insights, and money interact quickly, easily and cheaply. For those firms that have mastered these elements, the revolution is uplifting and beautiful. For organizations that haven’t, it is dark and threatening.
A clear sign that the revolution has already taken place is the fact that the five largest firms in the world by market capitalization are no longer the lumbering industrial giants of the 20tth Century like Exxon or General Electric, but instead, firms practicing for the most part the new management principles: Amazon, Apple, Facebook, Google and Microsoft.
The Management Revolution Now Under Way
The management revolution now under way is about working smarter, not harder, and achieving more value from less work, with much greater adaptability. It began emerging many decades ago but took off in a major way in the software development industry in the last 15 years. Sparking dramatic improvements in quality, innovation, and speed to delivering value, the Agile movement is now spreading quickly, throughout all parts and all kinds of organizations. It enables a team, a unit, and an entire organization to nimbly adapt and upgrade products and services to meet rapidly changing technology and end-user needs and create new businesses.
The new way of managing includes three “laws”: the Law of the Customer, the Law of the Small Team and the Law of the Network. Fundamental to everything is a recognition that the new way of managing is not a process but a mindset; in which the entire organization embraces the new principles. This is about “being Agile,” not just "doing Agile."
Yet while the capability to improve existing products and services (“Operational Agility”) is important, and indeed vital to survive, it’s not enough for a firm to thrive. Major financial gains are more likely to come from “Strategic Agility”, i.e. generating innovations that create entirely new markets and that turn non-customers into customers. Instead of being slightly better than everybody else in a crowded and established field, a firm practicing Strategic Agility creates new markets and dominates them. The profit margins are bigger, and the value to society is often larger. Achieving Strategic Agility, involves mastering a playbook for systematically generating market-creating innovations and the necessary shift in culture that is required.
Understanding Disruption
In retrospect, we can now understand more clearly the phenomenon of disruption identified by Clayton Christensen. Paradoxically, it was argued that smart companies and their executives failed to deal with even well-known threats of disruption by implementing good management.
Clayton Christensen, Oct. 11, 2016. Photo: Christopher Goodney/Bloomberg
“Market-leading companies,” as analyst Alan Murray wrote in the Wall Street Journal, “have missed game-changing transformations in industry after industry—computers (mainframes to PCs), telephony (landline to mobile), photography (film to digital), stock markets (floor to online)—not because of ‘bad’ management, but because they followed the dictates of ‘good’ management.”
In effect, the “good management” that these firms were practicing wasn’t good management at all. It was management that had become anachronistic. It was management that simply didn’t work anymore. A new kind of management had to be invented. Thus, the age of Agile was born.
And read also:
Achieving The Holy Grail of Strategic Agility
Four Keys To Achieving Strategic Agility
Steve Denning’s new book is The Age of Agile (AMACOM, 2018)
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