While supercharging businesses aren’t exactly on everyone’s to-do list, a series of articles on this topic by Steve Denning, a management consulting professional, is worth sharing because of its relevant insights to anyone who works. If you’re a bookish person and ever wondered how there could be so many new books about management every time you visited a bookstore, online or not, Denning has an answer worth thinking about, especially among those interested in changing the culture of their company or organisation for the better and who have the means to do so.

A clear majority of CEOs have been paying lip service to the priority of increasing the agility of their large firms, especially in an age of technological transformation. But many in these firms, including the CEOs themselves, are often aware of the lacklustre impact of their efforts, evidenced by their inability to capitalise on markets and achieve the extraordinary profits they know that they could, compared with the successes of companies such as Amazon, Netflix, and Tesla. Many remain stuck with 20^th-century management practices, despite their earnest efforts to transform and thrive in the 21^st-century marketplace.   

Denning argues that the myriad efforts by companies to transform their management practices are often tackling just part of the larger puzzle that needs to be completely solved to facilitate that transformation, and the proliferation of management books, each revolutionary in their own way, merely address some aspect of the whole problem. For example, business agility is enabled in part by small self-organising teams, but such teams cannot operate to their potential unless other values are embraced by the firm, such as customer obsession – i.e., ‘reporting’ to the customers’ needs and wants rather to bosses – as well as the freedom to operate as a network. Furthermore, as long as activities or processes in the back end are at cross purposes with operations, agility cannot be achieved.

One such activity is the prioritization of ‘process’ over ‘product’ and the use of internal output measures that shifts the attention away from more important external outcomes, such as evidence that customers’ lives are enhanced and that their perception of the company is positive. People at the top aren’t usually the ones who can successfully transit the company because their focus tends to primarily be on internal issues. According to the Harvard Business Review, the average CEO spends about 3% of their time with customers.

21^st-century corporate agility is almost the opposite of 20^th-century management, and if change from the latter to the former is to be sustained, the entire organization must be run differently. Agility has been given different names in the literature, like Project Aristotle, Renhanheyi, the Vinci Way, mission command, adhocracy, and more. But they each converge on similar ideas about how best to do 21^st-century work. The relative success of companies such as Amazon and Microsoft over former titans like GE and IBM speak of the value of 21^st-century management and leadership practices.

Given the key role of talent, people management must attract good people at all levels of the organisation and enable them to bring value to customers.

The tell-tale signs of genuine 21st-century management include:

The management lives and breathes the three core principles of business agility: customer obsession, self-organizing teams, horizontal network of competence.

Teams get work completely done at the end of each short cycle.

All teams have a clear line of sight to the external customer. There is no talk of “internal customers.”

External measures for all work are in place before work starts.

Activities that are yielding no benefit to customers are systematically eliminated.

Back-office functions are in sync with, and enhancing, operations.

The firm is seeing major financial gains already accomplished or at least clarity as to how they will be attained.

Steve Denning

While many are now familiar with the ocean of literature surrounding management best practices, management practices in real life, however, largely remain stuck in the past, disposed to offering ineffective remedies – such as helicoptering new leaders or trying to cut costs here or there – to age-old problems. There are many reasons for this. 20^th-century management appears clear, coherent, and internally consistent. It is easy to understand and create, resembles other familiar hierarchical structures across human societies, such as the nuclear family, monarchies, and so on. And it has produced remarkable success in the past.   

20th-century principles are singularly focused on making money and hence maximising shareholder value. Because of this, work inevitably becomes less and less inspiring to those doing the work, and so they need to be closely monitored. Bureaucracy, with everyone reporting to someone else, naturally emerges, along with an attendant hierarchy.  

These three core 20th-century principles—shareholders, bureaucracy and vertical hierarchy—in turn lead inexorably to the all-too-familiar set of 20th century corporate processes. Thus, leadership has to come from the top because it is only the executives who, being compensated in stock options for delivering short-term shareholder value, are deeply committed to implementing that goal; as a result, leadership is inevitably transactional rather than transformational: the top has to resort to carrots and sticks, rather than inspiration.

Steven Denning

The greatest challenge to this transformation is moving wholesale rather than piecemeal. As Denning notes, ‘unless all the principles and processes of 20th-century management are eventually neutralized or removed, major change will be constrained or even doomed.’ As mentioned, an ocean of books has been written tackling one or other aspect of the management malaise many now recognise to be counterproductive to the goals of any firm that believes in its mission and respects itself. But when they are taken in isolation, they fail to contend with everything else that will undermine the change.

Blue ocean strategy is a vital piece of the puzzle, as anyone who has read the book would likely agree, but it is only one piece. Unless companies are committed to finding all the pieces completing the puzzle, nothing sustainable is likely to happen. The Blue Ocean Shift authors themselves agree but provide no detailed solutions to those other problems, such as navigating insidious politics to enact the goal of innovation:

“Is your organization dysfunctional? Ridiculously bureaucratic? Or highly political so that getting things done feels akin to walking through a minefield? Large, older organizations may feel this way. So can government entities. In these situations, in addition to putting the team together and selecting the right team leader, you also want to think about enlisting a consigliere…. As a respected insider, he or she can advise the team and provide air cover from potential detractors, as well as garner support from individuals who might otherwise want to thwart the initiative actively or through passive aggression.”

Blue Ocean Shift

Many other revolutionary management books do the same thing. The Cult of the Customer talks about revaluating the value of customer retention; Humanocracy and Reinventing Organizations argue for de-bureaucratization; other books talk about the movement away from transactional to transformational leadership; Selling with Noble Purpose pushes for the value of innovation and job satisfaction, and many more such books offer insightful solutions to management problems. Each of them, however, taken in isolation, cannot sustain the intended change if everything else in the company isn’t moving.

Another thing to look out for is innovation theatre. Innovation theatre is exactly what it sounds like: initiatives intended to make companies look like they are engaging in meaningful innovation activities, which are often given fancy names like hackathons, accelerators, or incubators, and which often have enormous resources poured into them, only to not deliver any product at the end of the process or inspire any marked change in company culture overall.

When it comes to ideas, there are already plenty. A good majority of people in any company, especially if they’ve been around for a while and have had their hands in different pies, know how things can be better. The real challenges are the ability to narrow down those ideas to ones that are customer-oriented, actionable, fit for scale, and the gumption to act on them.  

As companies and agencies get larger, they start to value the importance of ‘process’ over the product […] People who manage processes are not the same people as those who create product. Product people are often messy, hate paperwork, and prefer to spend their time creating stuff rather than documenting it. Over time as organizations grow, they become risk averse. The process people dominate management, and the product people end up reporting to them.

Steven Blank, Entrepreneur

Many changes that sound good on paper don’t effect much change in the intended direction for the long term:

Often the first plan from leadership for innovation is hiring management consultants who bring out their twentieth-century playbook […] The consultants reorganize the company (surprise!), often from a functional organization into a matrixed organization. The result is organizational theater. The reorg keeps everyone busy for a year, perhaps provides new focus on new regions or targets, but in the end is an inadequate response to the need for rapid innovation for product.

Steven Blank

In the end, how a company gets reorganised doesn’t really matter unless the structure of the org chart itself changes, from a hierarchy to a network. Changing CEOs won’t work either and may make things worse, since a new CEO would not understand the workings of the company well enough to diagnose the problem and fix the issues. In a bureaucratic system, people themselves don’t matter as much as the processes. Good when the processes deliver results beyond what the available talent pool is capable of, an unfortunate waste of talent and profit when, more often than not, they don’t.

Effecting transformational change is not for the faint of heart. It would force everyone in the company to relearn things and put almost everything in question. Those looking for a comfortable working life would have to look elsewhere (at least at the beginning stages of the transformation, before it becomes a delightfully creative place to work in). The change is also not something that can fit the needs of all companies either. Only people with intimate knowledge, experience, and relative authority in the company would have the means to adapt transformational management practices to their situation.

The practices of any company go well beyond what one reads in their operational manuals, HR documents, value statements, or even policy and strategy documents. Companies are run much more intricately and with many more unspoken beliefs and assumptions held by key personnel that must be recognised and addressed.

We should also note that 20^th-century management has its place. If it did not achieve any success, it would have disappeared a long time ago. Such practices were effective in the middle of the 20^th century when it found its feet in a calmer world that valued trust and mutual respect, even in business. As the singular drive to make more money in the face of disruption took over the trust and respect of the mid-1900s however, management practices could no longer keep up. Of course, some kinds of companies still have good reason to practice 20^th-century management such as those in the commodities sector where there are no customers.  

For everyone else, a good place to start on that transformation journey would be to find people who are already working, in their own way, with 21^st-century principles. In most companies, these are usually the IT people. Talk to them, find out what obstacles they are facing, and see how a stronger symbiotic relationship can be cultivated with them.  

Going back to the kind of people who have the power to inaugurate a new era of management practices in a company, they are typically people in middle management who are deeply passionate about making change happen. People higher up are usually too concerned about other things, and given their remuneration, aren’t incentivised to rock the boat either. Even if they were – when, for example, their company is flailing – their command-and-control approach to such change would be perceived as another top-down directive that predictably foments underground resistance and other forms of virulent passive aggression. Bright-eyed people too low on the totem pole don’t have the bird’s eye view, the knowledge, experience, or connections to get things going and sustain such change either.

A group of middle managers with experience and hands in many pies who are sold on the mission of change and are willing to forgo an easy working life to create and sustain a more meaningful and successful culture for countless others is the company’s best bet. Even better if they have tacit approval and support from the C-suite.

This group should contain people who can inspire others with stories, touching both the rational and emotional sides of listeners and galvanising transformational action. These stories should ideally allow people to have “moments of truth” when they see how the goals of the company can be met much more easily and competently with a distinct set of management principles which incidentally also gives everyone a stage and a voice:

In Microsoft, in 2008, developer Aaron Bjork had done everything according to the Microsoft way to bring his product to market, but it was three years too late. He could see that if he, and Microsoft, continued in this fashion, they would be unable to compete. […] In the same vein, Jeff Bezos in 2002 discovered that an obvious step that needed to be taken was blocked in a battle between the vertical silos. He saw that Amazon would never be able to move fast enough if such simple problems could not be solved. It was obvious that Amazon had to switch from being hierarchy of authority to a network of competence.

Steven Denning

When everyone in a company has a clear connection to the reason for their work, i.e., the customer, along with the freedom and creativity to collaborate, share goals and create instant value, few would be willing to go back to a tightly run bureaucracy.

Each journey will be unique to the organization, but we can learn from other firms the likely shape of the voyage. Thus, the pictures shown below depict four typical stages of the transition journey. Check out Steve Denning’s original materials for a clearer picture.

The preliminary stages of change start with experimenting on self-organising teams to draw on the full talents of those working on said project. Without other changes swift on its heels however, this stage of the agile agenda is likely to have a short shelf life. The middle stages usually include the gradual transition to just about all the main Agile principles listed in the image above, leaving just finance, budget, HR, and strategy remaining at cross purpose to operational principles.

These back-office functions have long-standing traditions of top-down bureaucratic management and have little or no experience with 21st century versions of what they do. As a result, these functions can become lobbyists not only for maintaining 20^th century-style versions of their own functions but also for returning the rest of the organizations to the familiar stability of 20^th century management, thus rescuing the firm from the supposed “chaos” of the new management.

Steven Denning

Agile, itself a kind of process that is derived from the 21^st-century environment, also has to evolve, as the management practices that came before it. Therefore, the journey to becoming and staying agile will necessarily involve throwing away some principles and processes that supported the early stages of the agile journey. Being fluid and malleable in the prevailing disruptive environment yields the greatest chance of long-term success.

In the above ways, 21st-century leadership and management can be developed and adapted to meet the needs of any firm, much to the benefit of everyone. Good luck!

Denning provides a reading list for those wanting to learn more about how to make their workplaces more Agile which is presumably worth checking out. His articles and book are a search engine away.