Managing In The Digital Age: A Diagnostic Tool
Managing In The Digital Age: A Diagnostic Tool
Excerpt from Chapter 4 of Reinventing Capitalism In The Digital Age , (Cambridge University Press, September 2022)
A Powerful Diagnostic Tool For Digital Era Enterprises
This chapter offers a diagnostic tool to measure the progress of the transition from industrial-era management to operating in the digital age. It can be used at the level of the firm, a unit, a team, or an individual.
There are currently two strikingly different ways of running a corporation in a coherent and consistent fashion. In one—the predominant mode of the industrial era, refined over the last 50 years—the goal of the firm is to make money for the firm and maximize shareholder value. This goal leads to principles and processes that emphasize stable structures that control staff, contain costs, and increase revenues, profits and the current stock price. This approach was successful in the relatively stable industrial-era and is still applicable in some contexts.
By contrast, for digital era management—the pioneering mode of Agile enterprises and of leading Silicon Valley firms, as well as individual businesses in Europe and China—the goal of the firm is to create customers. This goal leads to principles and processes that enable agility as well as stability. The principles and processes help firms mobilize talent to create instant, intimate, frictionless, incremental value for customers. In this mode of operating, profits and the stock price are viewed as results, not goals.
The new management is thus very different from the industrial era. Instead of a focus on internal efficiency and outputs, the primary preoccupation in the new age is external: an obsession with creating value and outcomes for customers and users. Instead of starting from what the firm can produce that might be sold to customers, digital firms work backwards from what customers need and then figure out how that might be delivered in a sustainable way. Instead of limiting themselves to what the firm itself can provide, the firm often mobilizes other firms to help meet user needs. Instead of leadership located solely at the top of the organization, leadership and initiative that create fresh value are nurtured throughout the organization. Instead of tight control of individuals reporting to bosses, self-organizing teams throughout the firm create value by working in short cycles and drawing on their own talents and imagination. Instead of the steep hierarchies of authority of industrial era-firms, digital firms tend to be organized in horizontal networks of competence. In these ways, most of the central management tenets of the industrial era have been upended.
Firms operating in the new way have been transforming everything society does—how we work, play, shop, access knowledge, learn, entertain ourselves, communicate, move about, stay healthy and even how we worship. For better or worse, our lives are becoming as different from those of the industrial era as those of the industrial era were different from the agricultural age. Firms that are able deliver these kinds of benefits have enjoyed massive financial gains and astronomic market capitalizations.
s a result, most firms see the writing on the wall and recognize in varying degrees that the old way of operating can’t cope with the current disruption. Most are pursuing transitions from the old to the new at various speeds and intensities. Yet most of these efforts are no more than partial steps towards digital-era management. The result is generally a mishmash of industrial- era and digital-age principles and processes that is no more effective in coping with the disruption than trying to run from a tsunami crashing onshore. The principles and processes of the two modes of management are not merely different. In most cases they are the opposite of each other. Moreover, because the principles and processes in each system of management mutually support each other, they tend to operate like the body’s immune system: the proponents of each process help defend the organization against deviations from the norm. If an inconsistent process appears, the overall system will tend to combine and treat the deviant process like an invading virus that must be destroyed and eliminated from the organization.
Thus, for firms practicing industrial-era management, the principles and processes of digital age management, such as self-organizing teams and networks of competence can be seen as a threat to the stability and top-down control of industrial-era management. It is only when the principles and processes of an organization are entirely aligned with either the industrial-era or the digital-age modality that the firm will be free from internal infighting and friction.
A Diagnostic Tool: The Principles and Processes Worksheet?
Without such a diagnostic tool, managers and consultants, risk making the effects of market disruption worse, with actions such as CEO firings, downsizings, de-layerings, reorganizations, and efficiency drives. Such managers and consultants don’t intend harm: they take those steps because they have no way of making an objective assessment of the state of the organization or the organizational dysfunctions that need treating.?
Using The Diagnostic Tool
The PP worksheet enables leaders to map where industrial-era or digital-age principles are being practiced, in their own business unit, entire organization or leadership team. Each of these assessments is likely to be different in the details. Those using the PP worksheet will become what Richard Sheridan, CEO of Menlo Innovations, calls “high tech anthropologists” probing what is going on.8 The worksheet can also be used to compare different viewpoints on the same unit.
For example, the PP worksheet has been used to picture retroactively what happened in a major Silicon Valley organization (SRI International) over a 20-year period. At the outset, as shown in 1998, the firm was implementing industrial-era management. After several years with a new CEO, the firm was making progress towards digital-age management, as shown in 2000.
Some ten years after that, the firm under the same CEO had essentially completed the transition to digital-age management as shown in 2014, along with a major expansion of revenues.
However, a change in the senior management shortly thereafter sparked a return to industrial- era management. After several years, the reversion was visible, as shown in 2020, and was accompanied by a significant decline in revenues.
Without the PP worksheet, all that observers could say was that the CEO holding office in the time period covered in 2000 and 2014 was a better executive than his predecessor or his successor. With the help of the PP worksheet, we can grasp the specific performance issues and accomplishments at each stage, along with pointers as to how the firm can redress the underlying causes of the decline in performance.
WORKSHOP - NOV 16, 2022: 15.00-17.00
Reinventing Capitalism in the Digital Age
领英推荐
Vienna Hilton Plaza, Schottenring 11, 1010 Vienna, Austria
The workshop is available to both attendees and non-attendees of the Drucker Forum conference. (No fee, but places are limited)
The workshop shows why the goal of creating value for customers activates the entrepreneurial spirit, as opposed to industrial-era management, which systematically discourages innovation.
The workshop shows the principles and processes that enable firms to move more quickly, operate more efficiently, mobilize more resources, attract more talent, and use it more effectively, win over customers more readily, and enjoy more elevated market capitalizations.
Customer capitalism differs fundamentally from industrial-era management including goal, structure, dynamic, leadership, strategy, innovation, operations, marketing, sales, ESG, budget, HR, risk management, and key performance indicators,
To register, go here: (No fee, but places?are limited)?
Meet the speakers
Steve Denning
Senior Contributor, @?Forbes.com
?Steve Denning is a former executive of the World Bank, and is the author of seven books on leadership, innovation, leadership storytelling, and Agile management, as well as a novel and a volume of poems. His forthcoming book is entitled?Reinventing Capitalism In The Digital Age ?and will be published by Cambridge University Press in December 2022. Since 2011, he has been writing a popular leadership column for?Forbes.com? where he is a Senior Contributor. He has published nearly a thousand Forbes articles, with more than 10 million visitors and 20 million page views.
Curtis Carlson
Former CEO, SRI International
Curtis Carlson is recognized as a pioneer in developing value creation practices that profoundly improve an enterprise’s innovative performance. He was formerly CEO of SRI International in Silicon Valley from 1998 to 2014. During this time, SRI's revenue tripled, and SRI became recognized as one of the world's most productive innovation enterprises, having helped create Siri, HDTV, Intuitive Surgical, and other world-changing innovations.
Miriam Schwarz
SVP, Bank of the West
Miriam Schwarz is recognized for her outstanding work in the corporate industry, both in the United States and internationally. She is a senior delivery executive and transformation change agent dedicated to building a sustainable ecosystem for individuals and organizations.
Miriam is the Board Chair of the SD Learning Consortium (the SDLC); which is a nonprofit organization whose members are committed to discover together the world’s most advanced agility goals, principles and practices and to disseminate them globally. The Consortium’s current members includes American Express, Bank of the West, C.H. Robinson, Ericsson, and Optum.
The workshop builds on the findings of Steve Denning’s forthcoming book,?Reinventing Capitalism in the Digital Age
(Cambridge University Press, December 2022).
This is about the re-imagining of the very concepts of management and leadership.
Steve Denning ?
Happy to see that your new book is out, Stephen. I'll push it to the top of my book. Radical Management has influenced my management and organizational coaching work since we met about 10 years ago when you were relatively new on the agile scene. Wonderful contributions to improving our thinking - thank you for the hard work!
Transforming Telecom Through TM Forum Expertise
2 年Steve Denning I enjoyed reading your book, but this particular topic of contexts was not addressed in Age of agile, and I would greatly appreciate it if you could elaborate. Where can I find some reading materials?