Hack:
“Industry Revolutions and Management Innovations”

The first industry revolution and the first management innovation: taylorism

 

The first industrial revolution started before World War I. It was a period of growth for the iron and textile industries, and the steam engine and electricity provided the power needed by an emerging mass production. Managers had to direct and to discipline the unskilled workers freshly recruited from rural agricultural areas. In 1911, Fredrick W. Taylor wrote 'The Principles of Scientific Management' to help manage unskilled workers recruited from agriculture to work on an assembly-line. Taylor’s teaching was complemented by May Weber who praised bureaucracy, and by Henri Fayol who emphasized management controls.

 

Much has been written about taylorism and its deficiencies, but taylorism is not dead. Some of its principles and practices - such as top/down command, hierarchy and bureaucracy, and a performance measurements focused on short-term financial figures – have been decried, but to some extent they still remain present today’s management.

The second industry revolution and second management innovation: the total quality management

 

In the 70s, the larger markets became more sophisticated, and multinational corporations and larger enterprises but also producers from the emerging countries had to adopt quality control and more sophisticated management methods in order to delight customers with predictable quality, and to compete cost effectively.

 

Dr. W. E. Deming, a statistician, worked with W. Shewhart at Bell Telephone on reducing variances in order to produce predictable results. They broke-down activities into processes so that each one of them could be managed and monitored. Processes could be entrusted to teams trained to use an extensive Total Quality Management (TQM) toolkit to help teams manage (1) the teamwork (2) the creative approaches (3) the relevant facts and figures.

 

Dr. W. E. Deming stated: “We are here to make another world.” Initially, he did not elicit much following in the USA, so he took his ideas to Japan, which at the time badly needed quality control. Deming had an integral approach to the arrangement of all the processes that drive the enterprise, and to the tasks of the management, which he described with his “plan-do-check-act”. Japanese academics - like Professors Ishikawa, Akao, Fukuda, and Western academics like Dr. J.M. Juran -contributed to the development of a TQM methodology, which is a comprehensive, connective, and collectively creative. Tools like Quality Functional Deployment help structure the cooperation of different teams, and Hoshin Kanri enabled the leadership to involve people at different levels in the strategic process.

 

As opposed to taylorism, TQM is participative, it endows the teams with a effective tool-kit to manage the processes, and it is customer-centered. Being influenced by the Japanese culture, TQM advocates dealing with people with respect and with trust.  When you watch a group of people discuss with their boss, in the West the boss is the one who talks the most, conversely in Japan the boss lets the people talk, and at the end nods in agreement or makes remarks.

 

In order to promote TQM, the Japanese introduced the Deming Prize, the US the Malcolm Baldridge Quality Award, and European Foundation of Quality Management the European Quality Award in order to test their the TQM proficiency of organizations. I was licensed by the European Quality Award to coach their program leading to the aforementioned award. The author of a book on TQM and ISO 9000, I emphasize TQM’s principles as follows: a systemic approach that connects people, plans, and processes over the whole architecture of the strategic and operational processes; a stimulating approach that empowers the teams, and that emphasizes continuous coaching and prompt recognition; a systematic approach to continuous improvement. (1)

 

TQM is designed to replace taylorism. Japanese corporation continue to apply TQM. However many Western organizations have progressively narrowed the scope of such programs to the quality needed to satisfy the customer, and to further reducing variances and costs with the tools of TQM and of Six Sigma. And so, hierarchy, bureaucracy, and focus on financial performances have remained largely unchanged. People-participation has remained largely confined to the operations. However, organizations that have effectively implemented TQM’s principles and practices will find it easy to adopt the following innovations of the management. (2)  

 

The third industry revolution and the third management of innovations: the intangible resources   

 

Starting in the 80s, the third industrial revolution is driven by the digital revolution, by personal computers, and by the information and communication technologies. Unlike TQM that was based on the innovation of management principles and practices, the third management innovation was sparked by technologies.

 

Doing more of the same or the same cheaper and faster was no longer enough. Market leaders started competing first with evolutionary innovation, then with radical innovation, and then with a savvy combination of the evolutionary and revolutionary innovations. Some of the emphasis switched from managing processes to managing projects. As I show in my “The Innovative Enterprise”, the scope of innovations spread from products, to processes, to partners, to the power of the strategic resources, and to the corporate plans. (3)

 

Innovations are mainly driven by intangible resources such as talents. In my previously mentioned book, I also show that the innovation-projects are powered by different types of talents that I refer to as the “5<i>” namely: ideation, investigation, imagination, implementation, and interpersonal relations. Several authors discussed the management of intangible resources. Kaplan & Norton stated: “Over 75% of the firm’s market value is now derived from intangible resources, which are not captured by financial metrics”. So, they introduced the Balanced Scorecard, which evaluates the organization’s performances on a combination of tangible resources, intangible resources, and internal processes. (4)

 

In my “The Innovative Enterprise”, I present my model of the 5 interactive  <corporate capitals>, which include: the <organizational capital>, the <market capital>, the <talent capital>, the <life and time cycles>, and the <financial capital>. The <financial capital> is the only tangible resources while the other <corporate capitals> are essentially intangible resources. Moreover, I breakdown each of the 5 <corporate capitals> in 5 <capital-components> so as to enable people at all levels and in all functions to get down to grips with their work. My model is more detailed than the model proposed by Kaplan & Norton, and thusly it enables more precise planning and result evaluations.

 

The third management innovation adds an important concept, the power of the intangible resources. However, it can use the learning of TQM including the tools of creativity and of team-management.

 

The fourth industry revolution and the fourth management of innovation: agile management     

 

The turn of the 21st marks the dawning of a new era, the era of the new technologies such as the Cloud, the artificial intelligence, quant computing, 3D printing, nano-technologies, and biotechnologies. . As compared with the previous industrial revolutions, this one is mainly driven by new and more sophisticated technologies and by their integration. Prof. Klaus Schwab wrote: “The Fourth Industrial Revolution”. (5) After the Internet of Things, G5 will power the fourth generation of these communication technologies.

 

Technologies widened the scope and the interactions of things but dramatically shrunk the time, and this had a big impact on project-management.

 

In 2001, a group of IT programmers wrote: “The Agile Manifesto” that showed how to develop IT programs more efficiently. Sutherland & Sutherland proposed “Scrum: the Art of Doing Twice the Work in Half the Time”. These authors do not refer to TQM, and to the work of the likes of Bob King who published in 1987 “Better Designs in Half the Time” where he discussed TQM’s quality functional deployment”. Actually, the TQM methodology and its tool-box are very important to the implementation of agile management, which constitutes  the fourth management of innovation or Management 4.0.

 

As I will show in my next book: “The Platform of Agile Management and the Program to Install It”, agile management builds on some of the principles of  “The Agile Manifesto” in order to achieve operational agility. (7)

 

“The Agile Manifesto” and Management 4.0. advocate a systemic approach that integrates all contributions to the creation of the value with and for all the significant stakeholders of the enterprise, and both of them emphasize broad-based participation by the personnel and by the external partners.

 

Management 4.0. relies first and foremost on the teams and on their networks to manage themselves. Thusly, it flattens the hierarchy, and bureaucracy must be cut to the bare bone because it stymies agility. Both Management 4.0. and “Scrum” feature an extensive tool-kit.

 

“The Agile Manifesto” and Management 4.0. require frequent reviews by the teams, and by their networks on the progress made, on the problems to be solved, on the plans concerning the next steps. These reviews must be short and smart, and very often they are stand-up reviews that last much less than an hour. They keep people on their toes and they are a frequent reminder of the spirit of agile management. IT is used for communications and for relentless progress and discipline. Management 4.0. applies big data and other technologies some of which were unavailable 10 years ago.

 

However, operational agility is not enough, today enterprises need to combine it with strategic agility, and to this effect we must understand the Internet Generation, its potential for radical innovations, and how best to deal with their strategic and operational agility.

 

The Internet Generation includes entrepreneurs like Page & Brin of Google, Jeff Bezos  of amazon, Mark Zuckerberg of Facebook, Elon Musk of Tesla and Sun City, and the late Steve Job of Apple Corporation. They have written some of the front pages of the agile revolution, but new pages are being written by new entrepreneurs almost every week. Some young men took “Kevlar”, an engineering fiber developed at DuPont and used to reinforce tires, they made suits for bike drivers, and became millionaires in a couple of months. When a virus called “WonnaCry” infected 200’000 computers in 150 countries, Markus Hutchins, a 22 years old British geek, was the first to find the way to block its diffusion.

 

The Internet Generation is different; they think out-of-the-box, but they think systemically. Some of them have a wide-open, bottom/up view of new benefits that could be offered to the consumer, and they look at innovative way to produce those benefits. They network widely, and they drive their network with their vision of the big benefits that could be offered; they are not driven by short-term financial objectives. Losing money for an extended period did not deter Jeff Bezos or many others of the Internet Generation, nor their investors who saw the potential value of the envisioned benefits and who could wait to see the results show up. 

 

At the time when I consulted on TQM, to stir the creativity of teams we suggested to develop ideas without regard for costs, for time, and for failure. The Internet Generation appears to develop business models without being held up by traditional constraints.

 

Agile management is now the management’s ultimate frontier. To get there, the leadership must innovate the management. But management cannot innovate itself, people can innovate the management, but first they may have to innovate themselves because as Albert Einstein submitted: “We cannot solve our problems with the same thinking that created them”. So, to innovate the management the leadership must start by helping the people to innovate themselves. To this effect, “The Platform of Agile Management and the Program to Install It” features:

 

3 principles to help innovate the way people think

3 paradigms to help people innovate the way they behave

3 practices to help people innovate the way they act.

 

Once the advocated platform has been installed, the people will know how to keep innovating themselves and innovating their management following TQM’s principle of continuous improvement. And so, Management 4.0. will have achieved an almost complete turn around from Management 1.0., taylorism.