Re-Imagining Organisations for the 21st Century…
Beyond Cartesianism — Unleashing Human Potential
When US entrepreneur Henry Ford pioneered and launched the Model-T Automobile to the market in 1908, he had to develop a new management philosophy to accommodate higher productivity and stimulate consumer demand.
He built on the ideas of 19th Century US Mechanical Engineer Frederick Taylor, who had developed the concept of scientific management, which was anchored in the axioms of certainty, prediction, and control.
Taylorism was beginning to be widely embraced as part of the Industrial Revolution. Its elements included synthesis, logic, rationality, empiricism (e.g. quantitative KPIs, metrics), work ethic, efficiency, elimination of waste, best practice and standardisation.
Whereas Taylor sought machine and worker efficiency, Ford sought to combine these into one unit of production with the objective of the minimisation of costs instead of maximisation of profit.
The specialisation of function, business silos, productivity, standardisation, and operating scale became business's new vernacular and practices.
A dogma further solidified by US Economist Milton Friedman’s 1970 The New York Times article “The social responsibility of business is to increase profits”.
By the end of the 20th Century, the combination of Taylorism, Fordism and Friedmanism saw the prevailing approach to leadership and management in Organisations anchored in Cartesian Logic, Scientific Management and a Productivity/Efficiency narrative.
A focus on maximising the returns on capital (i.e. both income & capital gains) for shareholders, optimising the cost of capital, driving operating efficiency, building economies of scale, embracing Economist Adam Smith’s Theory of Specialisation including functional silos, layered management (spans of control), hierarchy, and specialist skills and embracing a range of quantitative metrics to measure with precision performance (Output, Activity, Control, Time).
In this world, the organisation plays an important role in bringing people physically together, sharing, centralising and converting this information into knowledge (collective sensemaking) to produce through mass production techniques goods and services.
Strategic business models, in some cases, were shaped by combining production with distribution.
Examples of this approach included food & beverage producers and traditional media publishing companies forming relationships with retail outlets (e.g. supermarkets, newsagents, book-stores etc.).
Operating scale was also important as growing revenues enabled the predominantly fixed costs of operating a business to be defrayed over a larger and larger revenue base. Shopping centres, supermarkets, universities, and traditional media companies epitomised these business models.
Leadership and Management were generally focused on optimising short-term operating performance.
“Optimisers” were the type of Leaders that were successful in this world. The ultimate archetypes being Organisations and Business Leaders that excelled at “Mass”:
- Samuel M. Walton Wal-Mart – Mass Retail;
- Walter E. Disney Walt Disney – Mass Media;
- Henry Ford Ford Motor – Mass Production;
- Alfred P. Sloan Jr. General Motors – Mass Production;
- John F. Welch Jr. General Electric – Mass Production; and
- Raymond A. Kroc McDonald’s – Mass Retail.
The emerging impact of Digital Information Systems through the mid to late 20th Century
In 1988, some 3 years before the launch of the world wide web and some 19 years before the launch of the Apple smartphone, 20th Century Global Management Theory thought leader Peter Drucker wrote a prescient article for the Harvard Business Review titled “The Coming of the New Organisation” outlining what he believed was ahead for society and business as we moved into the 21st Century.
As Organisations shifted increasingly to information-based businesses (e.g. the rise of the service sector) through the adoption of digital information technologies, the nature of business and competition fundamentally changed.
How quickly and accurately an Organisation could convert information into actionable insights, knowledge and the delivery of goods & services to solve problems and delight a customer had increasingly become the basis for competitive advantage.
A follow-up Peter Drucker article in 1992 was published by Harvard Business Review titled “The New Society of Organisations” which explored the shift to a knowledge society, the emergence of the knowledge worker and the implications for Organisations.
The article outlined how the dynamics of the accelerating conversion of information into knowledge imposed one clear imperative on every organisation to essentially begin to build the management of change into its DNA.
In this world:
- algorithmic management that codified practice needed to be balanced with entrepreneurship that could navigate uncertainty; and
- Operational efficiency needed to be balanced with learning to learn, discovery, new knowledge, and innovation.
The emerging Organisation in the Knowledge Age
Innovation is a human-based practice of creativity, ideas and problem-solving.
Entrepreneurship is a form of management that can respond to environments of high uncertainty by embracing problem-solving & innovation to develop and commercialise new products & services.
As Peter Drucker outlined, the shift in the business environment driven by accelerating change, the proliferation of new knowledge and technologies and increasing recognition of the nature of an organisation in an interdependent and interrelated system has resulted in organisations having to increasingly embrace Entrepreneurship alongside traditional Business Management as core competencies.
In essence, the emergence of a bi-focal or ambidextrous organisation.
A new form of Leader emerges in this environment.
“Integrators” that can balance the need for short-term performance optimisation with a longer-term focus on discovery, experimentation, problem-solving, innovation and the generation of new knowledge to solve customer & community problems.
An Organisation based around unleashing human potential, creativity, problem-solving, collaboration and creating a performance environment anchored in “Learning how to Learn” to acquire new knowledge.
“It is in the prosecution of some single object, and in striving to reach it by the combined application of his moral and physical energies, that the true happiness of man, in his full vigor and development, consists”
— Wilhelm Von Humboldt
“ Even the most free and self-reliant of men is hindered in his development, when set in a monotonous situation”…
— Wilhelm Von Humboldt
New Leadership, Management & Skills are required for this new world.
Automation in the 21st Century – Is transformation really about Technology?
The lens through which automation is viewed depends on how we see the nature of the Organisation and the nature of the transformation process to respond to the Knowledge Age.
In April 2019, Prof. Gerald Kane, Anh Nguyen Philips, Jonathan Copulsku and Gareth Andrus released a new book titled “The Technology Fallacy – How people are the real key to digital transformation”.
The authors argue that digital disruption and transformation are primarily about people and that effective digital transformation involves changes to the organisational dynamics and how work gets done.
Focusing only on implementing the right digital technologies (The What?) will not likely lead to success.
The best way to respond to digital disruption is to focus on The How? by changing the company culture to be more agile, risk-tolerant, and experimental.
How you perceive the nature of your Organisation will shape your actions.
Will you focus on technology to drive automation, cost reduction, operating efficiency, and business transformation?
Or will you balance this approach by focusing on unleashing the potential of your teams and people?
Every Organisation faces conditions of accelerating social, economic and technological change as we progress through the 21st Century. The ability to adapt, respond and embrace these new conditions will be central to the future of the firm.
The choice is yours as to whether you continue to embrace Cartesianism — Taylorism, Fordism or Friedmanism or will you adopt a new form of Embodied Leadership and Management anchored in unleashing the Human potential of your teams?
