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Is the management glass half full or half empty? Both views were on offer at the stimulating and star-studded Global Peter Drucker Forum in Vienna late last year, held in memory of the man considered by many to be the founder of modern management.
On the gloomy side, management statesmen such as Clayton Christensen and Gary Hamel, of Harvard and London business schools respectively, worried that big companies were shunning job-creating innovation and bogged down in bureaucracy. Roger Martin, academic director of the Martin Prosperity Institute at Rotman School of Management in Toronto, suggested today’s capitalism was structured to reward banditry, rather than stewardship. The FT’s Martin Wolf asserted that the perverse incentives in shareholder primacy had led to looting and inequality, the reverse of what was intended.
More cheerfully, other speakers gave examples of practical optimism, enthusiasm and management ambition: companies where “everyone is a manager” (Morning Star, the tomato processor); where leaders are chosen by followers (WL Gore, maker of Gore-Tex fabrics); or where 30 innovations a day are routine (Etsy, the online marketplace).
The duality was most convincingly reconciled by the commentator Steve Denning, who declared both views right. His take: business is living in two parallel economies. One, powered by the traditional command-and-control paradigm, is grinding to a halt under the friction of its contradictions. The other is a new “creative” or entrepreneurial economy that is struggling to be born.
Not surprisingly, the attributes of the old economy are easier to delineate than those of the new. Despite the colossal financial muscle, political influence and grip on the public imagination of its biggest names, the quoted company sectors in the US and UK are in decline.
Returns are diminishing, while the number of listed companies has shrunk by more than half in 15 years. In that sense the fears seem justified: despite bulging coffers, quoted companies are investing too little and distributing too much in dividends and share buybacks to survive in the long term, let alone create the new products, markets and jobs economies require for sustainable growth.
Driven by customer rather than shareholder needs, the new paradigm is less familiar, more fluid and, for many, scarily incomplete. The goals, measures and methods locked in place by the shareholder-value model — command and control, hierarchical organisation, product-push through incentives and advertising — has been so internalised that organisations find it hard to imagine another. One based on measures against customer value and “enabling practices”, such as co-operation, self-organising teams and others yet to be devised, is the antithesis of what they know. While Denning cites Apple, Amazon, Etsy and others as embodying some of the emerging qualities, exemplars are rare.
What is more, the pull of the old model remains strong. Many “app economy” start-ups look like froth that would have drawn stern glances from Drucker, while those that have attracted the most attention from investors create few wider social and economic benefits such as full-time jobs. For some sceptical forum participants, the trendy “sharing economy” looks like an Orwellian misnomer: shared exploitation for those who do the work, while those at the centre play “winner takes all”.
All this suggests the calling of a turning point is justified. It is common ground that the combination of Moore’s Law (exponentially increasing computer power) and ubiquitous connectivity (the internet of things) has brought the world to the brink of a technology explosion that could make what it has experienced so far seem like a popgun.
Fully 47 per cent of US jobs could be automated, by one recent estimate. The question is how business will exploit the opportunities technology creates. Will it use it, like old-economy companies, to improve efficiency to reduce headcount and distribute capital? Or will it bring creative-economy principles to bear to meet Drucker’s 1984 injunction that “the proper social responsibility of business is to tame the dragon, that is, to turn a social problem into economic opportunity and economic benefit, into productive capacity, into human competence, into well-paid jobs, and into wealth”?
The mooted subject of next year’s Drucker-fest is “technology-enhanced humanism”. So watch this space — not least because it may concern you.