In this excellent book, Dr Hamel offers us five factors that, he argues, will determine the success of most firms in the coming years. While the number five feels rather arbitrary, he makes a very strong case for each of them. The book is, in fact, divided into five sections, each focusing on one of the following key issues: values, innovation, adaptability, passion, and ideology.
Why these five issues? As he points out in the preface, businesses face plenty of new disruptions these days. Although he does not state this explicitly, Hamel has chosen to focus on key factors that either transcend changing market conditions or help firms to leverage change to their advantage. Are these the only issues that meet that standard? Perhaps not, but it really does not matter. Hamel gives us plenty of food for thought in this “tapas bar” (his analogy) of a book.
I believe there is some significance to the fact that Hamel addresses the values issue first. While not so sexy as innovation, he makes a strong case that our recent financial crisis was in fact a crisis in values, one that revealed a significant values gap in business as it is practiced today. Hamel introduces the concept of stewardship, which here implies fealty, charity, prudence, accountability, and equity. While discussions of fealty and charity may lead to feelings of unease on Wall Street (where Hamel's idea of “equity” is also likely to be misinterpreted), there is a strong case to be made for even the most opportunistic leaders to take stewardship to heart. First, customers and shareholders are showing that they care; between 2005 and 2010, socially responsible funds grew by some 34 percent. Second, if firms cannot embrace a better set of values, then they will be far more susceptible to intrusive regulation. Third, the widespread adoption of such values will lead to greater market stability and a more lasting prosperity.
Innovation, as Hamel puts it, is the only sustainable strategy for creating long-term value. This may well be a golden age of innovation; if so, firms that do not have a serious commitment to being innovative will find themselves at a significant disadvantage. Hamel discusses five types of innovative firms (he does seem to think in fives), but the most instructive are the “Born-Again Innovators.” These are firms like P&G, IBM, and Ford that have spent years on the wrong side of innovative changes to their markets before finding religion and transforming their organizations into innovation leaders. If these firms can do it, we are led to believe, so can ours. What is critical to this transformation is having pro-innovation processes in place. This means training employees to think like innovators, streamlining development checkpoints, and aligning incentives and metrics to support innovation goals.
Hamel also discusses the importance of great design and cites several examples, both well-known (the iPhone, Google's home page) and perhaps less so (the Leica M9 camera). It is no great surprise to find IDEO's Tim Brown cited at this point in the book, and we are given a brief review of what puts IDEO among the most prominent design firms in the world. This is just enough to introduce the reader to the importance of design thinking, which is central to Brown's approach to innovation. The same may be said of innovation generally; the book introduces key concepts and leads us to ask important questions about our firms and industries. The rest is up to us.
The section on adaptability begins with an extended look at organized religion, which has fallen on hard times as younger people find traditional services less relevant. The problem, as Hamel puts it, is not with the religion part (most Americans still believe in God) but with the organized part. Conventional “rituals, roles, and routines” have become less relevant, and most churches need to become “less structured, less hierarchical, and less routinized” if they hope to thrive in the age of Web 2.0.
The analogy is clear. Just as with the church, the structure and routines that have made businesses so efficient have also made them much less adaptable. Also, even the best companies are susceptible to the realities of diminishing returns and the law of averages, and even the best strategies will fail eventually. Instead of trying to fight against the inevitable demise of the status quo business model, firms should embrace the disruptions that bring it about. This is where too much structure works against us. Instead, we should seek opportunities to invest in flexibility, disaggregate processes, and encourage diversity and competition for resources with our firms. A portfolio of strategic options can be even more valuable than a portfolio of strategic assets.
Hamel returns to the church analogy in his discussion of passion, where he introduces us to an Anglican parish that transformed itself by empowering its parishioners. The key to this transformation was the establishment of semi-autonomous medium-sized groups of common interests that were led by the parishioners themselves. The lesson here is not so different from the innovation lesson: Sometimes the best thing we can do for our organization is to get out of the way. When we give our people a chance to lead and organize around the things they care about, they tend to do remarkable things for us. The key is low control and high accountability”
This theme of giving up control extends into the final section (ideology) as well. Here we dive deeper into management theory, comparing, for example, “Theory X” organizations with “Theory Y” organizations. If we hope to make our firm feel more Theory Y-like, with open, trusting, participative associates, then we need to set them free. We sacrifice hierarchy for empowerment.
The central thesis of the second half of the book is that management is the problem, not the solution. But can firms manage without managers? Hamel gives us successful models in W.L. Gore (think Gore-Tex), Morning Star (a $700 million food processor), and HCLT (an India-based technology company). Each has enjoyed great success without hierarchies.
One may well wonder why, if these flat organizations have such an advantage, are there not more of them. The answer, of course, is the organizational transformation is hard, fraught with risk, and not so attractive to those who sit at the top of the hierarchy today. Best case scenario, management is exposed. The worst case scenario involves bankruptcy court. But as unlikely as this may sound, I believe that a new generation of business will emerge with the courage to champion this revolution.
So are values, innovation, adaptability, passion, and ideology truly what matters now? I'd have to say that Hamels has convinced me. The answer is yes. This book will give senior managers, executives, and entrepreneurs much food for thought, and I hope they take Hamels' insights to heart.
