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Forbes
26-05-2025
- Business
- Forbes
The New Destiny Of Management: Creating Value Faster
Communication technology with global internet network What will it take to attain the Drucker Forum's goal of turning management into a noble calling that helps create a worthy society? We will need more than piecemeal patches added on to current management thinking. Instead, we need to re-conceive management afresh as the art and science of creating value for others faster. In its HBR article of June 2024, the Drucker Forum suggested that 'The Next Management' should include at least seven aspirations: including innovation more than efficiency, ecosystems more than single institutions, long-term, more than short term, focus, human augmentation, more than automation, management as an art, more than a science, reality grounded more than ideology, and self-renewal capacity, more than revolution.[i] There is nothing wrong with these seven 'fixes' in themselves. They will, however, make little difference if the underlying concept of management involves creating value primarily for the firm, its executives and its shareholders. This traditional concept of management has a long and troubled history. It was assumed by Adam Smith in Wealth Of Nations, (1776), by Fredrick Taylor in The Principles of Scientific Management, (1911), by the U.S. Business Round Table (1997), by most articles in leading management journals even today [ii] Meanwhile, a different approach emerges from following Peter Drucker's advice to 'look out the window and note what is visible but not yet seen.' Over the last quarter century, some firms have already begun implementing the converse of merely making money for the company. Now profits are a result, not the goal. As these new firms found ways to have human concerns modify and drive the processes, practices, and methods of management, they have grown much faster and ironically have made exponentially more money than companies focused primarily on making money. They tend to began with the customer and worked backwards, while also giving thought to all the stakeholders. In so doing, they began to live the new destiny of management: creating value for others. Examples of firms that are mostly pursuing this goal and the results they have obtained in terms of long term returns and workplace satisfaction are included below in Figure 1. They include firms of all sizes and in all sectors in the U.S., Europe and Asia. In one sense, this is like rediscovering the wheel. For millennia, the human race has known that when we create value for others, the true spirit of living is alive in us. Whatever our kind of work, whether it is a business, a team, a family, a community or a political movement, when we embody the spirit of creating value for others, we become inventive, searching, daring, and self-expressing. We may disturb and upset, but we often also open the way for better understanding. What led to the change? It wasn't a sudden moral epiphany on the part of business leaders. It's a recognition by businesses that the world itself has changed. The internet (and now AI) gave rise first, to firms, new possibilities for innovation, and then to customers, more choices, and finally to firms again, the potential of new business models that can generate exponential network effects.[iii] The old way of managing can't keep up. Smart managers saw they had to do something different. While each firm is unique and uses its own language, the underlying management patterns have much in common. Thus Apple talks of a different 'culture'. Microsoft speaks about 'mindset', 'empathy' and 'values.' Amazon focuses on 'leadership principles.' Some firms talked of 'mental models' and 'narratives.' The Agile Manifesto spoke of valuing 'individuals and interactions' more than 'processes and tools.' Despite the differences, they are all about putting people ahead of processes. The new breed of firm generally uses subjective concepts to drive their objective business processes. These mindsets, goals, values, and narratives are the very things that traditional management dismissed in principle. The result has been an upheaval in every aspect of business practices. It can be called a paradigm shift in management, although probably no more than 20% of public firms have yet made the transition. Instead of trying to fix individual issues by adding patches to a framework of traditional management, the fastest growing firms have transformed almost every process so as to form an integrated concept of running a company. These multiple but integrated changes require that managers and staff need to think about work differently. How they perceive the organization is different, as is the language they use in the workplace. Methods, processes and tools don't disappear. But in these firms. it is the mindsets, and values that drive and transform the methods and processes, rather than vice versa. The result is a culture where employees can see meaning in what they do. It is not that the fast-growing firms without flaws. They all need to make continued progress towards creating steadily more value for stakeholders. and avoid backsliding towards self-interest. Lessons For Others Understanding how these fast-growing firms are being managed is the first step for those firms that are still being managed by yesterday's methods and processes. Unless they begin making similar shifts, most will not survive, at least in their current form. And read also: How Creating Value For Others Has Become The Key To Business Success How Networks Of Competence Are Crushing Hierarchies Of Authority Figure 1: Public firms with a track record of sustained fast growth. Firms with track records of sustained fast growth [i] Straub, R. Re-framing Management For The 21st Century,' HBR, June 2024. [ii] See for example Michael Mankins 'Lean Strategy Making' HBR, May-June 2025 [iii] Denning, S. 'Understanding How Exponential Network Effects Do—Or Don't—Happen' Aug 4, 2024 [iv] 'The CEO of e.l.f. Beauty on Maintaining a Startup Culture While Scaling.' HBR, Jan 2025
Forbes
20-04-2025
- Business
- Forbes
How Creating Value For Others Has Become The Key To Business Success
Figure 1: Logos of firms creating value faster. in the U.S. Europe and China Creating value for others has long been a staple of morality, Who has not heard, 'Love your neighbor as yourself"? Today, paradoxically, creating value for others has become the key to business success. The Mirage Of Scientific Management This is quite recent. For more than a century, businesses often lost sight of the importance of creating value for others. Many firms pursued the idea of scientific management, i.e. imposing a system of inert processes, methods, structure, and systems on staff in order to make money. Scientific management took off with Frederick Taylor's book, The Principles of Scientific Management, who predicted: 'In the past the man has been first; in the future the system must be first.' In the 1950s, the Carnegie Foundation insisted on scientific management in its funding of business schools. In the 1970s and beyond, the Nobel prize-winning economist Milton Friedman and his colleagues persuaded businesses to pursue maximizing shareholder value (MSV) as the sole goal of business. In 1997, the Business Round Table endorsed MSV the valid goal for all businesses. As recently as 2023, management guru Gary Hamel defined management as 'simply the tools, the methods, process and structures that we use as human beings to do together what we couldn't do alone.' This concept of management led to great gains in the 20th century, even as staff engagement was steadily lower and business returns gradually declined. Eventually, in 2019, the Business Round Table realized that business based totally on the self-interest of short-term profits was untenable and officially renounced it. The New Goal Of Business Management Emerges Meanwhile, over the last quarter century, firms had already begun implementing the converse of Taylor's dictum. As they found ways to have human concerns modify and drive the processes, practices, and methods, they were able to grow much faster and generate exponentially more value. They began with the customer and worked backwards, while also giving thought to all the stakeholders. In so doing, they began to live a new destiny for business management: creating value for others. Illustrations of firms that are mostly pursuing this goal and the results they have obtained in terms of long term returns and workplace satisfaction are included below in Figure 1. They include firms of all sizes and in all sectors in the U.S., Europe and Asia. In one sense, this is like discovering the wheel. For millennia, the human race has known that when we create value for others, the true spirit of living is alive in us. Whatever our kind of work, whether it is a business, a team, a family, a community, a political movement, or even a religion, when we embody the spirit of creating value for others, we become inventive, searching, daring, and self-expressing. We become interesting to other people. We may disturb and upset, but we do so to enlighten and open the way for better understanding. We have long known that some people are doing the opposite. They are trying to extract value for themselves, or to harm us, or to dominate us, or impose their process or system on us. In so doing, they can become mean, selfish, unpleasant, even inhuman. What led to the change? It wasn't a sudden moral epiphany on the part of business leaders. It was a recognition by businesses that the world itself had changed. This in turn necessitated change. The internet (and now AI) had given first, to firms, new possibilities for innovation, and then to customers, more choices, and finally to firms again, the potential of new business models that built on extraordinary network effects. The old way of managing couldn't keep up. Managers had to try something different. The terminology used by the firms varied. Apple talked of a different 'culture'. Microsoft talked about 'mindset', 'empathy' and 'values.' Amazon talked about 'leadership; principles.' Some firms talked of 'mental models' and 'narratives.' The Agile Manifesto spoke of valuing 'individuals and interactions' more than 'processes and tools.' At LVMH, CEO Bernard Arnault talked of giving designers 'freedom without limits'. Whatever the vocabulary, this new breed of firm used subjective concepts to drive their business processes. Their mental models, goals, mindsets, values, narratives, and purposes were the very things that scientific management had dismissed in principle. The result was an upheaval in every aspect of business practices It might be called a paradigm shift in management, although probably no more than 20% of public firms have yet made the transition. Instead of trying to fix individual issues by adding patches to a framework of scientific management, the fastest growing firms transformed almost every aspect of management. Figure 2: Hierarchy of authority vs Network of competence Each of the firms in the transition is unique. Some concentrate more on one dimension than another, depending on the particular needs of their context. Each of them has flaws, including some that are serious. In effect, none of them is a model that can or should be copied directly. But the principles of management that they have discovered require attention. What we are seeing here is not a fad. This is not something that was cooked up last night and will evaporate in a flash. It's not just a theory. It's based on hard financial and social facts. It's been gathering momentum for several decades. And it has roots in countries around the world. In fact, there's now a lot of solid knowledge about how and why this new kind of management works. What the other 80% of firms have to do is to unlearn most of what they know about management and, in the process, get to know the organization of the future. They can learn from the practices of the leading firms and understand how they achieved their success. They should not set out to copy their practices exactly. Those practices were right for those firms in their settings. In transitioning to the new, firms have to develop principles and practices that are right for their own setting. They also need to learn why change is inevitable. To be master of their fates, they will have to embrace new ways of thinking and communicating and acting. Their organization will need to become, in effect, a new organizational life-form. Almost everything will be different. But it will also exciting. Suddenly, the firm will be in sync with its context. Management will for once have pizzazz. And read also: The Management Paradigm Driving The World's Fastest Growing Firms Understanding Why Networks Of Competence Crush Hierarchies Of Authority FIGURE 1 5-YEAR TOTAL RETURNS OF FAST GROWING FIRMS IN US, EUROPE AND CHINA 250419
