13
WHAT WILL BE THE NEXT NEW MANAGEMENT BREAKTHROUGH?
Since the 1890s, there have arguably been only a few major management breakthroughs with several minor ones. What will be the next big thing in management that can differentiate leading organisations from also-rans lagging behind them? I suggest one possibility at the conclusion of this chapter.
THE HISTORY OF MANAGEMENT BREAKTHROUGHS
Where do we draw the line between major and minor management breakthroughs of innovative methodologies that can provide an organisation with a competitive edge? I’m not sure, so the following list likely describes a blend:
• Frederick Winslow Taylor’s scientific management. In the 1890s, Taylor, the luminary of industrial engineers, pioneered methods to systematically organise work. His techniques helped make Henry Ford wealthy when Ford’s car company applied these methods to divide labour into specialised skill sets in a sequential production line and set stop-watch measured time standards as target goals to monitor employee production rates. Production rates faster than the standard were good, and slower were bad. During the same period, Alexander Hamilton Church, an English accountant, designed a method of measuring cost accounting variances to measure the favourable and unfavourable cost impact of faster or slower production speeds compared to the expected standard cost.
• Alfred P. Sloan’s customer segmentation. Henry Ford’s pursuit of a low unit cost per a single type of car (ie, the Model T) was countered with an idea championed by Alfred P. Sloan, who became President of General Motors in 1923. Sloan advocated expansion of product diversity in style, quality and performance, with increasingly more expensive features in car models as a staircase for higher income consumers to climb, starting with the Chevrolet and ultimately peaking with the Cadillac. It revealed the power of branding to retain customer loyalty.
• Harvard Business School’s Alfred D. Chandler Jr.’s organisational structure. In 1962, Professor Chandler’s pathbreaking book, Strategy and Structure, concluded that a factor explaining why some large companies fail or succeed involved how they learn about customers and how they understand the boundaries of their competencies to focus their strengths.
• Harvard Business School’s Michael E. Porter’s theories of competitive advantage. It is hard to believe that prior to Porter’s 1970 book, Competitive Strategy: Techniques for Analyzing Industries and Competitors, very few organisations had a formal strategic planning department. Today, they are commonplace. Conglomerates comprising many diverse businesses were becoming numerous in the 1960s when Porter introduced his ‘four forces’ approach for individual businesses to assess their strengths and opportunities. His message was strategy is about making tough choices.
• Total quality management from Edward Deming, Joseph Juran and Phil Crosby. The total quality management (TQM) and continuous quality improvement programmes of the 1970s were a response to Japanese manufacturers grabbing market share as they progressed from being viewed as making cheap products to high quality ones. During the same time period, Shigeo Shingo and Taiichi Ohno of Toyota Motors, introduced ‘pull-based,’ just-in-time (JIT) production systems that were counter to traditional, large batch-and-queue production management economic lot size thinking. JIT provides faster throughput with less inventories. In the 1990s, at Motorola Mikel, Harry introduced a TQM refinement called Six Sigma, which recently has merged with lean management techniques.
• Michael Hammer’s business process re-engineering. In the early 1990s, Michael Hammer recognised the importance of focusing on and satisfying customers. He observed that stove-piped and self-serving organisational departments were inefficient at serving customers and that the best way to improve service, particularly given the rapid adoption of computers, was not to just modestly improve business processes but, rather, to radically re-engineer processes with re-design.
• Pepper and Rogers’ customer relationship management. In 1994, Martha Rogers and Don Peppers authored the book, Customer Relationship Management—One-to-One Marketing, which announced the eventual death of mass selling and mass marketing. It described how computers could track characteristics and preferences of individual customers.
• Peter Senghe and organisational learning. Around 1980, Professor Peter Senghe of MIT, recognising that many industries were increasingly dependent on educated knowledge workers, published research that concluded a differentiator going forward between successful and unsuccessful organisations is the rate of organisational learning—not the amount, but the rate.
• Kaplan & Norton’s strategy maps and balanced scorecard. In 1996, Professors Robert S. Kaplan and David Norton published the first of four related books, The Balanced Scorecard. They recognised that executives were failing not due to poor strategy formulation but, rather, failure to successfully implement it. They advocated executives to communicate their strategy to employees using visual maps and shifting performance measures from month-end financial results to non-financial operational measures that aligns work and priorities with the strategy.
WILL BUSINESS ANALYTICS BE THE NEXT BREAKTHROUGH?
Enterprise performance management (EPM), by applying its broad definition as the integration of multiple managerial customer, operational and financial methodologies, embraces all the preceding advances. EPM integrates methodologies and their supporting systems to produce synergy not present when they are implemented in isolation of each other.
Professor Tom Davenport of Babson College in Massachusetts and Accenture’s Jeanne Harris have authored two books, Competing on Analytics and Analytics at Work. Their books propose that the next differentiator for competitive advantage will be business analytics. Their premises are that organisations need much deeper insights and that change at all levels has accelerated so much that reacting after the fact is too late and too risky. They assert that organisations must anticipate change to be proactive, and the primary way is through robust quantitative analysis. This is now feasible due to the combination of massive amounts of economically stored business intelligence and powerful statistical software that can provide previously undetected patterns and reliable forecasts.
For example, customers can be finely micro-segmented in multiple combinations, such as age, income level, residence location and purchase history, and patterns can be recognised that can predict which customers may defect to a competitor, providing time to attend to such customers with a deal, offer or higher service level to increase retention levels. As an additional example, minute shifts in customer demands for products or services can be real-time monitored and projected to speed or slow actions and spending to induce customer behaviour.
EPM is not just better at managing performance but at improving performance. Integrating systems and information is a pre-requisite step, but applying business analytics, especially predictive analytics, may be the critical element to achieve the full vision of EPM.