Management Theory Is Dead. Here's Why.

The world is volatile. Change is fast and furious. Data sets are imperfect. Markets are saturated and systems stressed. In this new normal, no product, process or person stays successful for long. This is the reality of our Volatile, Uncertain, Complex, Ambiguous, Networked and Stressed (VUCANS) world. All business models and strategies will fail sooner rather than later unless they are able to constantly adapt, at velocity. But this constant turbulence, although profoundly challenging for us all, also means that space is always being opened up for more innovative, accessible, social, user-friendly, playful and purposeful - and so ethical - ways of creating value for others. Every problem, from recession to technology to climate change, is an opportunity for leaders who can spot it and act on it with a breakthrough. Whether you forge the future or fail depends on whether you consciously break out of management theory and “good” management practice for long enough to creatively invent the future.

The creation of the future through creatively grappling with change is what innovation is all about. More specifically, it is the preserve of breakthrough - or disruptive - innovators (whether in private, non-profit or government sector). Thinking innovation was where all the action was in this mercurial Digital Age, in 1999 I set up a disruptive innovation agency. We were essentially a creative management consultancy, helping organizations inject creativity into their plans for the future. As such we were focused on the "outer game" of business change - leading disruptive innovation strategy, branding and marketing for companies like Xbox, Nike, PlayStation, Disney and Microsoft to name but a few. But after witnessing great company after great company miss out on game-changing breakthroughs time and time again - even though we had presented then with the innovation ideas, strategies and business models as part of the projects they had commissioned - I realized that the "inner game" - purpose, leadership, mindset and culture - is where the secret to long-term success resides.

This is because you cannot innovate for someone else. You cannot transform for others. Plenty of consultancies design and implement re-orgs, restructures, IT systems and redundancy programs. But they are easy because they follow rules, best-practice and logic. Genuine user-focused innovation and employee-focused transformation have to be led by those who want to create change. Organizations must themselves go on the journey of breakthrough, wrestling from the jaws of uncertainty and chaos ideas that fit the future, rather than fail it, if they are going to lead transformative change. We can inspire, advise, guide, encourage, train, cajole and create rigorous programs and tools to take away the pain of transformation and the fear of innovation (the two go in step usuaally). But unless your leaders can themselves grapple with uncertainty and conceive of, and deliver, breakthroughs, elemental ideas will be destroyed and essential people discouraged before they get to create the exponential value that your stakeholders, and we as a global society, are seeking.

The need for constant, proactive and dynamic transformation and innovation within organizations that were designed for control, certainty and predictability is the greatest challenge that your organization faces today. What makes it even harder is that your enterprise is managed, like all organization are, by human beings not machines. All our biologies are naturally wired up in our formative years to hold onto old ideas and repeat old habits rather than break through the past to invent the future. Although the latest neurobiology shows that we are all born for breakthrough, we have to learn how to overcome our fears and aversions in order to make use of our creative capacities (something they didn’t teach us at school or talk much about at management school).

Unless we fully understand the dynamics, and specifically the biodynamics, of breakthrough, we will likely develop strategies that appear to be innovative on the surface but don’t deliver breakthrough impact: Sustainable ways to massively increase the thriving (and decrease the suffering) of millions of users, customers and consumers (for this is what purposeful, conscious and ethical value creation is really about). With a population due to rise by 3 billon people over the next few decades, there are ever-increasing numbers of customers and users that we can make a difference to in new ways. Breakthrough leaders know that they must confidently and courageously drive forward continuous breakthroughs in every of every organization, without much respite, before fleet and flexible incumbents, new technologies and trends and global risks disrupt them into irrelevance.

I guarantee that most of the insights and ideas you need to forge the future like this and deliver exponential impact lie latent within your leaders (at every level of your organization). But you won’t be able to access them or implement them until you feel, think and do breakthrough not just talk it. This means stopping following conventional management theory and best-practice (at least for a bit). Because to crack this challenge is as least as much about emotional mastery, creativity, resilience and wisdom as it is smarts. If it were just about intelligence, Kodak, Nokia and RIM (Blackberry) who had access to the very best management thinking and consulting would be thriving. And they are not.

Leaders who want to take their organizations on this journey of continuous breakthrough must first master their own risk-averse and biologies so they are able to get out of what we call Control & Protect Mode (where best-practice enables incremental improvements when faced with familiar problems) and into Create & Connect Mode (seizing opportunities with breakthrough solutions to novel problems driven by rapid change and uncertainty). Then they have to be able to help others shift between these two Modes as the situation demands. Finally they must be able to consciously hack through management processes and management-led cultures that support the corporate immune system which viscerally - and often viscously - rejects the ideas and innovators needed to succeed in uncertainty. For most orgs this means leading it to recalibrate between Control & Create so both are available at any given moment.

Failure to do this will keep your organization locked into a value destruction cycle moving steadily towards irrelevance even whilst others with far less access to capital, MBAs, management consultants and vertical power bring breakthrough after breakthrough to market. Irrelevance, a lack of fit with the world as it changes, shows up in underperformance relative to resources, lackluster results, rapidly commodifying products, atrophying business models, the need for constant acquisitions (and perhaps looming take-over bids) to generate growth, disengaged people and an inability to attract and keep Millenial talent (who are not simply motivated by fame and fortune).

In the new normal of the Volatile, Uncertain, Complex, Ambiguous, Networked and Stressed (VUCANS) world, management theory is no longer entirely fit for purpose. This form of intelligence about how to transform raw materials and labor as efficiently as possible into value and profit was developed in the industrial revolution(s) of the 18th/19th Century and perfected in the 20th. The theory was designed to fit a very specific historical context: Customer needs were consistent and markets unsaturated. The means of production and distribution was limited to those with capital. Technological innovations were relatively slow to spread. Employees and consumers were relatively disempowered. This was the heyday of management, whose major preoccupation was and still is how to perpetuate a steady growth of profits in reasonably predictable environments.

But that world has gone.

We live in a reality in which a social media strategy is out of date in 3 months and even the newest and most disruptive businesses - like Uber and Airbnb - are having to adapt daily to new value-creating competitors, rapidly-enacted legislation and fast-changing customer values. It has been estimated that the average ‘half-life’ of an organizational competency has dropped from 30 years in 1984 to 5 years in 2014, which goes somewhat to explain why 40% of the Fortune 500, including some Silicon Valley unicorns I imagine, wont exist in a decade. Everyone needs to be able to breakthrough not just once but continuously to thrive.

The dictates of management theory that evolved to fit stable times - formalize established best-practices to manage efficient processes that generate predictable results - cannot cope with volatility, uncertainty, ambiguity and rapid change. As economist Frank Knight pointed out, uncertainty is not risk. It cannot be rationally managed away with a spreadsheet nor disappeared with a computer, no matter how fast its algorithm. The VUCANS world has to be engaged with, in heart and mind, as we coax breakthroughs from it. It cannot be managed, pushed down or avoided. It will catch up with all of us eventually, even in slow-paced industries with highly defensible capital structures.

The fundamental law of evolution is simple: Adapt or die. Fit the future or fail it. Creative destruction underpins both ecologies and economies. The way that organisms in nature ensure that they survive is by increasing their adaptability and rate of creative change to keep in step with accelerating environments. This is described by the evolutionary Law of Requisite Variety. Organization must do the same. But the doozie is that well-trained managers, willingly assisted by smart management consultants, have spent decades attempting to disappear adaptability and creative change everywhere they find it with efficient IT systems, re-orgs and redundancy programs. They have actively tried to stamp out the divergent thinking, the deviation from norms, the local insight, the desire to make change and the empowered and entrepreneurial mindsets that they now desperately need to survive in the new VUCANS normal. Eek!

Conventional management theory buckles under the pressure of our VUCANS reality, as many middle-managers and front-line staff will gladly divulge from their lived experience. It also locks organizations into business models, strategies and processes that are almost certain to fail the future because they cannot adapt quickly enough to fit the changing world. So whilst you need to keep good managers doing efficient and predictable work in areas that are relatively stable - where the fit between the product and business model and the customer and environment is not showing any warning signals of mismatch (like falling sales, decreasing margins, rapidly growing competitors, talent disengagement etc) — you have no choice but to do a lot of ‘bad’ management - AKA breakthrough leadership - in areas where you the writing is being writ large on the wall.

Follow good management alone and you will be squeezing marginal gains in profitability out of your existing business model for years. You will celebrate wildly to get a 1% point more market share even whilst the underlying model is decaying into irrelevance and others are inventing more ‘fitted’ ones with 10x or even 100x returns (a 10x ROI is 1000% growth). Sure you’ll be getting more productivity from your gladiators. But Rome will still burn. Good management is about efficiently fitting parts (humans) into the whole (industrial mechanism), no matter whether these human beings are passionate about their work. It is premised on them being trained not to innovate (so not challenging the rules), collaborate (so not disturbing the vertical silos that produce efficiently) or make purposeful decisions (so not calling into question the ethics of their organizations). But your orgs can't thrive in the future and create exponential value without unleashing this human potential with all the uncertainty that engenders. By actively increasing uncertainty and complexity within you have a better chance of tackling the increased uncertainty and complexity outside. Yet few know how to lead this in a safe and rewarding way for all involved.

For a breakthrough leader to willingly look for, and spot, the mismatches between their business model, organizational structure, purpose, culture and leadership capacity on the one hand and how the world is emerging, on the other, is quite something. It means being radically honest about the relative value your organization creates compared with nimble and purposeful competitors with far fewer resources to deploy. It means having the wherewithal to spot the early warning signs of lack of fit, of mismatch, before they create convulsions and crises. It means looking at the problems without flinching, not matter how painful that is to those within. Early warning signals are always there, hiding in plain site, for someone to see. You will probably find that your most talented leaders have seen the signals and have already begun to noodle on emerging solutions… but have never been genuinely asked, or actively listened to, about what they see is possible in the future. This is one of the reason we run innovation-oriented leadership programs for ‘future’ leaders: They have the ideas you need because they are living the future now and, by unleashing their potential, you keep them engaged in a way that money cannot buy.

Breakthrough leaders must be able to consciously leverage divergent, creative, breakthrough thinking as their primary weapon against creeping uncertainty, complexity and volatility. This means proactively empowering and enabling your leaders to engage with change and to experiment with ideas and innovations at the ‘edge of chaos’ that might help you forge the future of your industry (learning how to encourage people to genuinely “fail forward” with their ideas). It means inspiring leaders at every level, including emerging and Millenial talent, to step up with a ‘Founder’s Mentality’ to own the problems they can see and metabolize them into creative possibilities, whether product and business model innovations or internal transformation. And you must do all this before those with the most passion, curiosity and courage - the most switched on - get disillusioned and either disengage and give up or simply leave. This is heart-breaking and tragic in equal measure. Organizations kill the ideas and crush the people that they need to survive, let alone thrive, in uncertainty and chaos.

The craziest thing of all in the 21st Century organization is that, whilst shareholders and Boards want and expect leaders to drive transformation and innovation in our VUCANS world, most MBAs and leadership programs (which are really management programs) don’t teach people how to lead breakthrough innovation or genuine transformation. This is probably because both internal transformation and external innovation are often ‘inefficient’ (we must actively take apart the old before we can forge the future), ‘messy’ (because they involve real human beings not just machines and systems) and full of emotional ups and downs. It is also because most HR folk, who own training budgets, have very little experience with, and confidence in, genuine innovation and transformation. But it matters little what stops you empowering your managers to become breakthrough leaders. You must decide if you are willing to unleash them from the dictates of management theory enough to forge the future for you.

If you don’t, others will, usually those unencumbered by the old rules and the incentive structures of “good” management (which usually involves avoiding challenge, confrontation and risk). Although truly divergent, creative breakthrough thinking may seem dangerous, irrational and illogical, 25 years attempting to understand it and practice it has proven to me there is a clear logic within that can be learnt and mastered. This has come together in the Switch On Way, a tried-and-tested methodology, toolset and philosophy for embracing change, uncertainty and chaos and metabolizing the pain of this is possibility. With it we can relentlessly lead breakthroughs that forge the future whilst preventing the relentless drift back to old behaviors and mindsets that kill innovation, stifle growth and limit change. It maps the very latest brain and behavioral sciences against timeless wisdom and practical tools from change management, design and systems thinking and growth hacking / lean entrepreneurship.

Leading breakthrough innovation and transformation is not like managing slow and steady growth. It takes both great hubris and humility, strength and vulnerability, curiosity and commitment, intuition and smarts. Breakthrough leadership is not just about leading breakthrough innovation externally and organization transformation internally: It is about learning how to thrive in the new normal of uncertainty, volatility, complexity and chaos without becoming overwhelmed, disillusioned or shut down and switched off in the process. Those that switch on and master this realize that nothing is as enlivening or fulfilling on the planet.

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