by David Hallowell & Dennis Stevens
Over the last three centuries advances in technology, supportive government policies, and expanding and changing trade networks have combined to lead to major changes in organizations and how businesses create value. At each of the major changes new challenges for managing organizations arise. Management has had to develop new capabilities to respond to these challenges. Today, management faces another nexus of technology, globalization, and new business models that is changing how businesses create value. Knowledge and creativity are becoming increasingly important and the management practices from the Industrial Age and the Productivity Age are no longer enough. Managers that develop the new capabilities to respond to these new challenges will gain an advantage over the ones that don’t.
Industrial Age: 1700-1939
The industrial age refers to the developments that transformed Great Britain, between 1750 and 1830, from largely rural people making a living almost entirely from agriculture to a town-centered society engaged increasingly in factory manufacturing. Over the next 100 years, the industrial revolution spread across much of the world. The industrial revolution was fueled by a combination of new technology, expansive government policies, and a large and varied trade network. During the industrial revolution assembly line production raised the productivity of workers and taller building in cities put workers in closer proximity to the means of production. The coordinating a large workforce and transitioning unskilled agrarian workers to industrial jobs presented new challenges to management. Management had to develop new capabilities to handle these challenges. Hierarchical organizations and work standardization work allowed mass production to take hold.
Productivity Age: 1940-2000
Throughout the second half of the twentieth century, business has been working to optimize the models that resulted from the industrial revolution. Introducing process improvement techniques such as; the Toyota Production System, TQM, Lean, Six Sigma, and Business Process Re-engineering have lead to order of magnitude improvements in productivity. The focus on cutting variation, robust design, improving quality, and cutting out waste are the keys to these productivity gains. Improvements in transportation and low barriers of entry to manufacturing lead to a large and varied trade network where textiles, cars, computers, and appliances built in one part of the world and sold in another part. Computing power and a ubiquitous communication network led to communication connectivity and availability of information that has suppliers, producers, and consumers interacting to create new business models. This combination of productivity gains, globalization, and technology advancements have changed how businesses create value. These changes have created new challenges to management. Business intelligence, knowledge management, decentralization of information and decision making, process management, project management, and matrix organizations have developed to address these new challenges.
Knowledge Age: (Present-????)
The current combination of the Internet and massive computing power, the entry of two billion workers from China and India, and the movement of information and buying power to the consumer once again form a nexus that will change how businesses create value. Moreover, there is a sense that process has largely been exploited and it is time to work on the people side. Management needs to develop new capabilities to exploit the current nexus. These new capabilities will revolve around improving how organizations leverage knowledge and creativity. Since knowledge and creativity are social processes, the new capabilities will revolve around social interaction. From a social interaction standpoint, organizations can be looked at a network of context setting, coordinating, committing, and learning conversations. The primary capability management has to develop is to leverage conversation to improving the ‘fidelity’ of this network. The focus once again will be on cutting variation, improving quality, and cutting out waste. But this time the target will be improving the conversations in the organization. A few ‘info-degrading’ nodes can have undue influence – degrading the performance of the whole network. Management will have to figure out how to find out what conversations are critical; who should be involved in each conversation, how to make sure relevant information is available, and how to know reduce waste in the conversations.
This new management capability will take active effort and attention to intentionally shape the context setting, coordinating, committing and learning conversations needed for the performance of work. Productivity gains will occur though raising the throughput and quality of information flows while cutting out the waste of these conversations. We are on the brink of a new age. The new capability of managing conversations to improve the organizations ability to set shared context, coordinate, reliably commit and to learn and rapidly adapt to changes in the market are what is needed to meet the new challenges ahead.
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David Hallowell is Managing Partner at Six Sigma Advantage, a consulting firm that applies Six Sigma to products, services and the technologies that drive them. For more informatin, please visit www.6siga.com.
Dennis Stevens leads Synaptus, a consulting firm that helps executives improve business performance by bridging the gap between strategy and performance. For more information, please visit www.synaptus.com.