It wasn’t meant to happen. In fact, it had never happened before. Funny little companies had suddenly become stunningly big companies, worth many billions, and eventually trillions, of dollars. The changes happened in a hurry—in the space of just a few years. Famous economists like Robert Solow had said that this couldn’t happen. Economic guru Robert Gordon said the whole thing would soon blow over.
The distinguished management theorist, Clayton Christensen, knew that Apple’s iPhone couldn’t last: the lessons of history were clear on that, Now though, more than a decade later, we are still waiting for the lessons of history to kick in. The firms, such as those in Figure 1, continue to grow, as customers and investors are thrilled.
On Came The Critics and Regulators
Yet not everyone is happy. Some critics and regulators see the phenomena as the result of wrongdoing: these firms must have taken advantage of the lack of regulation for digital technology and had grabbed monopoly positions which they are now unfairly exploiting to crush their competitors. Regulations have been drafted and law suits have been launched against some of the biggest companies to rein them in, cut them down to size, and possibly break them into pieces.
Zealous regulators pay little attention to the fact that we as customers love these firms’ products and services that are transforming our lives in almost every way—how we work, how we play, how we communicate, in effect, how we live. Our submission to these firms is seen as just another horrifying sign of these firms’ ability to manipulate us. Regulators are shocked to hear Berkshire Hathaway CEO Warren Buffett say that he would rather give up his airplane than his iPhone. An even more troubling sign of the firms’ malignity is to realize that young people love the products and services and see them as cool.
The regulators also listen carefully to the tales of woe from the bumbling old bureaucracies that are being put out of business by firms that operate with much greater agility and sensitivity to customers’ needs.
The regulators are alsi worried by the discomfort of older folks who see their traditional way of life disappearing like the horse-and-buggy, even as they grudgingly start using the new products and services because of their ease, their convenience, their price—in a word, because they are better.
What’s Going On Here?
These rapidly growing firms now comprise around 20% of firms in the S&P500 and are now worth as much as the combined.value of the bottom 80%. The top 20% are also growing faster than the bottom 80%, so that the gap between the two groups of firms is widening.
Are the top 20% of firms truly implements of evil? At first, analysts saw their success as having something to do with Silicon Valley, perhaps another dot-com bubble as in 2000. Other analysts said that the key to the firms’ success is software: “Software,” Marc Andreesen declared in 2011, “is eating the world.” But then the same sudden-growth phenomenon started appearing in non-software sectors such as automobiles, retail shopping, agriculture, finance, and pharmaceuticals, So it must be something beyond software. But what?
How Management Itself Became Cool
It has taken a while for us all to grasp that what lies behind these odd phenomena is radically different management. It has been difficult to admit that the once-boring discipline of management—with those green-eye-shade bosses who are busy planning, organizing, monitoring and controlling their workers with dispiritingly bureaucratic practices, has somehow created firms embodying creativity and innovation, where staff are being liberated with permissionless workplaces, and customers’ needs and experiences are being anticipated even before the customers themselves know they have them.
This different way of managing isn’t something that was learned in business schools, which are still largely teaching traditional management. It was mostly learned from other practitioners. And it isn’t just new firms. Some seemingly tired old bureaucracies like Microsoft learned what was involved and applied the ideas to their world with trillion-dollar success.
Three Key Ideas Driving The New Discipline Of Management
In fact, the three key ideas behind these phenomena are very simple. The first is that the best way to understand the emergence of these firms is to recognize that these firms are run by people with a dazzlingly different kind of mindset, that can be learned and applied to any sector. It includes the goal of the firm, the way work is organized, and the role of change, as shown in Figure 2.
Although the firms in Figure 1 in different sectors may look as if they don’t have very much in common, they share a basic, underlying mindset. It is something that they have mostly imbibed from each other, first in Silicon Valley, then in Seattle, and then in other hot spots around the world. No one told these firms that management should be done differently. They just listened and learned and went ahead and did it, based on conversations in bars and coffees houses in the vicinity and workshops and conferences and their own experiments and experiences. Venture capitalists also saw the potential and helped fund much of the change. In this way, a different kind of mindset spread.
New Processes To Support The Mindset
At the same time, the firms learned that they had to reimagine their processes to reflect the different mindset. Many processes had to be retired. As the firms grew and scaled, they found the traditional processes of budgeting, HR, sales and marketing also had to be reimagined as shown in Figure 3.
New Assumptions Helped Create The New Culture
Finally, they found that the staff that they brought in from traditional firms for their expertise often came with inappropriate assumptions (or culture) that were barely conscious. These assumptions had to be identified and eliminated like a set of potentially harmful viruses, as shown in Figure 4.
The Three Driving Forces
These three characteristics—one, mindsets, two, processes that reflected and supported the mindsets,; and three, the underlying assumptions of culture that had to be brought in line with the mindsets and processes—are the three forces that define how Apple remains the most valuable company on the planet, how Microsoft emerged from its living death to become a multi-trillion dollar company, and the trajectory of all the other firms proceeding on this fast track.
Of the three driving forces, the first—the different mindset—is the most important because it determines everything else. The second is also crucial because it is the processes that enable a firm to scale. But the third, the ferreting out and celebrating the assumptions of the reimagined culture—is the most difficult. It operates at a barely conscious level, but it is the element that holds the other two forces together.
Together, the three forces permit the greatest insight into how the once-boring discipline of management transformed itself into the essence of cool. The fact that there is no official name for this new kind of management doesn’t mean that it is any less real. For now, let’s just call it “management reimagined.”
And read also:
Seven Keys To Unpacking A Culture Of Creativity
How The Top 20% Reinvented Management For The Digital Age
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