Traditional Management Stopped Working!

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A conversation between Luis Suarez and Stephen Denning


I  am really pleased to have this conversation in we-magazine. It started out with a brief Twitter chat between me, Ulrike Reinhard,  and Luis in which I asked him if he would be willing to contribute to our leadership issue. “Sure”, he said ;-) Lucky us! The idea was to get Luis interviewing/talking to some “leadership” insider. So we contacted Stephen Denning, who immediately agreed to join the conversation. It went on for almost 4 weeks on piratepad: asking, answering, discussing, expanding. For me – and I think for our readers as well – it offers some great insights on why traditional management doesn’t work anymore …


Stephen Denning
… is the author of some award-winning books. His most recent book, The Leader’s Guide to Radical Management: Re-inventing the Workplace for the 21st Century was selected by 800-CEO-READ as one of the best five books on management in 2010. From 1996 to 2000, Steve was the Program Director, Knowledge Management at the World Bank where he spearheaded the World Bank’s award-winning knowledge sharing program. In November 2000, he was selected as one of the world’s ten Most Admired Knowledge Leaders (Teleos). Steve now works with organizations in the U.S., Europe, Asia and Australia on leadership, innovation, business narrative and most recently, radical  management.

Luis Suarez
… has been working at IBM for 14 years. In that time he’s specialised in the fields of Knowledge Management, Collaboration, Community Building and for the last 9 years in Social Computing (Enterprise 2.0) and Social Software. He is currently working within the BlueIQ team, at IBM Software, as a KMer, Community Builder and Social Computing Evangelist, helping accelerate the take-up of social software both inside and outside the firewall. In his spare time, he has been running a rather successful experiment to ditch corporate email and  rely more heavily on social software tools. It was featured in the New York Times.


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Luis Suarez: Steve, in your book you mention the concept of “new localism” as perhaps an opportunity to help shape the leadership of the 21st century, in a world that is rather distributed, global and virtual. How do you envision the role of leadership as the key balance that would need to happen between that new localism and our global culture / economy? Do you think that both local and global leaders could co-exist in a sustainable manner by taking their clients to a higher level?

Stephen Denning: I refer to “the new localism” in which a number of books have been written about the possibility of returning to a more local approach to work in order to combat the malfunctions of the modern workplace. Books such as The Craftsman by Richard Sennett, Deep Economy by Bill McKibben and Shop Class as Soulcraft, by Matthew Crawford. For these writers, the solution to big business is small business. Yet my conclusion is that these calls for a return to a local approach to work are romantic but unrealistic. There is no way that the local store is going to be able to produce a flat-screen television. So long as people want flat-screen televisions or their equivalent, globalization is here to stay. As a general economic theory, the new localism may be nutty, but I also point to the grain of truth within it: the importance of a clear line of sight from those doing the work to those for whom the work is intended, and the possibility of focusing work on delighting those people as a way of relieving the threat to the human spirit posed by boring, meaningless labor.

Luis Suarez: That’s a very good point, Steve, and I wholeheartedly agree that globalisation is here to stay. However, I would like to point out that there may be smarter ways of remaining global, but with local execution; starting with small things like transport of goods, mainly food supplies, for instance. I wouldn’t  say that it could replace globalisation, but it can certainly help it to become smarter in its execution so that resources are utilised more wisely. I think that aspect of sustainable economy is going to become rather important for businesses to survive and  also as an indication of how they too can become more human, as you hinted above. I think that new localism, as romantic and unrealistic as it may sound, will help globalisation wake up and smarten up on how it executes across the globe.

Stephen Denning: The new localism is a wonderful thing, so far as it goes. But it’s romantic and unrealistic to think that it can replace the global economy. It’s a  question of scale.

Luis Suarez: I agree and I am not saying that it is going to replace globalisation, by far (Although I wish it would eventually ;-)). But what I think it’s going to do is to help us understand how globalisation needs to smarten up on how certain business processes and modus operandi work. With simple things like why do I have to purchase apples grown in Italy when on my own island they are grown in an amazing quality and are cheaper to the consumer. Plus the new localism of buying from folks who “know” you. However, there are some aspects of globalisation, like purchases of electronics, that will remain global. I think it’s going to be a combination of the two that will help us introduce the concept of a sustainable economy, because so far the global one alone has only got us into trouble. Like I said, I am not saying it’s negative, just saying it needs to become smarter, and closer to the customer.

Stephen Denning: I agree that the new localism can help us achieve insights in the global marketplace. It’s important however to draw the RIGHT lesson, which is not, “Let’s do everything locally!”. The right lesson is: “Let’s delight our clients the way local firms do!”

Luis Suarez: One of the things that surprised me tremendously in your book is how powerfully it advocates a new kind of leadership/management where, above all other values and traits, the main characteristic demanded from this new kind of leadership is being human. Is the business world humanising the enterprise? What role do you think social computing will play in helping accelerate this transformation and making us all more human, touching on those insights you shared in some of the stories about the benefits from this new localism?

Stephen Denning: I agree that this is mainly about a shift from a focus on things to a focus on people. In retrospect, we can see that the 20th century was a gigantic experiment to see how far we could get by focusing on people as things. Much was achieved. The standard of living in rich countries increased by a factor of fifty in the course of the century. But by the end of the century the experiment had come unstuck. Both customers and employees had come to resent being manipulated as things. So organizations started becoming less and less productive. By contrast, firms that treated their employees and customers as people were able to delight their customers and began putting the thing-driven bureaucracies out of business. We’re still in the early stages of the transition, but you can already see the impact in terms of the performance of old stalwarts like GE and Walmart, compared to Apple and Amazon.

Luis Suarez: These are some very good points, Steve. I see that same transition you mention from a focus on things to a focus on people as the transition from a labour based economy into a knowledge based one. The so-called knowledge economy of the 21st century surely makes perfect sense when you think about how crucial and critical the role of knowledge will become.

However, how do you envision that leaders of labour based companies will be making that transition into knowledge based ones, where they need to empower their employees to take plenty more responsibility, if they are not willing to let go of control and still think they can rule through command and control? What steps do leaders need to embark on in order to help that transition be as smooth as possible? Or do you think it will be done rather disruptively, in a semi revolutionary fashion?

Stephen Denning: I spell out in the book how various companies have made the transition. None has done it “disruptively, in a semi-revolutionary fashion.” Instead, the revolution happens through economic forces: if the firm doesn’t delight the client, the firm goes out of business.

Luis Suarez: I am glad to see that they haven’t revolu-tionalised the way they work, but are rather preparing themselves for a natural path of evolution into what they want to be in the 21st century. Alas, we have to recognise as well that not all businesses out there will make that transition. Like you said, they will probably cease to exist. I just hope their number doesn’t exceed the number of those which evolve. Or perhaps it should …

Stephen Denning: I hope all of them learn and change, rather than die. I am doing my best to achieve that. However realistically, not all will survive. The death rate is accelerating. The life expectancy of a firm in the Fortune 500 is down from around 70 years half a century ago to currently under 15 years, and heading towards 5 years, if things continue as now.

Luis Suarez: That’s also another very good point and it seems to come pretty close to the perception of how businesses penetrate markets in the millions;

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The typical example of how radio, TV, cinema, then Facebook, iPhones and its Apps have reached millions in a much shorter period of time seems to reflect how much shorter they stick around in the markets, if they are not capable of adapting themselves to the new laws of how markets operate.

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I find it rather interesting to see all of this, working myself for a company that on June 16th this year will be marking its 100th anniversary. I myself have been working there for aslong as that average of 15 years for most of the Fortune 500. Flexibility and adaptability to the markets is surely going to remain a key aspect of how businesses want to prevail over the course of decades.

But let me ask the next question Steve: I was wondering whether you feel our current leadership will be capable of transforming themselves into becoming more human, and therefore more sustainable both within the corporate world and our society. Or rather do we have to wait for a new generation to make that happen? Do you envision our current leadership giving up their control, power and greed that easily? How much is really at stake to provoke that radical management shift?

Stephen Denning: I believe that the change will happen inexorably because it is driven by the economics. The new organizations will put the old ones out of business. In this re- spect, the creative destruction of capitalism really does work. For these old-school managers and organizations, the  writing is on the wall: change or die. In the arena of health care, we have seen that people faced with the choice of behavioral change or death, often choose death. So some managers will cling to the current ways of acting until they are forced out of their jobs and out of business. Others will embrace the change and move into the future. It’s hard to say now what the proportions will be. Obviously, I am doing my best to persuade these managers that change is a better choice than death. Only time will tell how many respond.

Luis Suarez: These are some rather interesting insights and I sure hope they will make that change and shift gears. However, we all know that most businesses today still self-regulate themselves based on profit share, growth and generating more revenue. So I think as long as businesses keep up with these goals it will be a challenge for them to shift. I wonder whether the real key element to make it work will be what you mentioned in your book as “delighting your clients”, which is certainly a whole lot more than just “good enough”. Do you think that customers will use this unique opportunity to shape up the leadership of the corporate world and push the mantra of being delighted and move away from the “good enough”? If so, what repercussions would that provoke in the business world? Will itt be the birth of a new CRM, what some folks have claimed as social CRM shaping up the next generation of leaders?

Stephen Denning: As you might say, “these are some   rather interesting insights.”
However it’s actually pretty simple.

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Firms that don’t delight their clients will go out of business.
Punto. End of story
.

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Luis Suarez: Not sure that I agree with you. To give you an example … in various countries there are some businesses who still take advantage of the monopoly they have enjoyed over the decades and their pledge of delighting the clients is almost non-existent. In fact, quite the opposite. Yet, quarter after quarter their revenues grow big time. One example: most  European Telecoms, specially in southern Europe. I think if they have a niche to exploit they will still be around, even if they don’t delight their clients, like a bunch of  Telecoms is doing already.

Stephen Denning: I am talking in terms of long term trends. It is of course possible for companies to find a niche where there is no competition, and milk it for a considerable period. But in the end, things catch up with them.
As to Social CRM, the name is a horrible leftover from the 20th Century. CRM implies manipulating the customer and manufacturing demand – the very opposite of what I am talking about.  Social CRM is not much better. As one site at http://mashable.com/ 2010/05 /21/social-crm/ puts it: “As mentioned above, I don’t necessarily agree that Social CRM is the best name for this kind of process because CRM has typically enabled one-way conversations with customers, with a disproportionate focus on technology.

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The name CRM stands for “customer relationship management,” which is a misnomer because the company no longer controls or manages the relationship – the customer does.”

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Social media can be a wonderful thing if it is people talking to people about real experiences. Once you are talking about “managing the customer relation-ship”, you are into something entirely different and retrograde.

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