Disruptive innovation is a CEO’s worst nightmare, because, as the recent Nokia experience confirms, good management leads to disaster.
What to do? How can CEOs enable their firms to evolve beyond “good” traditional management and make them as adept at handling disruptive innovation as they have been at implementing disciplined execution? How can innovation become an organization-wide capability, a part of the firm’s DNA?
In one sense, the answer is simple: commit the firm to continuous innovation and focus everyone and everything in the firm on that goal. Thus the new CEO of Nokia doesn’t have to go far to find the cause of its Smartphone disaster: the complacency is visible on Nokia’s own website, which still proudly proclaims that “Nokia is the world leader in mobility”. From this static perspective of Nokia’s role in the world, any expensive investment in an innovation for which the market response is inherently uncertain is bound to appear too risky to attempt. Instead, Nokia’s CEO needs to commit everyone and everything to providing a continuous stream of new value for customers sooner. That message needs to be reflected in every communication and every action that management takes.
Yet making that happen in an established organization is far from simple, because creating a capability for continuous innovation is not a matter of adding something on to the existing management system. Rather it involves radically re-thinking the very fundamentals of how work is structured and how the firm is managed.
Continuous innovation implies fundamental changes in the way most established organizations are structured and run. That’s because traditional command-and-control bureaucracy is constitutionally unsuited to continuous innovation. It’s too slow, insufficiently agile and too internally focused to be responsive to customer needs.
Once a firm commits to the goal of constantly increasing the value of what it offers to its customers and delivering it sooner, it will naturally gravitate towards the seven principles of radical management, i.e. focusing the entire organization on delighting clients; working in self-organizing teams; operating in client-driven iterations; delivering value to clients with each iteration; fostering radical transparency; nurturing continuous self-improvement and communicating interactively.
The principles of radical management first emerged in isolated pockets of the economy—particularly software development, car manufacturing and successful startups. They are now spreading to other sectors, such as finance, consulting, construction and manufacturing, and in effect, the entire economy.
This radically different way of managing requires that everyone and everything in the organization be focused on the goal of constantly increasing the value of what the organization offers to its clients and delivering it sooner. That’s because it is only through mobilizing the full energy and ingenuity of the entire workforce that the firm can generate the continuous value innovation needed to survive in today’s marketplace.
Do the benefits of radical management warrant the cost of such a transition? The most important benefit is that the firm—and the CEO—may survive. The life expectancy of firms in the Fortune 500 has already declined to around 15 years, and, according to Deloitte’s Center for the Edge, is heading towards 5 years, unless traditional management is transformed.
Focusing the firm on continuous innovation through radical management also leads simultaneously to major gains in productivity, continuous innovation and deep job satisfaction for those doing the work. It is only when these keys are in place that a CEO can be assured that the organization is up to the challenge of coping with disruptive innovation.
To learn more about radical management, go to: