As we look forward, we must also continue to remember the past. In our Thinkers50 Top Blog series, we revisit the ideas of our Thinkers.
As followers of the Thinkers50 will undoubtedly know, disruptive innovation was popularized by Clay Christensen of Harvard Business School. It refers to a new technology that so completely transforms a market that the previously established way of doing business cannot continue. Examples are legion throughout the industrial era and the internet age, from the railway replacing the horse-and-carriage to internet search engines rendering printed encyclopaedias almost redundant.
Yet in management we rarely discuss new ideas as being disruptive. This is in contrast to other social sciences. For example, in politics and the law it is well established that ideas are powerful and should be used as the basis for drafting the constitution and the laws of a nation. The ideas that no one is above the law, and that the executive and legislative functions and the judiciary should be kept separate, form the basis of western democracy. These ideas did not just happen by accident. They were invented by brilliant individuals, every bit as much as ideas for generating electricity or developing a programmable computer or the internet.
The ideas that underpin the dominant business model hit reached a crisis point with the global financial crisis 2008/09. Until that point, policy was informed by the following operating assumptions:
- Markets are rational and automatically self-correcting,
- Financial data is sufficient to inform company performance and market behaviour,
- Executives are rational and only incentivized by financial returns such as stock options,
- Companies constitute a set of assets, one of which is people,
- Reducing the direct cost of employing people increases profit margins.
This model helped create the conditions for crisis, failed to predict it, and offered no solution when it occurred. We have learned since that economies and organizations are dynamic; that people are emotional, sentient beings, not cold acquisitive machines or replaceable resources.
But collectively, there has been insufficient intellectual response: we urgently need to shape a business model fit for the 21st Century. I want to accelerate that necessary initiative.
There is now a vast body of evidence showing conclusively that a move towards a dynamic understanding of organizations, allied to a commitment to harness emotional well-being and fulfilment at work, can create more successful and resilient organizations, as well as contributing to a better society.
If one actually studies in depth – as I have done for the past 20 years – the dynamics of a successful enterprise, they do not follow the cold, calculating approach summarized in the list above. They are quite different. Instead of denying human emotion, they seek to harness it. Many of the most innovative, resilient and profitable firms have strong values, including ethical values, and see themselves as serving a wider role in a society, not just being an engine for generating profits – but, counter-intuitively, they typically generate superior returns also, especially when judged over the longer term.
The organization is understood as being more like a living organism than a machine.
My research forms the basis for a different philosophy, a fundamental shift:
- From a controlling mindset to an empowering one,
- From setting rules to establishing principles,
- From issuing instructions to creating teams,
- From overseeing transactions to building alliances,
- From a focus on short-term profits to serving all stakeholders.
This is a pragmatic option, not a utopian dream. We can now demonstrate the how, as well as the why and the what, of this different way of operating, based on a fundamentally different set of ideas about the organization, the manager, the employee and the wider economy.
A few of us within the business schools and some pioneering employers have begun implementing this new paradigm. The results are astounding: more empowered leaders, more fulfilled employees, better living and working conditions, better returns for investors.
The central learning from our initiatives at implementation, however, is that one cannot achieve this transformational shift through better policies or leadership techniques alone; we also need a fundamentally different mindset, in line with the principles described.
To that end, we have begun initiatives to disseminate these ideas. I have begun discussion with major management institutes and other thought leaders to prepare a Petition and Manifesto for enlightened leadership and management. The world of business needs its Age of Enlightenment.
Vlatka Hlupic is author of The Management Shift (Palgrave Macmillan, 2014). She is Professor of Business and Management at Westminster Business School, University of Westminster. For more information visit www.themanagementshift.com