What is management innovation?
All companies manage and endeavor to grow the business, or fight for survival. When small improvements are not enough, CEOs must take decisive actions to lead management innovation, that is, business restructuring, reorganization, new business development, and any other drastic measures to change the speed and direction of the company. It is not the usual operational improvement. It is much more fundamental and drastic.
Saturating market demand, changing customer needs, violent competition, and complacent employees require CEOs to lead very serious review of their main businesses and search for new business opportunities at the speed of thought.
If CEOs cannot lead serious actions immediately, the company is bound to lose businesses that may have provided solid base for a long time. This kind of creeping change often happens unnoticed and surprises customers and the company itself.
Why management innovation is not so simple
No matter how strongly a CEO alerts that the company is in crisis, executives, managers, and staff may not listen or take it seriously, so nothing changes. Why?
CEOs may not be sharing company’s business and financial situation properly. They fail to instill in their subordinates sense of ownership and responsibility. Typically, those CEOs ask only for financial results and give new marching orders. They rarely ask their executives, managers, and staff to think seriously on their own with sense of ownership. They are not aware that their communication style and direction is the problem and become very frustrated by subordinates’ lack of responsiveness, ownership, and commitment.
Or, CEOs may overlook negative signs, even decreasing revenues for a few years, thinking that it would recover soon. Even when the business may be hitting a hard wall because there is not enough space to grow in that industry, they tend to cling to optimism and dismiss that they are really in bad shape.
Only CEOs acting without hesitation can save the company.
Bad news is, many CEOs cannot take drastic actions. Even owner CEOs, second or third generation, may not be brave and courageous enough to move.
Another bad news: Executives and managers have seen too often efforts by people that saw serious management issues in existing businesses and tried to initiate management innovation—escalating issues and even suggesting direction changes to the CEO—turn into a lost cause. Formerly competent young leaders become discouraged, risk averse, and bureaucratic after a few trials in vain. Then, with all good intentions, their judgment may be killing new actions and sabotaging management innovation. It is just easier to not change.
When the CEO wakes up to the realities and tries to build a new business in the organization, one must protect it from jealousy and criticism from legacy business units that still have strong power and inertia. Unfortunately, those CEOs are often too busy or not fully aware the importance to protect, care, and support new business development initiatives.
Many CEOs may not know how to build a new business because they were promoted through the ranks for successfully managing important businesses already established by their predecessors. They may not have experienced the speed, decision-making, enthusiasm, pain, and the real commitment required for new business development.
Usually there are very competent managers in corporate and business unit planning team who tend to be good at developing thick, well-documented reports. They may work all night if necessary without much complaint. Unfortunately, these smart people in headquarters may not understand how to increase revenue, reduce cost to generate substantially bigger profits, and win in the battlefields.
There must be strong managers and young high-performing staff in the business units. However, identifying and empowering them to be active in management innovation is quite challenging. They are not easily replaced, as they tend to be the core people for existing businesses. Or, they are buried deep in the organization. Even if they are interested to innovate, their bosses have all kinds of reasons why they must stay in the current teams.
It goes without saying that CEOs must put their money where their mouth is. Who can trust from the bottom of their heart a leader who shouts, “We are in crisis. We have to start aggressive management innovation right now!” then drives excessively expensive cars, dine and wine every night with old friends, and plays golf on weekends and some weekdays.
These are some of the reasons management innovation is not so simple even if CEOs seriously want it. It takes CEOs serious commitment, show of strong and consistent leadership, to become a role model, and to take multiple actions all at once. Only then will their subordinates take it seriously, own it, move, and change their behavior.
Need seven keys to start management innovation
Management innovation is easily said, but very difficult to do in a true sense.
To understand the difficulty and nature of management innovation, you might imagine a door with seven locks. You need seven keys to unlock them at the same time to open the door.
Typically a CEO will first make substantial effort to find the key to unlock one. Of course, the door will not open. Already one is wondering why it’s so difficult. After spending more time for trial and error, one concludes that there a few more locks and finds the keys to unlock them. Still, the door does not open.
In my experience, it takes at least seven keys to consistently open the door. Finding the keys one by one is not good enough. It is critical to apply them all at the same time to unlock and move the big door. Management innovation is painstaking operation that must happen quickly, systematically, and simultaneously with clear understanding of what it really is, what is required, and what is at stake. There is no secret or anything like that.
If it is not done, you may have a hard time to recover company performance, no matter how hard you try. If it is not executed correctly, you may regret having wasted yours and everyone else’s time.
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I have been involved in management innovation more than 30 years including 14 years in McKinsey. It includes global industry leading companies, specialized medium-size companies, and fast growing start-ups in Japan, Korea, India, Indonesia, and Vietnam.
Based on those experiences, I have to say that there are very clear ways to start and accelerate management innovation that I have helped execute so many times for variety of companies in various countries.
Conclusion: Management innovation can be achieved if the CEO seriously desires it, knows what it takes, owns it and commits for a few years in a hands-on manner. Delegating management innovation to somebody with a wait and see attitude does not work.
I will talk about the seven keys and how CEOs should keep leading and contributing in the next seven weeks. Stay tuned.
▼ 7keys to accelerate Management Innovation
The Seven Keys to Accelerate Management Innovation
Need to Unlock Seven Keys to Start and Accelerate Management Innovation
The First Key：Change Vision and Strategy, and Let Everybody Know
The Second Key：Rapid Improvement of Existing Businesses
The Third Key：Developing Multiple New Businesses
The Fourth Key：Management Innovation Team
The Fifth Key：Human Resource Development Committee
The Sixth Key：Innovation in Boss-subordinate Relationship
The Seventh Key：Positive Feedback and Active Listening