The EFMD business magazine

The EFMD business magazine

Management's second curve
Management has served us well. Since the Industrial Revolution, it has paved the way for a sustained and accelerating rise in living standards, unheard of and unforeseen. But with the ‘digital revolution’, we are entering a new era where the logic of industrial-age organisation has lost its purchase. It is time to reinvent it, says Richard Straub.

It could be said that what previous great innovations, based on steam, electricity and the internal combustion engine, did for human muscle, computers and sensors linked by the internet are promising to do for the human brain.

Indeed, this has led some in Silicon Valley to talk seriously of the “singularity”, the talismanic moment when the computer power of the machine brain equals or outstrips that of the human variety.

And just as dramatic changes in the human condition brought about in previous revolutions – such as urbanisation, large-scale employment, mass literacy and generalised healthcare – swept away much of the pre-industrial past, the accelerating cycles of digital technologies will, for good or ill, upend much of the socio-economic and mental structures that we have inhabited for the past two centuries.

As Charles Handy notes: “The internet and its corollaries are revolutionising much of our lives, but taking the guts out of many of our institutions as they do so”.

Tumbling transaction costs alter the economics of organisation and, at a stroke, invalidate old business models while enabling unimagined new ones.

New giants such as Amazon, Google, Apple and Facebook, along with emerging upstarts such asUber and Airbnb, are borne by waves of “winner takes all” network effects that dramatically speed up corporate, and leadership, life cycles. Michael Porter sees the advent of smart connected products as signalling a new spurt of growth and change. And beyond that, the implications for further innovations are simply incalculable. But we can say that no aspect of working or private life will be unaffected.

A foretaste of what is to come is the rapid progress of automation not just in routine manufacturing and service work but also increasingly in knowledge jobs.

In a much-quoted report, the Oxford Martin School in the UK has predicted that over the next 20 years 45% of US jobs are at “high risk” of being automated.

As artificial intelligence improves, it will not just be “workers in construction sales and logistics” who feel the employment pinch; managers, scientists, engineers, journalists and others in the “creative industries” will be affected too.

If we continue to take the idea of automation literally (we don’t have to) the “job” in the sense that generations of employees have understood it may be over. At the very least, “we can no longer rely on the institutions of education and the workplace to prepare us for life and look after us during it,” Handy observes.

Yet dazzling as humankind’s technological achievements have been, technology itself is only part of the story. Those achievements are part of, and embedded in, a larger social reality.

Reviewing the history of growth, the Bank of England’s Andrew Haldane notes that, “as far as we can tell historically” the growth spurts in previous innovation phases were the product of “a complex mix of the sociological and technological, typically acting in harmony”.

Alongside technology, increasing social, human and infrastructure capital have all played a part.

This time, though, Haldane notes that while “the technological tailwinds to growth are strong, so too are the sociological headwinds”. These include increasing inequality, faltering educational attainment and a rise in impatient, short-term thinking (as opposed to slow, deep, reflection, in Daniel Kahneman’s classification) – perhaps partly due to technology itself in the shape of information overload.

The role of management

As Peter Drucker once said, the 20th century was created by management. Like the science-based technologies, the discipline has evolved over time as both cause and effect. Governance, processes, structures, attitudes to customers and employees shift in response to social, financial and technological norms.

In turn, expectations are changed by the transformations that management has helped to bring about. So it should be no surprise that the digital revolution requires it to shift again. In business, too, as Albert Einstein famously observed, “the significant problems that we face cannot be solved at the level that we created them.”

This is not just a question of countering the headwinds (although fostering capital of all kinds is undeniably part of management’s mandate). Digital technology like any other is a means, not an end, and as Henry Mintzberg warns, confusion between the two is a hallmark of the age.

As the stewards of what Drucker called the constitutive elements of modern society – its organisations and institutions – managers have a key role to play in steering the technology revolution in a direction that benefits all humanity, not just the few; and that means a different one from the past.

Management's second curve

See more articles from Vol.09 Issue 02 – ’15.

Richard Straub is Founder and President of the Peter Drucker Society Europe and of the Global Peter Drucker Forum.

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