Management InnovationGood business management is not magic. Actual people with actual expertise make decisions that bring good outcomes. In an article in the Summer 2006 issue of the MIT Sloan Managment Review, Julian Birkinshaw and Michael Moi of the London Business School provide insight into how well-managed companies arrive at management innovations that pay off in terms of improved business performance.
Birkinshaw and Moi define management innovation as
implementation of new management practices, processes and structures that represent a significant departure from current norms.In their research, which drew both on the history of important past innovations and on 11 recent cases of innovation, Birkinshaw and Moi found that management innovation is more diffuse and tends to take longer than technological innovation. It also tends to involve external change agents "academics, consultants, management gurus and ex-employees" especially in the inspiration and validation stages.
Typically, there are four stages:
- Dissatisfaction with the status quo, e.g., a nagging operational problem, an outright crisis, or a strategic threat (a change in the business environment or the emergence of new competitors).
- Inspiration from other sources, generally outside the innovator's industry. Management innovators are receptive to a broad range of ideas about how to achieve goals more surely and quickly, and how to address root causes of problems.
- Invention of suitable new management practices, processes and/or structures. This phase is generally iterative and gradual.
- Validation. Internally, it is important for the innovation's champion to build "a supportive coalition to carry the invention into the organization." External validation (e.g., from a respected academic or management guru) increases the likelihood that the innovation will spread to other companies, but it also makes it more likely that "the pioneer company will stick with the innovation."
- Become a conscious management innovator, starting by "selling the importance of management innovation to the organization."
- Create a questioning, problem-solving culture, which means avoiding the fire-fighting approach, and instead exploring root causes and new approaches to solution.
- Seek analogies and exemplars from different environments, e.g., from the non-profit sector or from other countries.
- Build a capacity for low-risk experimentation, which generally means trying an innovation first in just a section of the organization to see how it works. The process Best Buy went through with its ROWE initiative is a good example.
- Make use of external change agents to explore your new ideas, i.e., use outsiders as "a source of new ideas and analogies from different settings, ... as a sounding board for making sense of a company's emerging innovations and ... to validate what is accomplished."
- Become a serial management innovator, à la GE and Toyota.