Posted by We are on the threshold of a new and different world. How it will unfold depends on the collective thinking and actions of managers.
Over the last 250 years, a series of radical scientific and engineering advances has triggered an accelerating rise in living standards that even the two deadliest wars in history have failed to halt. The digital revolution propelled by Moore’s law is the latest and most far-reaching in this line of transforming “general purpose technologies.” It carries the tantalising promise to augment the power of the human brain in the same way that steam, the internal combustion engine and electricity augmented human brawn.
But as stunning as humankind’s technological achievements have been, they are only half the story. All are part of and embedded in a larger social reality. The advent of the modern organization and the practice of management constitutes a “social technology” that has been equally transformative.
But what happens as we continue down this path? If previous revolutions wrought dramatic changes in the human condition—including urbanisation, mass literacy, large-scale employment and generalised healthcare – exponentially accelerating technology cycles threaten to upend much of the socio-economic infrastructure that has taken root over the past two centuries. Tumbling transaction costs alter the economics of organisation and, at a stroke, invalidate old business models while enabling unimagined newer ones. New giants like Amazon, Google, Apple and Facebook, along with emerging ones such as Uber and Airbnb, are borne by waves of “winner takes all” network effects. These trends will leave no aspect of working and private life unaffected. A foretaste of what is to come is the rapid progress of automation not only in manufacturing and services but also increasingly in knowledge jobs.
Directing the path and force of these revolutions has been management, with its embrace of scientific rationality and engineering prowess, and with key assumptions about the behaviour of economic man and the efficiency of bureaucratic organizations as its hallmarks.
Yet it is clear today that this industrial-age mindset stands in the way of fully realising the promise of the digital revolution. Those modes of thinking have hardened into a straitjacket constraining human energy and creativity in organizations. Meanwhile, “heroic” management actions such as cutting jobs and investment as a response to currency fluctuations and their accounting impact on EPS are applauded by stock markets despite the damage to the longer-term value creating capacity of the enterprise. Too often share buy-backs are preferred to investment in innovation, entrepreneurship and value creation. Internal innovation tends to be obsessively targeted toward cost-cutting instead of finding new ways to delight customers, and enable employees and partners.
This is the end-point of an implacable logic held together by measurement, formulas and algorithms—the 20th century model. There is just one problem: The most important future-oriented indicators have gone missing in action. These would be indicators that gauge the levels of social capital and trust within the organization and of society, and the ability to unleash human creativity and engagement. Objectives such as these are rather afterthoughts for interesting discussions on company programs that may be scrapped if next quarter’s EPS is under threat.
Indeed, here is the great downside of industrial-age philosophy: the downgrading of the human being to a resource that can be sacrificed to short-term interests of shareholders and those who are supposed to exercise the stewardship of what Peter Drucker called the constitutive elements of modern society—our organizations and institutions. Corporations benefit from great privileges conferred on them by society, including their legal status. The reciprocal duty of care to society is therefore not a charitable option but a fundamental obligation of management.
The digital revolution—the “mother of all technology developments”—marks a fork in the road. As the Future of Life Institute starkly sums it up: ‘Technology has given life the opportunity to flourish like never before… or self-destruct’. One way can spring us from the industrial-age management practices and mindsets that currently hold so many companies back. The other reinforces the mechanistic logic of existing organizations by hard-wiring them in ever-accumulating data and software routines.
There are ample signs around us of the limits of rational logic and algorithmic determinism—and always, of the precious, unique capacities of human beings. Howard Gardner has shown that the analytical intelligence is just one in seven. What is most important happens where there is no replicable logic or algorithm. Rather, it occurs where human judgment, intuition, creativity, empathy and values are consciously brought into play. It is the domain of entrepreneurial thinking and innovation, of strategy setting, of collaboration and trust—qualities that cannot be replaced by whatever Singularity-seeking AI-creature the engineers in Silicon Valley might come up with.
Never in human history has there been a better opportunity to create a new world of prosperity for all. As the ultimate general purpose technology that pervades all aspects of life, digital technology has the potential to unleash a “new Golden Age,” in Carlotta Perez’s description—one that could dwarf the achievements of the steam, electrical and fossil fuel revolutions. However, this golden outcome depends on the choices of those called on to allocate resources on behalf of society and the economy. As Drucker put it: “Managers are society’s major leadership group…… They command the resources of society.” Will these leaders choose to put the “creative” back in the process of creative destruction by privileging entrepreneurial investment in customer- and market-creating innovation over short-term profits? Will they use big data, analytics and complexity sciences in ways that leverage rather than replace human judgement and values, taking them as what they are: tools and instruments to help us navigate a complex world?
To do so will require a new synthesis of the prevalent technocratic logic in politics, economics and management with a deep understanding of the human condition—nothing less than a reframing of management along the lines traced by Drucker and others, combining the best of art and science, imagination and logic, in a bold and distinctive liberal art for the 21st century.
It is perhaps ironic that in a moment of technology-driven information and knowledge explosion we should be feeling our way back to something that has been largely forgotten in the frenzy of accelerating change and instant gratification: genuine wisdom. Yet it is such wisdom—which can only come from human beings and not from machines—that we need in order to make the decisions that will create a better future for all.
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Dr. Richard Straub is founder and president of the Peter Drucker Society Europe, a member of the EFMD Executive Management team and the Secretary General of the European Learning Industy Group.
March 24, 2015
If we leave it to “the managers”, we’ll be waiting another hundred years. At least. Cf Upton Sinclair’s Dictum.
– Bob
Excellent article. The basic question is: will the future be tool- (machines, Computers, algorithms, etc) driven or man-driven including his anylytical capacities, but also his empathy, decency and philosophy. After all, we are social beings with responsibilities towards each other and towards Society.
Hi Richard,
Nice article. I agree that “a new synthesis of the prevalent technocratic logic in politics, economics and management with a deep understanding of the human condition” could be helpful.
But do we need to wait for that? Could better use of existing analytic tools go a long way to escaping the traps that you allude to? See for instance: http://www.forbes.com/sites/stevedenning/2014/05/26/clayton-christensen-do-we-need-a-revolution-in-management/.
In effect, do we need, not less analysis, but better analysis?
What will it take for traditional hierarchical structures and management mindsets to adapt to the interconnected conditions of continuous rapid information flows.
Perhaps they can evolve by becoming more intelligent .. more human, more aware, more empathic and differently decisive .. by acknowledging and using the new conditions that are inexorably swallowing and penetrating us.
Yes to Steve Denning’s better analysis .. combined with and accompanied by a better more holistic understanding that the ultimate purpose of organized human activities is about the betterment of human society and the human condition, not JUST making (more) money for shareholders / owners at th expense of everyone else.
Thanks Richard, I suppose if you are an optimist, like me, you will continue to hope that society will recognise that it is people that exploit the full potential of any inanimate object (even AI). Therefore the enlightened will recognise the need to view people as the most important facet in the ‘revolution’, therefore look after it. The unelightened will briefly shine then fade and disappear. Here’s hoping! Garry
Nice article. Since managers are society’s major leadership group and command the resources of society through corporations, it’s time for society to create a wiser corporation. 26 US states, including Delaware, have adopted a new corporate form, the benefit corporation, which requires the corporation to act with a social and environmental conscience that transcends and includes the usual profit oriented one. The Delaware version of this form, for example, requires corporations to operate in a “responsible and sustainable manner”. We can support the development of wiser leadership by placing leaders in corporations that are wisely designed for commerce in the interdependent world of the 21st century.
Quite simply, senior leadership has one role going forward which is to reinsert the word ‘human’ into ‘humanity’ … to ensure our organizations make a return to being humane, for the betterment of all stakeholders, thus society as a whole.
I certainly have to agree with these thoughts but also have to argue that the change you are looking for is actually underway. At least, in my small part of the world it is.
For years, I have complained about the technocratic approach many people have to business or even government and sought to place the individual at the center of the equation. Unfortunately, not being Don Quixote, there was little I could do from inside the company walls. So I struck out on my own into what I thought was unknown territory only to discover that it has been occupied for centuries by our various and numerous belief systems.
Without sounding like a complete crazy person, I’d like to posit that all belief systems are simply road maps to self-realization. Likewise, I would like to posit that the European experience of uncertainty reduction was based on property but that in the last century or so the rest of the world has caught up with the West’s most basic uncertainties without having property-based systems. Consequently, we are at the start of a new era in which the individual can chose to no longer be an industrial-era cog in the wheel but to be just themselves. However, this choice is not an easy one because the economics are difficult.
Yes, an individual might be able to provide their community with enough value that they make a living wage and maybe even something more. But many will not. This is where information technology and property laws can help.
Already, we see that the line between capital, productive assets, and private property, non-productive assets, is blurred. Your example of AirBnB is just such a case, private property being used for commercial purposes when it isn’t supposed to be creating all sorts of legislative challenges. Many other examples of the collaborative consumption economy support this blurry line view. Consequently, there is an opportunity – if not a need – to extend the legislative concepts afforded productive assets to non-productive ones. In doing so, every action undertaken by an individual on the Internet would be their productive asset, capital, and allow them to derive a revenue from being who they are. This simple change in legislation would oblige those mega-corporations who now benefit from a winner take all advantage to compensate their sources of data instead of using them for free affording a redistribution of the benefits created by the community.
So as you can see, it is possible to achieve the vision you argue for while still remaining faithful to the property-based system we have created but making it work for everyone.
The work I do with business leaders only allows me to take the first step, self-realization for the benefit of their community. The second step requires legislative changes and technology solutions. However, the first step is fascinating in and of itself. After all, how can lead others if you can’t lead yourself.
Leaders will soon recognise the tide is turning when employees will select their leaders not the other way around! The leaders who lead in this society will excel at engaging, orchestrating, removing barriers for others to succeed.