Seven Keys To Creating A Culture Of Creativity

Figure 1: Logos of some of the most valuable, and fastest growing, firms in the world

Today, the key to resilience is creativity. The top 20% of firms, including the firms in Figure 1, are resilient because of their embrace of a culture of creativity. As a result, they are more valuable, and are growing faster, than the bottom 80%, and hence more resilient.

In the 20th century, firms achieved scale and resilience through processes that enabled greater efficiency. Indeed, the concept of management even came to be seen as a set of processes that delivered ever more efficient production of “more of the same.”¹ Creativity suffered. That’s because processes don’t generate creativity, which involves “doing something different of greater value.” 

Understanding The Key Assumptions Of A Creative Culture

A culture of creativity resides, not in a firm’s processes, but in its culture. Culture, as business guru Edgar Schein noted in his seminal book, Organizational Culture and Leadership, (Figure 2) is “the pattern of barely conscious assumptions that group members have acquired over time as they learn to successfully cope with internal and external organizationally relevant problems.”² 

Figure 2

While some assumptions have little bearing on creativity (e.g. “where we eat” or “how we dress”), some key assumptions, particularly those in Figure 3, are central to a firm’s creativity, resilience, and even survival. These assumptions are largely the opposite of those in the bottom 80% where both creativity and resilience are lacking. 

Figure 3

The Key Performance Assumptions Of Today’s Most Creative Firms 

1. The Top 20% Assume Their Goal Is Creating Customer Value   

The top 20% of firms generally assume that a firm’s purpose is to create value for customers. They work backwards from the customer’s needs to explore multiple ways of meeting those needs. By contrast, the bottom 80% typically assume that the firm’s purpose is to make money for itself by continuing its own current mode of operation, thus systematically missing marketplace opportunities. 

2. The Top 20% Assume Firms Are Agile, Interactive Networks

The top 20% achieve agility and creativity by embracing the assumption that an organization is an interactive network, in which autonomy is granted to self-organizing teams that operate with agreed goals and performance outcomes. By contrast, the bottom 80% usually operate as hierarchies of authority, that make them slow to adjust to marketplace shifts.

3. The Top 20% Assume Firms Are Complex Adaptive Organisms

The top 20% typically see an organization as a living organism, not a machine. Any individual decision is expected to have unpredictable reactions throughout the firm. Continuous experimentation is the norm. By contrast, the bottom 80% usually assume that the firm can be managed with simple cause-and-effect thinking. 

4. The Top 20% Assume Management Is Multi-dimensional

The top 20% of firms generally realize that the success of making improvements to a single dimension (like strategy, budget, HR, or technology) will be determined partly by the interaction with other dimensions of management. By contrast, the bottom 80% often attempt changes within a single dimension. 

5.  The Top 20% Embrace The Role Of Mindsets And Assumptions 

The top 20% typically embrace the role of mindsets and assumptions in running the firm, including customer focus, self-organizing teams, and an expectation of change. By contrast, the bottom 80% usually view management simplistically as a set of observable processes as shown in Figure 4, thus treating subjective mindsets and assumptions, as somehow “outside management.”

Figure 4

6. The Top 20% Assume That Management Is About Enablement

The top 20% assume that everyone can innovate, not just appointed managers. The assumption that “managers know best” gives way to the realization that expertise exists throughout the organization. The bottom 80% still tend to see management as control, with authority hoarded by those with managerial job titles. This drastically limits the creativity of the firm.

7. The Top 20% Make Competitors Irrelevant

Apple’s iPhone didn’t just defeat Nokia’s market-leading phone in 2007. The iPhone made Nokia’s phone, and almost every other portable phone, irrelevant. The iPhone was able to do so many things, better, more quickly, more easily, and more elegantly, than any other device. Tesla now appears to be on a similar track in automobiles.³

By contrast, the bottom 20% are still mainly in the grip of Michael Porter’s 1979 dictum, “The essence of strategy is coping with competition.”⁴ GM and Ford compete with each other on traditional gasoline-based vehicles, and struggle to do the rethinking necessary to prosper in the emerging electric-vehicle world.

About the author:

Stephen Denning is a Senior Contributor at Forbes.com and a director of the SD Learning Consortium.

THE DRUCKER FORUM WORKSHOP ON NOVEMBER 29, 2023, 2PM-5PM

To learn more, attend the author’s workshop “Reimagining Management For Creative Resilience”  Vienna Hilton Plaza, Schottenring 11, 1010 Vienna, Austria.

The workshop will address the central question posed by the Drucker Forum 2023— how to achieve creative resilience in the digital age.

The workshop is available to all participants in the Drucker Forum

Register here: https://www.druckerforum.org/2023/special-events-2023/ 

References :

1. Hamel, G. “Why Management Matters with Raffaella Sadun”, June 6, 2023, https://www.garyhamel.com/video/why-management-matters-raffaella-sadun “Management is simply the tools, the methods, processes and structures that we use as human beings to do together what we couldn’t do alone.”

2. Wiley, 5th ed, 2016.

3. Denning, S. “How Tesla Is Revolutionizing Management To Save The Planet,” Forbes.com. July 5, 2023. https://www.forbes.com/sites/stevedenning/2023/07/05/how-tesla-is-revolutionizing-management-to-save-the-planet/ 

4. Porter, M. “How competitive forces shape strategy” McKinsey, 1979, https://getdowntobusiness.typepad.com/rdjohnson/files/how_competitive_forces_shape_strategy.pdf 

“Those who only gradually improve their performance in exponential times fall back exponentially.” Curt Carlson, former CEO Stanford Research Institute

Following the business news in the weeks after this year’s Drucker Forum, it became clear that management, as taught at business schools, is headed for irrelevance. Today it no longer solves problems. It creates them. So-called “best practices” of management have caused a multitude of problems that only became apparent after a delay of decades, but are now making themselves felt with force. Every newly graduated MBA contributed in good faith to the spread of these practices. Now that they are being applied in all companies worldwide, their limitations and weaknesses are becoming increasingly obvious.

They fall short in dynamic market environments. They stifle innovation with bureaucracy and rigid processes. They overextend the decision-making capabilities of companies in increasingly complex and uncertain environments. They are way too slow in learning from and adapting to new challenges. They pitch scarce and valuable human assets into senseless battles of domination. They frustrate workers, discourage entrepreneurial creativity and risk-taking, and impede cooperation across domains or companies.

Drucker Forum 2020

This article is one in the “shape the debate” series relating to the fully digital 12th Global Peter Drucker Forum, under the theme “Leadership Everywhere” on October 28, 29 & 30, 2020.
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Relevance lost

In short, our “best practices” have lost much of their business value. But why? First, let’s take a look at why they worked so well for so long.

At the dawn of the 20th century F. W. Taylor established the discipline of scientific management. His approaches created immediate benefits for companies by increasing productivity and quality, and reducing personnel costs. It was, in fact, one of the basic innovations of the second industrial revolution. Business schools emerging at this time adopted Taylor’s theories, weaving them into the DNA of management education.

Strict functional separation of the organization, combined with central control, and a shift of knowledge from skilled workers to management, boosted industrial productivity. This was such an advance that specialization, planning and control came to be regarded as general principles for efficient organization of all kinds of work. Taylorian practices were extended to strategic planning, accounting, people management and product innovation. And it all worked quite well, at a time of predictable market growth, with sufficient unconquered space still available for competitors.

Enter globalization and the internet

Yet this situation would not last forever. Enter the disruptive forces of globalization and the internet. Globally distributed value chains and just-in-time delivery increased the complexity of product markets. The internet democratized communication and opened up markets on a global scale by lowering entry barriers to many industries. Competition became ever tougher. Competitors multiplied, as did customer choice, prices fell and margins disappeared in the blink of an eye. Flexibility, speed and adaptability suddenly were in high demand. “Best practices” aimed at achieving maximum efficiency largely lost their power and thus their usefulness. But they had become firmly embedded as the gold standard of corporate management in the mind of managers who cling on to what they once learned, despite the fact that it doesn’t work any more.

Peter Drucker once wrote that the greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic.

Today’s market environments are complex and hyper-dynamic. The conditions for success have changed fundamentally. The old “best practices” are no longer even good. Companies need to find better ones if they are to thrive.

New practices for new times

We can do this by overcoming the self-imposed limitations of current management. Why plan in fixed yearly periods, when customers easily turn away from your products at any time? Why wait for the next budget cycle before approving funds for a new market opportunity? Why report and control tasks and resources along predetermined hierarchies, when relevant business activities require fast ad-hoc communication and coordination across networks of knowledge workers?

Today’s market environments call for management practices that can cope with complexity and change, with increasing customization of products and digital processes. In short: With customer-directed innovation at speed. New management principles are emerging from innovative leaders such as Amazon, Haier, Handelsbanken, Nucor, and Morning Star, which have broken up silos and decision-making bottlenecks to focus on customer needs and establishing entrepreneurial skills and incentives throughout the organization. Haier, Handelsbanken and Nucor impressively showcased these new principles at the GPDF20. As these and many more companies around the world demonstrate, such practices are not a privilege of start-ups or digital disruptors. They successfully work for companies of all sizes and industries. But beware: this time it won’t be done with the application of a few new methods at the operational level. The change is more fundamental. It will affect all levels of management.

Frederick Taylor brought one of the biggest management innovations of all time. But his practices have now reached their limits of their usefulness. Today, we need something else. Something better. Something that helps navigating the uncertainties of the digital age. Something that gives purpose again to management.

Change is here. Time to adapt.

About the Authors:
Janka Krings-Klebe and Jörg Schreiner are founders and managing partners of co-shift GmbH, helping companies to transform into business ecosystems, and authors of “Future Legends – Business in Hyper-Dynamic Markets“ (Tredition 2017)

This article is one in the “shape the debate” series relating to the fully digital 12th Global Peter Drucker Forum, under the theme “Leadership Everywhere” on October 28, 29 & 30, 2020.
#DruckerForum