Visiting Professor of Strategic and International Management
London Business School
Ranked by The Wall Street Journal as the world's most influential business thinker, Gary Hamel is a pioneer in 21st century business management, or "management 2.0." He is leading an effort to harness the power of open innovation and reinvent management through The Management Innovation Exchange, an online community through which the world's most progressive business leaders share their ideas about how to build organizations that are fit for the future and fit for human beings.
Hamel has written several landmark business books, including Competing for the Future, Leading the Revolution, and The Future of Management. His latest book, What Matters Now, was published in 2012. During the past two decades, he has authored many articles for the Harvard Business Review, The Wall Street Journal, Fortune, and The Financial Times.
Hamel is a fellow of the World Economic Forum and the Strategic Management Society and has served on the faculty of the London Business School since 1983.
How did you initially become interested in business strategy?
I think it was a bit of a fluke. My Ph.D. is in international business. In my first term at London Business School, I taught a course on competitive strategy, which was my initiation to the world of strategy. At the time, strategy was somewhat of an offshoot of marketing—it was mainly about where you compete and less about how you compete. What struck me was that strategy-making was really a creative enterprise—it wasn't simply about analytics, but understanding how you change the rules of the game. I came to see strategy as a huge opportunity for innovation rather than a deductive process of understanding where to place your bets.
What are several changes you would like to see occur in business management in the 21st century?
I think we need a change in our underlying principles. In any field of human endeavor, you ultimately reach a point where you can't solve the new problems with the old principles. I think that's where we are in the world of management and leadership: Organizations are being challenged to be far more adaptive, innovative, and inspiring places to work. Yet our organizations were never built to be any of those things. They were built to be efficient, disciplined, focused, and accountable, but they weren't built to be resilient, highly innovative, or truly engaging.
The real focus during the next decade or so needs to be on rethinking our management models—how we hire, promote, identify leaders, allocate resources, plan, and set direction. We're going to have to look for some new principles because the old principles that are very deeply baked into our organization—principles of standardization, specialization, formal hierarchy, unitary command, the use of extrinsic rewards, and so on—were good principles, but they're all in service of one overarching ideology, which is the ideology of control.
I think we need an ideological revolution in business. The ideology for the last 100 years has been "controlism," and the tangible form of that ideology was bureaucracy. As we move from the industrial economy through the service economy to the knowledge economy, and now the creative economy, the relative value of control as a source of competitive advantage is going down.
To supplement the ideology of control with the ideology of freedom is, for me, the primary challenge of the 21st century. We must understand the new organizational principles that we will need to embed in our companies if we want to have that sort of freedom and still retain a necessary control. And then it will require a lot of experimentation to rebalance our management models in ways that give equal weight to control, focus, and discipline, and then to creativity, experimentation, and innovation.
I think the caste system in organizations is largely going to disappear. The old model in which the executive ranks make the big decisions, the middle managers basically run the control processes, and at the bottom, the operators complete the day-to-day tasks—I think that's going to change dramatically. My sense is that going forward, at different times, everyone in the organization is going to play all three roles.
For example, if there is an open and participative process for creating strategy, an employee anywhere in the organization may have a great idea, and in that particular moment, he is playing an executive role. He is helping to set the direction of the enterprise. At another time, he may be leading a project team and is then in a management role, making sure that talent is assigned to the right tasks and things happen in a timely and orderly way. And then sometimes he'll be in an operator role in which he's simply getting something done.
The challenges that companies face today—to change more rapidly than ever before, to be more adaptable, to meet the expectations of this next generation of employees who are not going to work in management, and to make use of new social technologies—are conspiring to launch us on what I expect to be another round of fundamental management innovation unlike anything we've seen since the Industrial Revolution.
What are some of the progressive ideas that have resulted from your work with the Management Innovation Exchange (MIX)?
As managers and management theorists, we have been nowhere angry enough about how dispiriting, inertial, and incremental our organizations actually are, or about the extent to which they are less human than the people who work there. And so innovation comes out of some righteous indignation saying, "Why does it have to be this way?" But we also haven't been ambitious enough. And I think most managers, when faced with a new problem, don't get much beyond asking, "Where is the best practice?"
The effort began in 2008 when 35 of the top management thinkers around the world came together—people like Peter Senge and Henry Mintzberg, my departed colleague C.K. Prahalad, and some very progressive executives like Eric Schmidt from Google—to outline a set of new management challenges. We ended up with 25 challenges, which we called "management moonshots." For example, how do you deeply embed the ethos of citizenship and community in organizations, how do you dramatically increase the level of trust, how do you overcome the toxic effects of formal hierarchy, and how do you extend executive timeframes?
During this past year we've run three of what we call "M-Prizes," (management prizes), which are sponsored both by the Harvard Business Review and McKinsey & Company. One was focused on management 2.0—essentially, how we use the new social tools of the web to change the way we lead, manage, and organize. We ran a second M-Prize around busting bureaucracy that was focused on radical decentralization and inverting the pyramid. And now we are finishing the third, which was focused on long-term capitalism and how to create a sort of capitalism that is more responsible, more humane, and more focused on the long term.
We're still in the process of tweaking and evolving the model, but it's been pretty heartening. For the contest that just ended, we received 148 entries from every corner of the globe. We're trying to provide a resource where people can come and be inspired, find things that will work, find ideas that they can take back and experiment with at their organizations, and then also be inspired by people who are leading this work in other organizations.
How can managers harness the power of open innovation to effectively lead their businesses?
First, I think that you have to train people to be innovators if you want them to innovate. The trick is helping people to find ideas that are both radical—that are nonlinear and have the capacity to change the rules of the game—but also doable.
You can teach people how to get at the unarticulated needs of customers. You can teach people how to think about new ways of leveraging the firm's competencies and its strategic assets. You can teach people how to be alert to discontinuities in technology, regulation, or lifestyle and to start to think through how to use those discontinuities to change industry rules. You can teach people to look at the world around them as a reservoir of competencies and assets that they can recombine with what we already have in new and interesting partnership strategies. It's not that we don't know how to teach people how to innovate, but almost no company has done it. I would say until that happens, innovation is going to be more rhetoric than reality in most organizations.
Second, creating a process in which ideas get thumbs up or thumbs down within a few business days, and creating a market for experimental capital where there are many places in the organization where people can go to get funding for their new ideas is also crucial. For example, in a large organization, say to anybody who has any sort of discretionary budget: "Every year, you can take a small percent of that budget and use it to invest in any idea anywhere across the company that you think is promising."
What do you like to do for relaxation or fun?
I have a ski place, so in the winter, I get to enjoy a little bit of that. And once in a while, I make a bad attempt at golf, and that's about all I have time for.
More tangentially, I've been involved with a very large church in rethinking the whole idea of "What is church?" If you look in Europe and the United States, church is slowly becoming irrelevant to modern life, not because people are any less interested in the transcendent, but the role that organized religion plays has been declining. Whether you're atheist, agnostic, or a believer, clearly spiritual capital decline is not good for society. I've become very interested in thinking about how we move away from the stultified bureaucratic hierarchical models of church that have predominated for many centuries, and how we reinvent that model. I've been doing some thinking, speaking, and writing around that challenge.