Can't Innovate? It's Management's Fault (Really!)

Forget what you know about management, says business strategy guru Gary Hamel. It won't help you meet the challenges that face your company today.

"We're now living in a world where it's innovation that creates wealth," says Hamel, founder of the consultancy Strategos and a visiting professor at the London Business School. For more than 20 years, Hamel has studied what companies need to do to compete. He pioneered, with CK Prahalad, the concept of core competencies -- the unique expertise a company possesses that provides competitive advantage. In 2000, Hamel's book Leading the Revolution exhorted readers to embrace change as the dotcommers had and reinvent their business models.

In his new book, The Future of Management, Hamel argues that the principles and practices used to run most companies were invented to solve a problem -- how to be more efficient -- that today's businesses have largely mastered. "The most critical prerequisite to driving higher levels of efficiency is conformity -- to policy and standards and guidelines and quality protocols -- and yet, obviously, the most fundamental kind of prerequisite for innovation is diversity in thought and action."

Hamel suggests revamping every management concept -- from how employees use their time to how funding is allocated to projects so that managers may inspire workers, identify the most promising business ideas and marshal the resources to execute them. IT organizations will play a critical role in two ways: first, by building systems that companies will use internally to facilitate innovation and second, by identifying how companies can use new technologies to upend established business models and deliver new products and services. He spoke recently with CIO (US) Executive Editor Elana Varon about what IT leaders need to do differently.

CIO: People have always complained that management squelches innovation. What made you decide they were right?

Gary Hamel: Partly, it's having worked for the last 20 years to help companies of all sorts innovate. The work that my company, Strategos, has done through the years with companies like Shell and Nokia and others created billions of dollars in market value. But as soon as you turned your back, organizations reverted to type.

It seemed to me it was time to go back to the genetic foundations of management and of large organizations and understand how we make companies systematically more innovative than they have been over the last hundred years.

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