by Gary Hamel

The first rule of blog-writing is this: keep it current. So apologies. I haven’t posted anything in a few months because I’ve been working flat out to pull together a conference that will focus on the challenge of inventing the future of management. This invitation-only event will take place in Half Moon Bay, California on the 29th and 30th of May, and the attendees will include . . .

Academic heavyweight like Henry Mintzberg (McGill), Peter Senge, (MIT) Chris Argyris (Harvard), C.K. Prahalad (Michigan), Tom Malone (MIT), Jeffery Pfeffer (Stanford), and Linda Hill (Harvard).

Big thinkers like James Surowiecki (The Wisdom of Crowds), Eric Beinhocker (The Origins of Wealth), Lowell Bryan (Mobilizing Minds), Steven Weber (The Success of Open Source) and David Wolfe (Firms of Endearment).

Stars from the venture capital world, including Steve Jurvetson (Draper Fisher Jurvetson) and Leighton Reed, MD (Alloy Ventures).

Distinguished editors and writers like Kevin Kelly (former editor of Wired) and Tom Stewart (editor of Harvard Business Review).

And some very progressive business leaders, including: Terri Kelly (CEO, W.L. Gore), John Mackey (CEO, Whole Foods), Tim Brown (CEO, IDEO), VineetNayar (CEO, HCL Technologies), and Marissa Mayer (Google’s VP for search products).

The animating thought behind the conference is this: What would happen if you invited 35 really smart folks to reinvent management for the 21st century? Hence, the guest list. OK, so nobody’s going to reinvent management over the course of a two day schmooze-fest, but at a minimum, this august group of management thinkers and CEOs ought to be able to come up with a first-cut agenda for tomorrow’s management innovators—don’t you think? Well, we’re going to find out when we get this Ferrari dealership’s worth of intellectual focused on the following four questions:

1. What are the deep-seated impediments, or “design flaws,” that limit the capacity of organizations to adapt (to change without trauma); to innovate (to mobilize the imagination of everyone, every day); and to engage (to create environments that inspire extraordinary contributions).

2. Given these systemic impediments, and the new demands that will confront organizations in the years ahead, what should be the agenda for 21st century management innovators? That is, what are the “moonshot challenges” that must be addressed if we are to create organizations that are truly fit for the future?

3. Can we imagine, even in outline form, some potential solutions to these challenges, and if so, what sorts of experiments might be useful in helping us to test these ideas in real world settings?

4. More generally, what could be done to help accelerate the evolution of management in the years to come, that is, what is it that limits the pace of management innovation and how might these limits by overcome?

Of course, a few dozen brainiacs are no substitute for a “crowd” of unconventional and inspired thinkers. So, if YOU have a view on any or all of these questions, I and my colleagues at the MLab would like to hear from you. (You can post a comment below.) We’ll weave your ideas into the conversations we’ll be having in Half Moon Bay—so you let us know what you think, and be sure to append your name to your comment, so we can give credit where credit’s due.

And in a few weeks I’ll come back and tell you what happened when we gave the experts a couple of days to imagine the future of management.

by Gary Hamel

There isn’t a sport on the planet that delivers less adrenaline per unit of time than golf. For years, that simple fact kept me off the links. When compared to hurling myself down a black diamond ski run or diving on a wreck, the idea of spending the better part of a day struggling to propel a small round object toward a pint-sized hole, with a device ill-suited to the task, seemed to me both pointless and effete.

Yet there I was last week, hacking my way around two of the most extravagantly beautiful golf courses on the planet: Kauri Cliffs and Cape Kidnappers both of which have views across the Pacific from New Zealand’s North Island. And now I’m off to join a week-long golf orgy in Palm Springs—an annual event where the violent slash of my golf swing will once again be the subject of amusement and sarcasm: “Next time, see if you can slow it down to a blur.”

My journey from sneering skeptic to helpless addict began a decade ago when I set out to write a cover story for Fortune on the Internet. To imbue the piece with a bit of first person veracity, I visited eBay’s nascent website and, more or less randomly, entered a bid for a set of golf clubs. So confident was I that my low-ball offer would soon be bested, I didn’t bother to check back in on the auction. A few days later, I walked into my office and discovered an elongated box propped up in one corner. “Oh crap,” were the first words out of my mouth when a shiny set of Wilson irons tumbled out of the package. Nevertheless, within a few days I was down at the Stanford University driving range with a bucket of balls at my feet and a 7-iron in my hand. My first swing slammed into the ground a foot behind the ball, sending an electric shock up my arms. Another hideous spasm and the golf ball was whizzing sideways, provoking startled stares from my fellow range rats. “Dear-mother-of-all-things-absurdly-difficult,” I thought, “this is hard.” And then, ten, or twenty, or fifty lunges later, I connected—and with a whizzing sound sweeter than the air intake on a Ferrari F430, that little white orb started to soar. Up it went, suspended in the sparkling autumn sky. And then, 160-yards downrange, it returned to earth, bouncing softly on the grass.

Jeepers. I had just hit a ball farther than a Barry Bonds home run—and without any help from the jacked up folks at BALCO! And it felt good, that sudden, effervescent jolt of positive reinforcement. In that first euphoric moment, I had no idea I had just inhaled a drug more powerful than crack, but I knew I wanted more—more of that grin-inducing buzz that comes when you succeed, even intermittently, at something darn-near impossible. And like addicts of all sorts, my craving has cost me dearly. The new clubs every 18 months or so, the country club dues, and, most of all, the dollars and days consumed by coaches, golf schools, and training aids.

The golf swing has been called “the most difficult move in sports”—a gross understatement, as any golfer will tell you. To send your ball rocketing precisely toward its target, you must think of nothing but the target, while resisting the temptation to actually look at the target; you must keep your arms and hands relaxed, while torquing your torso like a taut rubber band; and you have to accelerate the club head from a standstill to more than ninety miles an hour in less than a second, while resisting the temptation to “swing hard.” And yet, with a bit of application, a middle-aged Boomer with a modicum of athletic ability can become a respectable golfer. And once or twice a round, this diligent, well-trained amateur will hit a golf shot that is the equal of anything you’re likely to see on the PGA Tour. This fact brings me neatly to my main point: Despite the old adage to the contrary, gray-haired dogs really can learn new tricks.

That’s why I’m optimistic that your company can dramatically improve its innovation performance. As my colleagues at Strategos have demonstrated again and again, in companies as diverse as Nokia, Shell, Best Buy, and Whirlpool, with the right tools and training, you can teach “ordinary” employees how to be extraordinary innovators.

Today, innovation is the buzzword du jour in virtually every company, but how many CEOs have put every employee through an intensive training program aimed at boosting the innovation skills of the rank and file? Sure companies have electronic suggestion boxes, slush funds for new ideas, elaborate pipeline management tools, and innovation awards—but in the absence of a cadre of extensively trained and highly skilled innovators, much of the investment in these innovation enablers will simply be wasted.

Imagine that you coaxed a keen, but woefully inexperienced golfer onto the first tee at Pebble Beach. After arming the tyro with the latest titanium driver, you challenge him to split the fairway with a monster drive. You promise the neophyte a $100 bonus every time he hits a long bomb that stays out of the rough, and another $100 for every hole where he manages to break par. But what you don’t do is this: You don’t give him any instruction—no books, no tips from Golf Digest, no Dave Pelz and Butch Harmon, no video feedback, and no time off to perfect his swing on the practice range. Given this scenario, how many 200-yard drives is our beginner likely to land in the fairway? How long is he likely to stay avidly devoted to the task at hand? And what kind of return are you likely to get on the $2,000 you spent on a bag full of high tech clubs and the 450 bucks you shelled out for a tee time? The answers are: Not many, not long, and not much. And no one who knows anything about golf would ever set up such a half-assed contest.

That’s why I’m dumbfounded by the fact that so few executives have invested in the innovation skills of their frontline employees. The least charitable explanation for this mind-boggling oversight: senior managers subscribe to a sort of innovation apartheid. They believe that a few blessed souls are genetically equipped to be creative, while everyone else is a dullard, unable to come up with anything more exciting than spiritless suggestions for Six Sigma improvements. A more charitable reading: CEOs and corporate HR leaders simply don’t know how to turn on the innovation genes that are found in every human being.

Obviously, you can’t teach someone to be an innovator unless you know where game-changing ideas come from. In other words, you need a theory of innovation—like Ben Hogan’s theory of the golf swing. This is why, a few years’ back, I and several colleagues analyzed more than a hundred cases of business innovation. Our goal: to under¬stand why some individuals, at certain points in time, are able to see opportunities that are invisible to everyone else. Here, in a pistachio-sized shell, is what we learned. Successful innovators have ways of seeing the world that throw new opportunities into sharp relief. They have developed, usually by accident, a set of perceptual “lenses” that allow them to pierce the fog of “what is” in order to see the promise of “what could be.” How? By paying close attention to four things that usually go unnoticed:

1. Unchallenged orthodoxies—the widely held industry beliefs that blind incumbents to new opportunities.
2. Underleveraged competencies—the “invisible” assets and competencies, locked up in moribund businesses, that can be repurposed as new growth platforms
3. Underappreciated trends—the nascent discontinunities that can be harnessed to reinvigorate old business models and create new ones.
4. Unarticulated needs—the frustrations and inconveniences that customers take for granted, and industry stalwarts have thus far failed to address.

I’ve learned that these modes of discernment can be taught to anyone who is genuinely eager to “see differently.” (For more information on the “how,” check out the forthcoming book from the Harvard Business School Press, "Innovation to the Core," by Peter Skarzynski and Rowan Gibson.) As individuals gain experience in seeing the world in new ways, and as their novel insights get shared and cross-tabulated, an organization’s capacity for innovation soars.

I can’t state the point strongly enough: The first and most important step for any company intent on building a capacity for continuous, game-changing, innovation is to teach its people how see what’s around them with fresh eyes. Until your company steps up to this challenge, it will be filled with innovation hackers whose ideas rarely find the fairway.

by Gary Hamel

I don’t read People magazine. It’s not that I’m disinterested in the lives and loves of Paris, Owen, Katie, Tom, Julia, Zac, Nicole, Keith, Jen, Ben, and all the other estimable icons of 21st century haut culture; rather, it’s that I seldom have the time. Friends and colleagues expect me to read the business press, and mostly I do. I am seldom asked, however, to render an opinion on Britney’s over-exposed anatomy or Lindsay’s latest run-in with the law. Nevertheless, the other day I found myself in the gym with 15 minutes of workout remaining and no unread pages left in my Financial Times. So, making sure I wasn’t seen, I slid the November 16 issue of People out of the magazine rack (Jane Seymour—Staying Sexy at 56!) and retreated back to my treadmill. Imagine my shock, when I discovered Nicholas Negroponte’s name on the contents page.

Nick is the co-founder and long-time director of MIT’s Media Lab—and as far as I know, a model of propriety who’s never seen the inside of the Viper Room. But he’s also a driven man, a crazy visionary who dreams of closing the digital divide by getting laptops into the hands of the poorest children in the world.

Negroponte’s One Laptop Per Child non-profit started producing computers in earnest last month, and is deploying the first batch in Uruguay, where a presidential initiative aims to get a computer into the hands of every school-age kid. For $399, first-world donors can get one of Negroponte’s cute, but seriously capable laptops, while sending another machine to a poverty-stricken child.

So there I was, abusing my middle-age knees while reflecting on the fact that a passionate boffin old enough to pull a Social Security check might just succeed in connecting the planet’s most disadvantaged children to a world of knowledge. And it struck me that while Nick Negroponte is certainly unusual, he’s hardly unique. There are other folks around the world—thousands of them, maybe millions of them—who’ve committed themselves to their own moonshot goals. Think of Craig Venter’s quest to unpack the human genome, of Bono’s campaign to focus attention on Africa’s crippling debt load, of Angelina Jolie’s work on behalf of the United Nations High Commission on Refugees (when was the last time you saw her emerging blearly-eyed and panty-less from a Bentley at 2 am?), or of all those NASA engineers plotting the next mission to Mars. And when one ventures out beyond the spotlight of celebrity-dom and billion-dollar budgets, one finds a legion of similarly valiant folks who are ardently picking away at obstinate and out-sized problems. (For an impressive list of such individuals, check out the Schwab Foundation for Social Entrepreneurship.

Unlike Nick Negroponte, I’m not a technologist, nor a social entrepreneur, and on most days, not all that big-hearted either. I’m a management professor and an author. I spend most of my time talking to and working with business leaders—from low-level project managers to Fortune 500 CEOs. Most of our conversations and our energies are focused on near in, nit-picky kinds of problems: How do you improve your planning process? How do you get more teamwork? How do you get products to market faster? Nevertheless, I envy those who’ve hitched themselves to a plow and are turning up fresh ground on big problems, even if they never get to the end of the furrow—and I wonder: those of us who are managers, or care about management, what’s our moonshot? What’s the big soul-stirring problem that our colleagues—or even our shareholders—would thank us for tackling? What are the laudable challenges that would require us to strike out beyond the boundaries of best practice? What are the seemingly intractable management challenges that may never be “solved,” but would reward patient and inspired effort?

Again, unlike Nick, most of us who work in management aren’t romantics. We’re pragmatic doers, not starry-eyed dreamers. And yet, as human beings, all of us are ultimately defined by the causes we serve and the problems we struggle to surmount. And while big problems don’t always yield big advances, small problems never do.

So let me ask once more, what should be management’s moonshot for the 21st century? When you think about the way your company is organized and run, when you think about management as usual, what makes you indignant—what do you think is just plain wrong? When you focus on the future, what are the over-the-horizon challenges that are going to stretch your company’s antiquated, industrial-age management practices to the breaking point? When you look into the faces of your colleagues, all those folks who are working 10-hour days to feed their kids and pay their mortgages, do you think they deserve better? Do you want to improve their lot somehow? When you listen to the buzzwords and platitudes that get bandied about in management meetings, do you sense an appalling gap between rhetoric and reality? Are there areas where management practice is still lagging badly behind management rhetoric?

As I’ve reflected on these questions over the past few years, three big and meaty problems have taken shape in my mind:

Challenge #1: How can we build organizations that are as nimble as change itself—not only operationally, but strategically?

Why should it take a crisis to drive deep change? Ruinous write-downs, convulsive reorganizations, swingeing lay-offs, plummeting market value—everyone pays the price when companies fail to reinvent themselves in a timely manner. In a world of accelerating change, organizations large and small must become as adaptable as they are efficient. Yet most management processes do little to facilitate ahead-of-the-curve adaptation. As a result, deep change is too often episodic and crisis-driven, and too seldom continuous and opportunity-driven.

Challenge #2: How can we make rule-breaking innovation a systemic capability—how can we give everyone the chance to be an innovator?

Look on the Web and you’ll discover a world of hackers, mixers, mashers, bloggers, and podcasters. Yet at work, too many people are viewed as little more than semi-programmable robots. Yet today, as the barriers that once protected industry incumbents come tumbling down, innovation is the only antidote to margin-crushing competition. Unfortunately, though, management was invented (a hundred years ago and more) to engender conformance and alignment, rather than contrarian thinking and bold experi¬mentation—another reason it must be reinvented root and branch.

Challenge #3: How can we create work environments that inspire individuals to give their very best of themselves—that truly inspire human beings?

In today’s “creative economy,” it’s not enough to have employees who are biddable, industrious and intelligent, since these human capabilities are rapidly becoming commodities. Instead, value creation depends on the willingness of employees to bring their initiative, creativity and passion to work each day—human capabilities that are, quite literally, gifts. While traditional management systems are good at compelling obedience and harnessing expertise, they often discourage extraordinary contribution. As result, most people bring only a fraction of their capabilities to work each day, and earn no more than a meager emotional return on the time they invest in their jobs.

These are the management problems I care about—and they reflect the systemic incompetencies—the in-built design flaws, if you will—of the hierarchical and bureaucratic management model that still predominates in most commercial and public sector organizations. These are the big problems we currently beavering away on at the Management Lab.

But what do you believe should be management’s moonshot? How would you reinvent management?" And if you’ve already made a start, how is it going?

by Gary Hamel

In Part One of this posting, I argued that the Web has the power to turn management-as-usual inside out. Now let’s consider five of the built-in “design flaws” that limit the performance of traditional bureaucratic organizations, and imagine briefly how the Web might help forward-thinking companies to overcome these deficits.

Design flaw #1: Share of voice equals share of power. In hierarchically arranged companies, the farther down employees sit in the organization, or the more unconventional their views, the harder it is for them to get a hearing. In contrast, the views of senior executives are often assigned a lofty “coefficient of credibility” simply because those folks sit higher up in the hierarchy.

A potential Web-based solution: A democracy of ideas. The Internet is a thoughtocracy, and as such, it has decisively destroyed the power of the elites to determine what gets published and who gets heard. The result? A torrent of online opinion, comment, advice, and insight. Unfortunately, the explosive growth of “citizen media” hasn’t been matched by equally dramatic changes in the market for ideas inside most large companies.

If you want to dramatically increase the quality of dialogue—and decisions—in your company, you have to think boldly. What if your company encouraged people to write critical in-house blogs (and allowed them to do it anonymously if they so wished)? What if it tracked the number of responses each blog posting generated (its “authority index”) and then required senior executives to respond to those that garnered the most feedback? What if it appointed an employee jury to award a monthly prize for the best blog posting—as a way of rewarding the most thoughtful, amusing, or courageous contributors? Sure, there will be objections and downsides. Attacks might get personal. Internal criticism may leak outside. All of this is possible—no, probable. Yet one must weigh these costs against the price that is paid for pushing dissent underground, for missing opportunities to improve the quality of key decisions, or of wasting the intellect of employees who don’t feel free to speak out on issues they care about.

Design flaw #2: Creative apartheid. In many companies, innovation is seen as the responsibility of the “creative types” who work in R&D or in new product development. Everyone else is viewed as peripheral to the task of innovation. This sort of “creative apartheid” denies “ordinary” employees the chance to fully exercise their imaginations, and thereby limits a company’s overall innovation performance.

A potential Web-based solution: Distributing the tools of innovation. Make no mistake, your company is filled with video bloggers, mixers, hackers, mashers, tuners, and podcasters. Like everyone else with a computer, they have been using Photoshop, TypePad, GarageBand, Final Cut Express, ProTools, VideoStudio, Home Designer Pro, and thousands of other creativity-boosting applications to give vent to their artistic urges. The question is what is your company doing to help all of these ingenious people become fully empowered business innovators? Has your company given every employee access to a comprehensive suite of business innovation tools? Do associates have unrestricted access to a global database of customer insights and competitor intelligence? Can they download detailed financial models in order to explore the profitability implications of changes in pricing, promotional spending, staffing, or other variables? Do they have online access to comprehensive maps of key business processes so they can analyze opportunities to reconfigure workflows? Does every employee have the chance to mock up new product designs using computer-aided design software? Is there an internal Web site that helps individuals garner peer feedback on their creative ideas? If not, your company isn’t really Web-enabled.

Design flaw #3: Under-informed decisions. Hubris, unchallenged assumptions, and inattention to competing viewpoints often lead to poor decision-making at the top. In a recent large-scale study, senior executives judged nearly a quarter of their decisions to have been wrong. (An independent audit would probably have put the figure higher.) Another study found that misplaced confidence frequently leads CEOs to seriously over-pay for acquisitions. The fact is, it’s virtually impossible for a small cadre of senior executives to accurately estimate the costs and benefits of a complex strategic decision.

A potential Web-based solution: A market for judgment. The Web is a great tool for collating the views of hundreds—or even thousands—of individuals and has spawned a wide variety of “opinion markets.” Suppose, for a moment, that your company created an internal “market for judgment” that aggregated the views of a broad cross section of employees with the goal of establishing the odds that a particular project will meet its intended return. For every big new project, employees would have the chance to buy a security that would pay out only if the initiative achieved a predetermined rate of return. These securities would be launched while the project was still in the planning stage, and the price of the security would reflect a wide range of opinions on the project’s likely success. Imagine, for example, a security that pays out $1,000 after 5 years if a specified project delivers an internal rate of return of 15% or better. If 6 months prior to breaking ground the security is selling for $100, it’s obvious that most employees are highly skeptical about the project’s prospects. Senior executives could still green-light the plan, but they would have a lot of explaining to do if the initiative ultimately failed.

Design flaw #4: A monopsony for new ideas. While an entrepreneur in Silicon Valley often has the chance to pitch a business plan to a half a dozen or more venture capitalists, in the average Fortune 500 company an employee with a new idea has only one place to go for funding—up the chain of command. This is often a substantial barrier to lining up capital and talent behind new ideas.

A potential Web-based solution: An internal “band of angels.” A new breed of online peer-to-peer banks, such as Zopa and Prospect, are helping lenders and borrowers to find each other and do business without the overhead of, well, bankers. These social markets provide a model for how your company might create more funding options for employees eager to experiment with new ideas. In most of the companies I work with, there are somewhere between a few hundred and few thousand individuals who control a budget of more than $100,000 per year. Imagine that each of these budget holders was given permission to invest up to 55% of their discretionary resources in any idea, anywhere across the company that they deemed attractive. Suddenly, internal entrepreneurs would have the chance to appeal to dozens of potential “angel investors.” No longer would a new idea die simply because it didn’t fit the prejudices or priorities of one’s boss.

Design flaw #5: Persistent misalignment between power and competence. Companies get into trouble when the mental models of key business leaders depreciate faster than their political power. Given the fact that it is politically difficult to reassign power in large organizations, since doing so typically involves firing or demoting a senior executive, there is often a substantial time delay between when an executive’s value-add starts to decline and a formal realignment of authority. The price paid for this time lag: an organization that fails to adapt to fast-changing circumstances.

A potential Web-based solution: Reverse accountability. An ideal management system would be one in which power was automatically redistributed when environmental changes devalued executive knowledge and competence. You may find it hard to imagine an organization in which authority is a fluid commodity, flowing smoothly toward leaders who add value and away from those who don’t, yet this is how the Web works today. In the online world, power and influence are the product of de facto leadership, rather than de jure appointments. Hierarchies get built from the bottom-up, rather than from the top down. In this sense they are natural rather than proscribed.

While the value of hierarchy as an organizing tool will wane in the years to come, it will never disappear. Some people, at certain times and on certain issues, will always wield more authority than others. Yet embedded in this pedestrian fact are some crucial questions: How is that authority gained? Under what circumstances is it lost? And what limits the ways in which it can be exercised? Consider the case of Linus Torvalds, the chief custodian of the Linux open software community. Torvalds has no formal power. He wasn’t appointed by a board and he has no direct reports. Torvalds’ power is granted from below, unbuttressed by formal positions and titles. His influence rests on his ability to recognize, balance, and serve the interests of the Linux development community. Every developer has the freedom to ignore Torvalds’ views on the evolution of Linux and “fork the code.” In this sense, Torvalds’ power is always open to challenge. As a servant leader, Torvald’s power is also constrained by the necessity for consultation and transparency—he can’t afford the luxury of making capricious decisions, and must extend “due process” to every well-intentioned idea. The moment Torvalds stops adding value, or starts making parochial, self-serving decisions, his power will start to erode. Companies everywhere should be looking for ways to apply this principle of “reverse accountability” in their own organizations—as it may be the best possible insurance against the fast-rising costs of organizational maladaptation.

It is difficult to think of any radical changes to the way companies organize and manage that don’t involve a dilution of executive power—this is hardly surprising, since the ultimate power for setting strategy and direction in most companies is still concentrated, Soviet-like, in the hands of a few senior executives. Given this, we shouldn’t be surprised if it takes a few years, or a few decades, for the outlines of Management 2.0 to fully emerge. Turkeys don’t vote for Thanksgiving, and senior vice presidents are unlikely to vote for a dramatic redistribution of authority. Nevertheless, the companies that take an early lead in webifying their management models are likely to enjoy even greater long-term rewards than companies which, like Amazon, pioneered new Web-based business models, or, like FedEx, have used the Internet to transform their operating model.

So here are a couple of questions for you: Can you think of other design flaws that limit the ability of large bureaucratic organizations to innovate, adapt, and get the very best out of their people? If so, do any of the Web’s nascent social technologies seem to offer the potential for a design fix? Please share your thoughts with all of us on this blog who are working to build Management 2.0.

by Gary Hamel

Over the last decade, the Internet has dramatically transformed the world of business. It has enabled real-time, globe-spanning supply lines, 24/7 customer service, and the digital distribution of many products and services. It has reduced the costs of coordination across geographic and organizational boundaries, and made it easier for companies to arbitrage wage costs via outsourcing and off-shoring. Just as significantly, the Web has allowed a swarm of upstarts to circumvent long-standing entry barriers in industries as diverse as publishing, music, travel, retailing, and insurance. Whether it’s incumbent companies overhauling old operating models, or newcomers blowing up time-worn business models, the Internet’s impact on business has been pervasive and profound.

Yet when it comes to the management models that predominate most companies—the methods and processes used to create strategies, set goals, make critical decisions, allocate resources, and align human effort—the Web’s impact has been comparatively modest.

While e-mail, Intranets, webcasts, and a burgeoning array of online collaboration tools have helped to make management more efficient, there’s little evidence that the Web has dramatically altered the responsibilities of business leaders, or fundamentally changed the way in which they do their jobs—at least thus far. Looking forward, though, there’s every reason to believe that the Internet will change the work of management just as thoroughly as it’s changed every other facet of commercial life. Why? Because the Internet is an immensely powerful tool for multiplying human accomplishment—a goal that is central to the work of every manager and the design of every management system.

At its essence, “modern” management is nothing more than a technology for “getting more out of people.” Unfortunately, it’s easy to lose sight of this simple truth when one is surrounded by the clanging Rube Goldberg-like machinery of corporate decision making—the never-ending budget wrangles, the elaborately staged planning sessions, the carefully scripted review meetings, and a gaggle of other similarly contentious and time-consuming rituals. Yet to fully appreciate the power of the Internet to transform the work of management, we have to go back to basics, and focus on the two essential tasks that confront anyone who seeks to extend the boundaries of human achievement.

The first task is to amplify human capabilities—that is, to create an environment in which individuals are empowered, equipped, and encouraged to give the very best of themselves. Studies show that fewer than 20% of employees around the world are highly engaged in their work. This is a potentially debilitating handicap for organizations competing in today’s “creative economy.” Disengaged employees may be obedient, industrious, and smart, but they are unlikely to bring their initiative, creativity, and passion to work—even though, as individuals, they may be richly endowed with these high value capabilities. The right tools, a compelling sense of mission, access to information, the freedom to chose one’s work, high caliber colleagues, a stimulating physical environment—these are a just a few of the things that help to amplify individual accomplishment.

The second task of management is to aggregate individual efforts together in ways that make it possible for human beings to do together what they couldn’t do on their own. No single individual can construct a jetliner, build a robust computer operating system, or make an Oscar-winning movie. Once unleashed, human effort must be coordinated, and coordination tasks come in varying degrees of complexity. The simplest involves merely pooling resources—assembling a busload of farm laborers, for example, and delivering them to an orchard that needs pruning. At the other end of the spectrum is the challenge of optimizing the performance of a highly complex production system that requires the sequencing and integration of a varied mix of critical inputs. Improving the yields in a semiconductor factory, or better managing risk in a global bank are examples of tasks that demand high levels of coordination.

One can picture these core challenges on two axes, as in Figure 1. Improving managerial effectiveness entails getting better at both amplifying and aggregating human capability—and it is this challenge that brings us back to the Internet. Over the next decade or two, it is likely that Internet will grow into the most powerful tool that humanity has ever possessed for boosting human accomplishment.

Figure 1: The Essence of Management

Everything about the Internet, its global reach and configurability, its diversity and openness, its community-centric ethos, and anarchic disorderliness, serves to enlarge the scope for human accomplishment. Blogs, podcasts, mash-ups, wikis, folksonomies, opinion markets, discussion boards, and social networks—these technologies have already extended the range of human creativity and collaboration in ways that would have been unimaginable a decade or two ago, and there is much more to come.

While the social technology of management has made an immense contribution to the world’s economic welfare over the past century, it is now a mature technology. Peel away the new-age rhetoric about innovation and teamwork, and in most companies you will find a management model that conforms closely to Max Weber’s bureaucratic ideal. While pundits are already talking about Web 3.0, most companies are still running Management 1.0. Nevertheless, over the coming years, management as currently practiced, will largely be absorbed by, and/or supplanted by, the new social technologies of the Web.

Before the Internet, human beings had only two choices when confronted with the challenge of mobilizing human effort for productive ends—create a market or build a bureaucracy. While markets are great at unleashing initiative and passion—picture the frenzied madness of a Wall Street trading floor or the passionate haggling in an Arab souk—they’re not very good at complex coordination tasks. A market will never build an A380 (a feat that even Airbus finds difficult). Bureaucracies, on the other hand, were invented to aggregate human capabilities—and modern bureaucracies are capable of feats that would have amazed even pyramid-building Pharaohs.

Yet as every victim of red tape, myopic leadership, and organizational inertia knows, bureaucracies aren’t very good at amplifying human capabilities. In a Management 1.0 regime, initiative and creativity nearly always take a back seat to conformance and alignment. In such a setting, individuals with a sense of derring-do are labeled loose cannons; those with a large dollop of creative genius are dismissed as romantic dreamers; and anyone who’s truly passionate is likely to be viewed as slightly delusional. It’s hardly surprising, then, that most large organizations are less lively, less creative, and less adaptable—in short, less human—than the people who work there.

But now, thanks to the power of the Web, there may be an opportunity to transcend the market-versus-hierarchy trade-offs that have long bedeviled human beings. (See Figure 2.) Eventually, the Web may allow each of us to avoid the trade-off between fully exercising our humanity and being a full partner in a grand enterprise, between being enormously creative and enormously productive, between doing the things we love and doing things at scale. Even in its adolescence, the Web gives us reason to believe that such hopes are not entirely naïve.

Figure 2: Markets, Hierarchies, and Networks

Like the stock market, the Web allows individuals to “trade on their own account,” to be free agents in the global economy; yet unlike the stock market, it also allows them to collaborate across time and space to build things of enormous complexity—like a computer operating system. Like a bureaucracy, the Web is filled with mini-hierarchies, where some voices carry more authority than others; yet unlike a bureaucracy, where share of voice is a product of credentials and titles, influence on the Web is a measure of the value one actually brings to the broader community.

If we’re clever, and a bit courageous, the Web may well allow us to overcome some of the systemic pathologies of our long-in-the-tooth bureaucratic management model.

Moving Management Online (Part Two) will appear in two weeks.