Management 2.0

There is a movement afoot in the business world that parallels the growing maturity of the internet and Web 2.0. Let’s call it Management 2.0. Google is a famous example at the vanguard, notable not so much for its management innovation per se — many companies are just as innovative when it comes to management — but rather for its rapid growth, global mindshare and financial success. A Harvard Business Review issue in the winter of 2006 claimed that management innovation — not technological innovation — is now the key driver of economic value worldwide. To be sure, management innovation is enabled by new technologies, especially those involving the internet and communication. Following are some of the concepts of Management 2.0, you are encouraged to complete and refine this list.

1. Crowdsourcing

With “The Wisdom of Crowds” in one hand and Wired’s “Crowdsourcing” issue in the other, businesses and even entire industries are being built on the backs of, well, you and me. But we like it that way. In a sense, the story of Web 2.0 is the story of crowdsourcing: open-source software development, creative commons and GNU licensing models, wikis, blogging, social networking, peer-to-peer networks, and scores of specific crowdsourcing niches like journalism (c.f. Digg, TMZ, et al). Google’s search algorithm is built on crowd wisdom (i.e. PageRank), and eBay’s entire business model is one giant crowdsource. They all work (and only work) because what we the crowd are being asked to do is compelling and of value to each of us individually. The trade is usually a no-cash affair, like when I correct an error I see in a Wikipedia entry. But sometimes crowd members get paid to contribute, and sometimes they even pay to become a member. Regardless, the real currency is Community and Goodwill, built on denominations of Trust and Fairness. Once this non-monetary economy is robust enough, conversion to dollars is manifest. Just be careful to control inflation.

2. User-Generated Content

If you do crowdsourcing right, what you end up with is user-generated content. The real beauty is that not only will your users create your content for you, but if you treat them fairly enough and add enough value yourself, you can turn around and sell them what they created.

3. ROWE Your Boat

ROWE stands for Results-Oriented Work Environment. For many job titles it makes perfect sense to let your employees make their own schedules: as long as they get their work done, what do you care what (or even how many) hours they work? But what about jobs that require frequent team meetings and ones that involve face-to-face customer interaction? ROWE advocates suggest in the former case, if you stop dictating from the top, teams will self-organize out of necessity; everyone has incentive to work out mutually agreeable meeting times, and those who are consistently uncooperative will be weeded out. Similarly, when customer face time is the issue, employees would much prefer to work out scheduling with their co-workers, trading favors where necessary. This yields a more globally optimal solution than could be achieved by centralized scheduling which can’t possibly take into account of each employees individual preferences and dynamically changing circumstances.

4. Failure is Good

Everyone knows that we learn more from failure than from success, but who wants to pay the immediate price when it could mean going out of business or getting fired? The key is to set up an environment in which experimentation is encouraged, consequence of failure is mitigated, and individual failure scenarios aren’t correlated. You are setting up a robust ecology of micro-businesses within your company, all competing for resources in terms of budget and talent. Initial success is backed up with additional investment, and failures are either quickly re-vamped or canned. Most importantly, the case study of failures (as in Harvard’s Case Method) must be analyzed and shared across the company, not as public flogging but rather as a way to learn and not repeat the same mistakes again. Failure in such an environment creates selective pressure for the entire company to evolve to the highest fitness peak in the business landscape.

5. Culture is Key

Jack Welch built GE into the single most successful for-profit corporation in the history of the world. His secret? Create the right company culture for your employees to achieve miracles. Welch’s greatest legacy at GE by his own reckoning was the “GE Way”, a cultural manifesto that he carried around and shared with his managers which at first visualized and ultimately created the GE corporate culture. For Welch, the rest of his job as manager was inconsequential to the bottom line and long-term success of the company. Warren Buffett claims in his 2006 Annual Report that one of his only roles is to “sculpt and harden our corporate culture”, which last year resulted in a valuation increase of $16.9B, the largest net-worth increase ever recorded for any American business, excluding those that resulted from mergers.

6. Everyone is Smart

Everyone in the company, from CEO to janitor, has big potential as a contributor. Yes, they may be vastly different in importance to the company’s success. But everyone is smart. American Airlines famously rewarded employees no matter what their job titles for suggesting ideas that helped the company. One favorite was the flight attendant who built a new house by recommending that the airline reduce their standard three olives per salad down to two (she’d noticed that a large portion of the olives were being left over). Whether you believe this apocryphal or true, the key to harnessing the wisdom of your company’s internal crowd is to provide the right incentives for individuals and make sure those incentives are in perfect alignment with the company’s goals.

7. Let the Market Decide (NASDAQ:LTMD)

Conventional economic theory views markets as efficient allocators of global resources. But they are also great sources of information. Robin Hanson, Professor of Economics at GMU, came up with a great idea: a marketplace where the “products” being bought and sold are ideas, not physical entities or services. Such markets turn out to be amongst the most accurate predictors we have of uncertain future outcomes, and when employed properly, can be used to make smart decisions on anything from corporate strategy to hiring to product innovation. Knowing exactly how and where to employ decision markets inside your company — especially knowing where they should NOT be used — is more art than science at this point. But when companies like Google are using internal markets to make better project timeline forecasts, and when the Department of Defense approves the use of markets to predict the next terrorist attack, you can be sure that LTMD is a long term BUY.

8. Simple is Back

Remember when all the good web sites were portals that did everything and had cluttered home pages, chock full o’ features you never used, and domain names like auctions.com? Notice how Web 2.0 sites tend to have lots of white space above the fold, do exactly one thing very will and tell you clearly what that is on the home page, and have intriguing (yet information-less) domain names like joost.com? Now compare revenues and profitability at time of IPO for Web 1.0 companies vs Web 2.0 companies. Communicating your product and value proposition to the masses is way more difficult than entrepreneurs realize. Expecting 30 million people to absorb anything more than a soundbite, let alone something as complex as a three sentence paragraph, is a lost cause. Even among VCs (the entrepreneur’s greek chorus in lieu of customers), the 30-page MS Word business plan has been scrapped in favor of the 12-slide PowerPoint with lots of pretty pictures. In other words… White Papers? pwn3d. Elevator Pitches? l33t!

9. Lose Control, Embrace Chaos

It’s so simple, just give all of your product away for free and you will be rich! How? Well, we’re not sure. But it’s got to work, after all YouTube is worth a billion after a year of operation and all they do is give away content and spew money down the bandwidth drain. Embracing chaos is antithetical to most people’s business sense and to everything we’re taught in school and by our parents. Must be something in our genes that demands we keep things close to the vest and have a firm hand on the wheel. Obviously you can’t just take your hand off and expect the car to find its way home (yet). But gripping tight enough is not most people’s problem, just the opposite. If you love your wealth, set it free. Have some faith.

10. Kinder + Gentler = Crazy Profitalicious!

Who says you can’t save the environment, eliminate poverty, create community and have fun while you make money? Ayn Rand, Milton Friedman, and Gordon Gekko to name a few. Greed is no longer good. Doing good is good and you will be rewarded in the marketplace. Everyone is talking about you behind your back and in yo’ face, and reputation is important. If you build a better mousetrap, you may get customers in the short run, but if you aren’t nice they will trash you in their blogs, and as soon as someone builds an even better mousetrap (in three months) your customers will jump ship never to return. So the only thing a rational business person can do is to play nice, be good, and feel good about making the world a better place. Oh, and you’ll make a lot of money if you do.

Got a Management 2.0 Concept to add? Share it below.

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  • Satish Sharma

    “Collaborate Complimentry services to Compete” this should be one of the key ingradient of Management 2.0. Holding on is past now, everyone of us has to follow “Let go”.

  • ace

    I really like the “Failure is Good” idea. Both when I was taking flying lessons and doing a lot of mountaineering I studied failures.

    “Accidents in North American Mountaineering” is published annually and is case studies of situations that went wrong. Written either by the participants in survivor situatioins or by the body collectors in the fatal ones, it quickly adds to one’s body of knowledge. It is surprising how often you find yourself in a similar developing situation later but are better prepared to make the correct decisions.

    Similarly with the accident reports published by the FAA, one can learn and prevent.

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