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Takeaways From The Drucker Forum 2014

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The Drucker Forum 2014 last week in Vienna, Austria, was an exhilarating and uplifting mix of leading speakers, blinding insights, moving moments, frank interchanges, thoughtful explorations, genuine learning and elegant entertainment, with only occasional hints of cliché or snake oil.

The event reached thousands around the world through live streaming and generated a hurricane of Tweets. It will go on reverberating for some time as the videos will be permanently available here by the end of November 2014. Thus it will take time to digest everything that was said and figure out what to make of it. I’ll be writing a series of articles on various aspects. As a start, you'll find below the remarks (lightly edited) that I made in the closing session of the Forum entitled “Takeaways in the Light of Drucker’s Thinking.”

Peter Drucker: Image: Wikipedia

Here in the closing session of the Drucker Forum 2014, I feel as though I have been attending two different conferences. One conference was, as a speaker said, about “the beginning of the end.” The other conference was about “the end of the beginning.”

“The beginning of the end”

Some speakers, mainly on the first day, dwelled on the problems of the economy that we inherited from the 20th Century, the economy of yesterday.

  • Clayton Christensen said that managers are using the wrong analytic tools, and so were failing to pursue “market-creating innovations” that would generate jobs, grow the economy and create prosperity.
  • Gary Hamel said that bureaucracy was stifling innovation by crushing human talent and capacities. Organizations could no longer keep up with the pace of change.
  • Roger Martin said that the management practices that were prevalent were promoting unsustainable inequality and destroying the very foundations of democratic capitalism. “We’ve structured the world in a way that facilitates the operation of banditry.”
  • Martin Wolf told us that the goal of maximizing shareholder value (as reflected in the stock price) was practically the dumbest idea in the world and had the opposite effect was what was intended: it resulted in looting of true shareholder value.
  • Pankaj Ghemawat told us that business schools were, among other things, failing to teach their students about the risks of market failures.

Listening to all these grim insights made me feel as though we were indeed coming to the end of civilization as we know it, with little hope of avoiding a cataclysm. Four characteristics of the discussion struck me:

  1. Lack of managerial ambition: managers, it was suggested, were suffering from a disease called ADD, or Ambition Deficit Disease. Many of the problems of this economy were said to be self-inflicted. For instance, no God had required the human race to pursue unintelligent goals, such as the maximization of shareholder value as reflected in the stock price. These were bad managerial choices, not inevitable destiny.
  2. A failure of imagination: Managers in this economy of yesterday were unable to imagine what it would be like to have large organizations that could inspire their employees and bring out the very best of their talents and capacities. They were unable to imagine, let alone implement, an organization that could keep up with the accelerating pace of change. They were unable for instance to envisage an organization that could implement significant thirty innovations per day. Such an organization was simply inconceivable.
  3. Interlocking goals, practices and metrics: It also came out that the goals, practices and metrics of this traditional way of running organizations fitted together as a kind of perfect marriage. That was because when you have a goal of making money for the shareholders and the executives, you cannot inspire people to pursue that goal with any commitment or passion. So you have no choice but to run the organizations with command-and-control. You had to have hierarchical bureaucracy to force the employees to pursue a goal that they didn’t really believe in. So shareholder value and hierarchical bureaucracy fit together in a perfect interlocking relationship, like a hand in a glove If you try to change one aspect, such as better team practices, the other aspects—the goals and metrics—undermine the change. So these organizations are stuck in a state of suboptimal equilibrium. When you throw in the phenomenon of exorbitant executive compensation that is linked to keeping up the stock price, it was hard to see how real change could be possible.
  4. Fear of the future: There was also an element of fear of what was to come. Speakers talked about the dark of side of technology and its unintended consequences such as the invasion of privacy and the increasing concentration of power in a few firms. “The Internet,” declared Andrew Keen, “is not the answer!” In this discussion, the future seemed to be something dark and menacing, just around the corner, and ready to destroy everything we hold dear.

So that was the conference that I attended about “the beginning of the end.”

“The end of the beginning”

But the Drucker Forum 2014 also embodied another conference about, not “the beginning of the end,” but rather “the end of the beginning.” This conference was very different in tone. A couple speakers touched on it in the first day, including Vineet Nayar, Rick Goings, and John Hagel, along with most of the speakers on the second day. These speakers seemed to be talking about a new kind of economy, with new kinds of goals, practices and metrics. It had different labels, including “the creative economy”, “the entrepreneurial economy,” “the economy of scalable learning,” "the flat army," "the elastic enterprise," and "radical management," among others. Organizations that were said to exemplify it, at least in part, included Amazon [AMZN], Apple [AAPL], Etsy, WL Gore & Associates, Haier Group, Morning Star, Salesforce [CRM], SWIFT/Innotribe, Telus, Riot Games, Teralytics, Whirlpool [CRM], Whole Foods [WFM] and Zara. The list included firms in software and firms outside software, young firms and old firms, big firms and small firms, US and non-US firms. There were also firms like GE which were said to be run partly in the old mode and partly in the new mode. In effect, the discussion was not about a type of firm, young or old, big or small, in or outside software, but rather a set of leadership and managerial practices that are taking over all kinds of organizations. The managers in these firms seemed to have the opposite characteristics of those in the economy of yesterday.

  1. Bold goals: Managers in this Creative Economy don’t seem to be suffering from ADD i.e. “Ambition Deficit Syndrome.” On the contrary, there are suffering from a different disease, which might be called “Ambition Surplus Syndrome” or ASS. These managers have bold goals. They are moving into the future. They are prudently taking risks. They are inspiring their employees. They are nurturing their cultures. They are grasping the possibilities. They are in touch with their customers. They are diligently pursuing Peter Drucker's dictum that the only valid purpose of a firm is to create a customer. These managers have both courage and ambition.
  2. The future is already here. Rather than saying that they cannot imagine what the organization of the future will look like, managers in the Creative Economy know that the future is already here. They are already running organizations that seek to inspire all the talents and capacities of their employees. They are creating goals that employees believe in and are passionate about. They are running organizations where everyone is a manager and a leader. We don’t have to imagine what such organizations might be like, because these organizations already exist. None of these organizations is perfect, but they feel very different from firms in the economy of yesterday. We can read more than a score of books about them. We can go and visit them and see how they are being run. We can talk to the people doing the work and see that they are passionate about what they do. We don't have to imagine what an organization implementing thirty innovations per day would look like, because we know real-life organizations which are doing just that.
  1. Integrated goals, measures and practices: Just as the methods of organizations in the traditional economy are held together by a kind of invisible glue, so too organizations in the Creative Economy are held together by the compatibility of the goals, metrics and practices, which fit together and interlock. The fact that they form an integrated whole creates a kind of invisible link that holds them in place. That's because delivering value to customers is an inherently inspiring goal: you don't need command-and-control to make employees do something they don't want to do. Unlike the economy of yesterday where you had to tell people what to do, and watch them closely to make sure they do it, in this new economy, you can have enabling management practices and metrics that thrive on shared goals and mutual trust. Practices like self-organizing teams, platforms, networks and ecosystems enhance and magnify the value of what employees themselves want to do. Instead of management having an adversarial relationship with employees, managers can have a collaborative trusting relationship with common goals. The goals, practices and metrics are not just a random grab bag of managerial gadgets. Together, they form a consistent, coherent and scalable whole.
  1. A positive view of the future: The managers of the Creative Economy are not unaware of the risks that technology brings. But the discussion isn't driven by fearful cries of "The Internet is not the answer!" That would be like the conversations thousands of years ago when people were no doubt shouting with great trepidation, "The wheel is not the answer!" And of course those people back then were absolutely right. The wheel was definitely not the answer! But it certainly changed everything. Now, when we have a technology that enables every human being to communicate with every other human being on the planet at zero cost, as with the wheel, everything is going to be different. So these managers are saying, “Let's take advantage of the opportunities, while dealing with the risk that the technology might be abused.” Instead of fearing and fighting the future, managers in the Creative Economy are embracing, and working in harmony with, the future. They know that the opportunities are so vast, it would be a tragedy if, out of fear, we don't take advantage of them.
  • [After my talk, it was announced that the theme for the Drucker Forum 2015 will be "Technology-Enhanced Humanism." This will enable fuller discussion of these important issues, including: (a) the Internet will arguably have a larger impact than the wheel; (b) the impact of the Internet is proceeding much faster than the wheel--thus it took 300 years from the time that potters' wheels were first used in 3,500 BC before wheels were first put on chariots; and (c) the Internet has far greater opportunities for centralized concentration of power and its abuses than the wheel ever had.]

Two wonderful conferences

So the Drucker Forum 2014 was made up of two wonderful conferences. The two conferences were taking place side by side. They were both exciting, even exhilarating, conferences. The speakers in both conferences were correct in almost everything they said. But the two different conferences were talking about two different economies that exist in parallel. The Drucker Forum 2014 was thus not an instance of some speakers seeing “the glass as half empty” and the other speakers seeing “the glass as half full.”

The speakers were talking about two different glasses standing side by side. One glass is leaking-- the economy of yesterday which, as John Hagel’s Center for the Edge has documented, is in steady decline. The other glass is getting progressively fuller, as we understand better and better how to make the Creative Economy happen.

So this shift from the old to the new goals, practices and metrics is happening inexorably. That's because organizations operating in the new mode are more productive than the steeply hierarchical bureaucracies of the traditional economy. These agile organizations are progressively putting the slow-moving, hierarchical bureaucracies of the traditional economy out of business. They are doing that because they are so much more profitable. It’s nice that they are also more fun to work in and that they create delight for their customers.

But the even more important fact is that these new goals, practices and metrics lead to organizations that make much more money. They are simply more economically viable. So over time, organizations deploying the new goals, practices and metrics will either drive the other organizations out of the marketplace or force them to adopt the new ways of doing business. (For instance, as Clayton Christensen said, many banks, as we know them today, won’t exist ten years from now.)

Thus it's not a question of whether this transition is going to happen. It’s already under way. It’s just a matter of time. So the choice is this: are we going to go through a transition that is slow and stupid and ugly and bloody, as the big old firms fight a bitter and ultimately losing fight to maintain the old ways? Or will those firms learn to embrace the future in a transition that is quick and intelligent and elegant. That's the choice.

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Have a different view? Love to hear from you! These are obviously not the final words on what was a massively thought-provoking global event, for which we should all give Richard Straub and the Drucker Forum staff our sincere thanks. I’ll be exploring further aspects in subsequent articles here. Stay tuned! And read also:

Three Key Issues The Drucker Forum Should Address

Capitalism’s Future Is Already Here

The Great Transformation: Has Capitalism Reached A Turning Point

The five surprises of radical management

----------------------------------------------- Follow Steve Denning on Twitter: @stevedenning