The first decade of the 21st century brought about an incredible amount of technological advances — Facebook, Twitter, Android, iPod/iTunes/iPhone/iPad, and many other innovations transformed how we communicate, work, and live. But it is often the processes that helped create and manage these technologies that prove most enduring. Understanding the most important management innovations of the past will inform how we continue to expand and build on our knowledge to improve the innovation process in the future and advance human progress. So with a decade just ended, it is a good time to take stock of recent developments, and then look ahead to likely future management innovations.
To gain perspective, it's often helpful to take a look back at the management processes developed in earlier eras.
In the 1960s, a significant management innovation that fostered the development of many technologies of that era was the concept of Systems Analysis that Robert McNamara and his colleagues brought into the U.S. government, particularly in the defense sector. This was a comprehensive way to assign priorities to competing projects, based on their total costs and benefits.
In the 1970s, the success of the Apollo missions to the moon spurred management innovation in project management. Program Evaluation Research Techniques (PERT) were developed to map sequences and dependencies in complex projects, so that the critical path that determined the date at which a project would be completed could be identified. PERT charts also helped companies assess trade-offs when activities on the critical path began to fall behind schedule.
The 1980s saw the rise of total quality management in the U.S., as the principles of Deming and Juran, which had been so influential in Japan in the 1970s, finally found acceptance in their home country. Related processes like Six Sigma and Total Quality Management became widespread, as the U.S. struggled to compete with higher quality products from Japan in many industries.
The 1990s witnessed the spread of supply chain management, as companies invested in sophisticated software and other tools to link themselves more and more closely with their key suppliers. The rise of the Internet allowed companies to link their supply chains closely to customer demand, as companies like Dell and Amazon took orders first, then organized the fulfillment of the customer's order through their networks of suppliers.
What about the decade just ended? There hasn't been much time to assess the many possible management innovations over the past decade, but one plausible suggestion is that this past decade has been the decade of open innovation. In this decade, companies started to open up their research and development processes, involving customers, suppliers, universities, third parties and individuals in the innovation process.
Armed with this perspective, where might management innovation go from here? I offer three short predictions:
First, management innovation will become more collaborative. Opening up the innovation process will not stop with accessing external ideas and sharing internal ideas. Rather, it will evolve into a more iterative, interactive process across the boundaries of companies, as communities of interested participants work together to create new innovations. Organizations like Syndicom, for example, have already established a community of spinal surgeons who meet up virtually to share effective protocols for screening patients for new therapies, and new methods and techniques to achieve better patient outcomes when utilizing those new therapies.
Second, business model innovation will become as important as technological innovation. It is generally accepted that a better business model can often beat a better technology. Yet companies that spend many millions of dollars on R&D seldom invest much money or time in exploring alternative business models to commercialize those discoveries. Not all business models are created equal, and we will learn how to design and improve business models in the coming decade. The rise of multinational companies from BRIC economies will further advance this trend.
Third, we will need to master the art and science of innovating in services-led economies. Most of what we know about managing innovation comes from the study of products and technologies. Yet the world's top advanced economies today derive most of their GDP from services rather than products or agriculture. To preserve prosperity and high wage employment in the advanced economies, we will have to learn how innovation works in services, which is likely to differ from how it works in products. If we incorporate the above two predictions as well, one can predict that the winning formula for managing innovation in the next decade will be via open services.
January 18, 2011