What, if anything, is truly new about the reinvention of capitalism as described here (MSFT), here (AMZN), here (SRI), and here? Is it more than a re-labeling of ideas that have long been around? The answer is that the concept of reinvented capitalism differs from most other ideas about management and leadership currently being discussed in academia, business, and the media, in ten important ways.
First, the reinvention of management is a set of ideas that aspires to present a discipline—a body of practical knowledge, that is inter-disciplinary, and brings together branches of expertise that have not always conversed with or learned from each other, and have not always kept abreast of economic and technological developments.
Second, it is comprehensive, with the ongoing re-imagination of the entire concept of management, rather than dwelling on little fixes to a bigger jigsaw puzzle. It is a vast task, building on the insights of many minds. It is unlike those consultant claims which present a few branded practices, often coupled with expensive services, that are presented as “the answer.” It is timely because reinvented capitalism occurs at a momentous time when the transition in thinking and practice is as revolutionary as the Copernican revolution in astronomy, the abandonment of bloodletting in medicine, or the transition from an agrarian to an industrial economy.
Third, the reinvention of capitalism seeks to remedy four wrong-turnings that have paralyzed management over the last half century and hindered it from becoming an intellectually serious discipline. First, in the 1950s, business schools set out to emulate the physical sciences: the result was a vast outpouring of academic studies that had little practical content or utility.
Another misstep occurred in the 1970s when management was effectively redefined by Milton Friedman and his colleagues as the maximization of short-term shareholder value, Even its champion, Jack Welch, eventually saw in 2009 that it was “the dumbest idea in the world,” but by then, it had been implemented with devastating economic, financial and social consequences.
Yet another wrong turning in management was the decline of many business schools into boot camps of analysts to be recruited by big business in pursuit of short-term profits.
The final wrong turning was the re-definition of “manager” by Abraham Zaleznik as a Dilbert-like administrator who was unable to make substantive decisions, while executives were ennobled with the title of “leaders” and even “entrepreneurs,” and compensated accordingly, regardless of whether they deserved the titles or not.
Management was thus downgraded to a minor subtopic of leadership, rather than leadership being seen as one part of the larger task of management.
Those four wrong turnings hamstrung management’s capacity to advance as a discipline or to contribute to the massive institutional changes needed to deal with digital technology. Reinvented capitalism seeks to correct those four errors.
Fourth, reinvented capitalism is integrative. It seeks to show how different pieces of the management puzzle fit together and explains the relationships and interactions. Whereas the interactions of industrial-era firms tended to be control-based, top-down, rigid, and output oriented, interactions in the digital-age corporation tend to be interactive, flexible and outcome-oriented.
Fifth, it recognizes complexity. It rejects the idea that the management of a corporation is a set of mechanical interactions, operating in a linear fashion, as if a firm can be governed by routines and processes, ignoring how human beings feel about things.
By contrast, reinvented capitalism recognizes that the corporation operates like the human body’s auto-immune system. It creates an immune system that fights against bureaucracy, just as bureaucracy itself fights against digital age management.
Sixth, the reinvention of capitalism necessitates uncustomary frankness. It discusses things that are well-known but rarely confronted directly. This includes how corporate leaders joined together in the Business RoundTable in 2019 and solemnly declared the end of prioritizing shareholder value without taking any steps to implement the decision. The result? The declaration was mostly for show.
Seventh, it is evidence–based, while recognizing that the with-and-without experiments of the physical sciences are usually not possible in the management domain. Gathering evidence here is is more like inspired detective-work, piecing together scraps of evidence and developing hypotheses as to what is going on, while recognizing the incompleteness of evidence and the possibility that new evidence and new developments will emerge and invalidate what was previously thought to be known. It seeks to make progress despite the incompleteness of information. It prefers to discuss public companies, where audited financial results are available.
Thus it seeks to be respectful of history, building on the thoughts of others. starting with Peter Drucker, as shown in Figure 3. Ideas are not presented as having a virgin birth, with no apparent parentage.
It is also self-reflective, considering what predictions and other mistakes have been made, and what unexpressed assumptions need to be exposed and re-examined. It insists on the symbiosis of ethics and effectiveness.
Seventh, it is above all practical in aspiration. It is based on what has been shown to work in practical settings. addressing any issues that may arise from undue concentration within specialized fields of study. It also recognizes the importance of risk, and the difficult lessons that the entire economy is having to learn. As Kodak, Blockbuster, Nokia, GE, and many others, discovered, the message is simple: persuade your firm to change before it’s too late.
Eighth, it is context-sensitive. not “one size fits all.” It identifies deep underlying patterns that are common across many organizations, while recognizing that each corporation is unique with its own peculiarities and language. Each firm will thus feel different. It accepts multiple terminologies, recognizing the possibility of firm preferences, while looking for the deeper underlying patterns that are in substance the same.
Finally, it recognizes that some areas are still work in progress, such as the inequities of executive compensation: From 1978 to 2018, CEO compensation grew by 1,008 % far outstripping S&P stock market growth (707%) and the wage growth of very high earners (339%). In contrast, wages for the typical worker grew by just 12%. Other areas where progress is still needed include the phenomenon of fake Agile aka Agile in name only, and the green-washing of social and ecological goals.
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