Management styles in the new economy

2011

New kinds of company require new management styles. It's fair to say mediocre old-economy managers make mediocre managers in the new economy. But you can hope to combine the fundamental know-how (business lore leavened by the lessons of experience) of the professional manager with the bold enterprise and creative imagination of the innovator - and to apply the fused combination in the uniquely favourable conditions of business development.

Internet start-ups lack all the management advantages that, paradoxically, act to the disadvantage of established firms. The latter have inhibiting priorities: existing customers, existing products, existing technologies, and existing markets. Their professional managers are employed and rewarded for seeking and winning the best available returns on capital, another inhibiting condition.

The start-up must somehow or other find new customers and markets for untried products and/or services that sometimes depend, at least in part, on untried technologies. As for return on capital, that is a pie in the sky for a long time after start-up.

For many years now, established companies have been striving, vainly in nearly all cases, to make their managements more adventurous, more entrepreneurial and more innovative. The advent of e-commerce has made this need still more imperative – so traditional and dot.com managements are being drawn closer together.

The new purpose is to get the best of both worlds: the solidity of existing businesses with the venturesome drive of the new. That must be the Holy Grail – the much-sought outcome that many big companies have pursued with such little result.

Many of the essential characteristics have already been foreshadowed by the Silicon Valley superstars. For example, their much shorter planning cycles, eighteen months or so, have come down to only 90 days.

New products are the centre of Silicon Valley planning. Companies take great care and as much time as necessary over design, but they move very rapidly to get the result into production and out to the market. They experiment continually, trying out small-scale projects, correcting plans as they go along, rather than waiting to launch a fully-fledged plan on a national or global basis.

These are 5F managements – Fast, Flexible, Focused, Friendly and Flat. Speed is a sine qua non in a world where websites need continual development and speed of customer response is a prime competitive advantage.

Flexibility is equally indispensable in a world of sudden change. Focus is another necessity: running e-ventures (or any start-up) under the shadow of the established business is a recipe for failure – as is unrelated diversification.

The next generation of e-companies must be careful to build their diversification around the original core business, adding capabilities to widen the product and customer base. They will also take extra care over choosing their friends – the allies who can strengthen the business.

Instead of treating bricks-and-mortar companies as doomed dinosaurs, enlightened e-companies have been forming partnerships that will combine old and new channels at lesser expense, and with greater commercial impact, than going it alone.

The plan of action should be as follows:

1) Stay focused on the business and don't get distracted.

2) Coordinate and communicate, ensuring the management and organisation stay as flat as possible.

3) Absorb uncertainty with thorough, open discussion and clear decision-making.

Focus, flatness and decisiveness, of course, have always been driving features of entrepreneurial success. The new management is going back to basics to move forward confidently amid spectacular uncertainties.

Most old-economy managers have forgotten (if they ever knew) the entrepreneurial basics. Their need to relearn true management is as urgent as that of the e-kids to learn it, period.

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About The Author

Robert Heller
Robert Heller

Robert Heller, who died aged 80 in August 2012, was Britain's most renowned and best-selling author on business management. Author of more than 50 books, he was the founding editor of Management Today and the Global Future Forum. About his latest title, The Fusion Manager, Sir John Harvey-Jones wrote: "The future lies with the thinking manager, and the thinking manager must read this book".