We are on the threshold of a new and different world. How it will unfold depends on the collective thinking and actions of managers.
Over the last 250 years, a series of radical scientific and engineering advances has triggered an accelerating rise in living standards that even the two deadliest wars in history have failed to halt. The digital revolution propelled by Moore’s law is the latest and most far-reaching in this line of transforming “general purpose technologies.” It carries the tantalising promise to augment the power of the human brain in the same way that steam, the internal combustion engine and electricity augmented human brawn.
But as stunning as humankind’s technological achievements have been, they are only half the story. All are part of and embedded in a larger social reality. The advent of the modern organization and the practice of management constitutes a “social technology” that has been equally transformative.
But what happens as we continue down this path? If previous revolutions wrought dramatic changes in the human condition—including urbanisation, mass literacy, large-scale employment and generalised healthcare – exponentially accelerating technology cycles threaten to upend much of the socio-economic infrastructure that has taken root over the past two centuries. Tumbling transaction costs alter the economics of organisation and, at a stroke, invalidate old business models while enabling unimagined newer ones. New giants like Amazon, Google, Apple and Facebook, along with emerging ones such as Uber and Airbnb, are borne by waves of “winner takes all” network effects. These trends will leave no aspect of working and private life unaffected. A foretaste of what is to come is the rapid progress of automation not only in manufacturing and services but also increasingly in knowledge jobs.
Directing the path and force of these revolutions has been management, with its embrace of scientific rationality and engineering prowess, and with key assumptions about the behaviour of economic man and the efficiency of bureaucratic organizations as its hallmarks.
Yet it is clear today that this industrial-age mindset stands in the way of fully realising the promise of the digital revolution. Those modes of thinking have hardened into a straitjacket constraining human energy and creativity in organizations. Meanwhile, “heroic” management actions such as cutting jobs and investment as a response to currency fluctuations and their accounting impact on EPS are applauded by stock markets despite the damage to the longer-term value creating capacity of the enterprise. Too often share buy-backs are preferred to investment in innovation, entrepreneurship and value creation. Internal innovation tends to be obsessively targeted toward cost-cutting instead of finding new ways to delight customers, and enable employees and partners.
This is the end-point of an implacable logic held together by measurement, formulas and algorithms—the 20th century model. There is just one problem: The most important future-oriented indicators have gone missing in action. These would be indicators that gauge the levels of social capital and trust within the organization and of society, and the ability to unleash human creativity and engagement. Objectives such as these are rather afterthoughts for interesting discussions on company programs that may be scrapped if next quarter’s EPS is under threat.
Indeed, here is the great downside of industrial-age philosophy: the downgrading of the human being to a resource that can be sacrificed to short-term interests of shareholders and those who are supposed to exercise the stewardship of what Peter Drucker called the constitutive elements of modern society—our organizations and institutions. Corporations benefit from great privileges conferred on them by society, including their legal status. The reciprocal duty of care to society is therefore not a charitable option but a fundamental obligation of management.
The digital revolution—the “mother of all technology developments”—marks a fork in the road. As the Future of Life Institute starkly sums it up: ‘Technology has given life the opportunity to flourish like never before… or self-destruct’. One way can spring us from the industrial-age management practices and mindsets that currently hold so many companies back. The other reinforces the mechanistic logic of existing organizations by hard-wiring them in ever-accumulating data and software routines.
There are ample signs around us of the limits of rational logic and algorithmic determinism—and always, of the precious, unique capacities of human beings. Howard Gardner has shown that the analytical intelligence is just one in seven. What is most important happens where there is no replicable logic or algorithm. Rather, it occurs where human judgment, intuition, creativity, empathy and values are consciously brought into play. It is the domain of entrepreneurial thinking and innovation, of strategy setting, of collaboration and trust—qualities that cannot be replaced by whatever Singularity-seeking AI-creature the engineers in Silicon Valley might come up with.
Never in human history has there been a better opportunity to create a new world of prosperity for all. As the ultimate general purpose technology that pervades all aspects of life, digital technology has the potential to unleash a “new Golden Age,” in Carlotta Perez’s description—one that could dwarf the achievements of the steam, electrical and fossil fuel revolutions. However, this golden outcome depends on the choices of those called on to allocate resources on behalf of society and the economy. As Drucker put it: “Managers are society’s major leadership group…… They command the resources of society.” Will these leaders choose to put the “creative” back in the process of creative destruction by privileging entrepreneurial investment in customer- and market-creating innovation over short-term profits? Will they use big data, analytics and complexity sciences in ways that leverage rather than replace human judgement and values, taking them as what they are: tools and instruments to help us navigate a complex world?
To do so will require a new synthesis of the prevalent technocratic logic in politics, economics and management with a deep understanding of the human condition—nothing less than a reframing of management along the lines traced by Drucker and others, combining the best of art and science, imagination and logic, in a bold and distinctive liberal art for the 21st century.
It is perhaps ironic that in a moment of technology-driven information and knowledge explosion we should be feeling our way back to something that has been largely forgotten in the frenzy of accelerating change and instant gratification: genuine wisdom. Yet it is such wisdom—which can only come from human beings and not from machines—that we need in order to make the decisions that will create a better future for all.
March 24, 2015