why km programs fail
TRANSCRIPT
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THE REINVENTION OF MANAGEMENT
WHY DO GREAT KM PROGRAMS FAIL?
Steve Denningwww.stevedenning.com
http://blogs.forbes.com/stevedenning [email protected]
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Knowledge management
1996-2000
By all indicators, an apparent success
“A world leader in KM”
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Knowledge management
2000-2008
By all indicators, an apparent success
Put on a back burner
Within a few years, it had been put on a back-burner
Not just the World Bank • BP• Ernst & Young• IBM• HP
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Why do managers act this way?
(These are highly intelligent, educated people!)
In 2008, I began exploring:
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2008
Why did management systematically kill all the creative
things in organizations?
• knowledge management?• lean manufacturing?• innovation?• marketing?• leadership storytelling?
It’s not just KM
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President, Ford Motor Company, 1960Secretary of Defence, 1961-1968President, World Bank, 1968-1981
Robert McNamara
“the smartest man I ever met”John F. Kennedy
1978 A second clue …
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Traditional management
rests on seven shaky principles
Most management textbooks…Most business schools …
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1. “The purpose of a firm is outputs”
7 planks of traditional management
Today, customers have choices.Rapid change firm makes wrong “things”People want: outcomes, not outputs.
The firm produces “things”, i.e. goods or services
World Bank = loans
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2. “Management’s main job: improve efficiency”
7 planks of traditional management
Result is declining returns
Today: we need organic growth
Efficiency focus kills innovation
Focus on squeezing costs:Getting bigger cost reductions
Economies of scale
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3. “The customer can be manipulated”
Michael Porter: “Parse and manufacture demand”
7 planks of traditional management
Today, the buyer is the bossInstant information available to all.
Customers have choices.Customers communicate with each other
The World Bank will make more loans,
whether countries want them or not.
E.g. we prepare the loans for the countries
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4. “Staff are human resources that can also be manipulated”
External incentives: carrot and sticks.
Today, most work is knowledge work:
Disengaged workers don’t produce their best.
7 planks of traditional management
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5. Communicate by directives
Tell people what to do
7 planks of traditional management
Knowledge workers don’t perform well
when they are ordered around
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7 planks of traditional management
6. “Traditional management practices are self-evident”
Management reflects
timeless truths of the universe.
Evidence of management dysfunction is inadmissible. Bad managers? Yes!
Management itself is bad? Impossible!
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7. “Managers don’t ask questions”7 planks of traditional management
The source of the Dilbert manager
1. Managers focus attention on procedure, and not on substance.
2. Managers communicate to subordinates indirectly by signals, rather than clearly stating a position.
3. Managers play for time.
A. Zaleznik: Managers & Leaders: Are They Different? 1977 HBR
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The assumptions are interlocking
Management function is to squeeze out costs
Purpose of a firm is to produce outputs
Communicate through commands
Demand can be manufactured
“Human resources” can be manipulated
Management principles are self-evident
Managers don’task questions
The mental model is impervious to challenge!
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2008 Q. Why were all the creative things in organizations systematically killed?
• knowledge management?• lean manufacturing?• innovation?• marketing?• leadership storytelling?
A. Management did it!
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2009: Conclusive proof of the failure of traditional management
• The rate of return on assets has fallen by 75% since 1965• The life expectancy of Fortune 500 firms down to 15 years, and is heading towards 5 years.• Only 1 in 5 workers fully engaged • In 1980-2005, established firms created zero net new jobs.
Sources: Deloitte’s Center for the Edge: The Shift Index; Kauffman Foundation
1965
Today
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Management has failed!
2010 Many writers are concluding:
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Management kills KM• systematically• relentlessly• through business schools• through cost-cutting drives • despite claims to the contrary
Although KM often makes temporary gains, eventually …
KM isa low hanging
fruit!
CFOCOO
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Knowledge Management:
horizontal, collaborative knowledge-based culture
Traditional management culture:
Top-down, authority based
Our hope in 1996
The reality of 15 years in KM
Knowledge Management:
horizontal, collaborative knowledge-based culture
Traditional managementculture:
Top-down, authority based
What we have learned
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Do you recognize the world of management I have just described?
Break for discussion
Yes?No?
Not sure?
KM isa low hanging
fruit!
CFOCOO 21
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We have to generate
a culture of continuous innovation
Implication for KM & organizational survival:
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1. New goal for the organization2. New role for managers3. New coordination mechanisms4. Shift from value to values5. New way to communicate
Five big shifts… and 70+ practices
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Customer Capitalism Delighting customersThe customer becomes the bossMaking money is result, not goal
Shareholder Capitalism Tweak the supply chain Make money for shareholders
1. NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders1
Deliver more value to customers sooner
The Age of
Customer Capitalism
We are entering
Roger Martin, HBR Jan 2010
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Outside-in perspectiveUnderstand the customer Solve the customer’s problems
Inside-out perspective Tweak the supply chain
1. NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders1
Deliver more value to customers sooner
We are entering
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1. NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders1
Not just satisfy them: Delight them!
We are entering
Everyone in the organization is focused on generating
a continuous stream of added value sooner
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Public sector equivalents
of “delighting
clients”
Education: “students first”Health: “patients first”
The convenience of “the system”
1 NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders
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1 NEW GOAL: from outputs to outcomes i.e. delight the clients and stakeholders
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This changes the game completely
Outputs Outcomes
Things People28
Simple Complex
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2. NEW MANAGER ROLE: from controller to enabler
• Work is done in networks of self-organizing teams
• Teams are empowered to decide.
• Teams report to clients, not managers
• Managers: set goals, remove impediments
• Control can’t delight customers
• You can’t control knowledge work
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3. COORDINATION OF WORK: Dynamic linking
• Work in short cycles: reduce risk & increase agility.
• Deliver value to clients each cycle (not reports).
• Specify the goal, not how the work is done
Hierarchical bureaucracyBig plan
Start Finish
Boss driven
Client driven
Shortcycles
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Radical transparencyFacing the brutal realityGet to root causes
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Alan Mullaly CEO, Ford
4. FROM VALUE TO VALUES: radical transparency
BureaucracyMake the numbers,
come what may!
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Bureaucracy = get the product out
• Systematically identify impediments
• Fix problems immediately
• Identify and remove root causes
4. FROM VALUE TO VALUES: continuous improvement
Enable continuous improvement
The status quo is never good enough
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5. INTERACTIVE COMMUNICATON: conversation
Command and control
• Adult to adult conversations • Storytelling • Open-ended questions• Springboard stories• User stories
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Managers are thinking how to… Everyone is thinking how to … Produce more outputs more cheaply Delight customers & stakeholdersSqueeze more from “human resources” Inspire others as peopleParse & manufacture demand Have relationships with customersSurprise them with unexpected charges Surprise them with unexpected
valueMake people feel queasy Make things feel easy and fun
Two different mental models of management
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The shifts are self-reinforcing & interdependent
Focus all work on delighting
customers
From controller to enabler
From bureaucracy to dynamic linking
From command to conversations
Radical transparency
WHAT’S NEW: doing all at once
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Where did these shifts begin?
In 1980s, the approach began spreading among auto manufacturers (“Lean”)
In mid-1990s, the approach began spreading to software development (“Agile”)
You can see current exemplars in firms like Apple, Amazon and Zappos
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The transition is inevitable
Two- to four-times gains in
productivityEconomics will drive the change!
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The transition is inevitable
Traditional management0% to -50%
Radical management
+1,000%
Ten year share price
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Educate yourselves
Spread the word
Become leaders of the new movement: inspire!
• Disseminate the Shift Index• Disseminate the books that show how
• Master the 5 principles and 70+ practices of radical management
The opportunity for KM
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Lead the revolution!
• Embody the change yourself • Make your KM world a model • Learn to tell authentically true stories • Capture people’s imagination • Join with those who share the vision • Encourage and support them in their work
The opportunity for KM
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“Revolutionizing the world of work”
Hang out with fellow revolutionaries:
2 day workshop May 12-13, 2011Washington DC
“Join us to help reinvent the Fortune 500, government, & the health and education sectors”