Thinking Managers

Robert Heller of argues that the new economy companies can learn from the old, just as the old can learn from the new.

Management styles and the new economy

New management styles are required for new types of companies. A mediocre old-economy manager will still be a mediocre manager in the new economy. However, you can aspire to combine the fundamental know-how and experience of the professional manager with the bold enterprise and creativity of the innovator, and to apply the fusion to exploit opportunities for business development.

Internet start-ups don't have all the management advantages that, paradoxically, act as disadvantages to established firms. The latter are faced with inhibiting priorities: existing customers, existing products, existing technologies, and existing markets. Their professional managers are employed and rewarded for gaining returns on capital, another inhibiting condition. The start-up must somehow or other find customers and markets for untried products and/or services that sometimes even depend, at least partially, on untried technologies. As for returns on capital, they are merely a dream for some time after start-up.

Established companies have long been striving, vainly in nearly all cases, to make their managements more adventurous, more entrepreneurial and more innovative. The advent of e-commerce has heightened this need – so traditional and managements are being drawn closer together.

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

Many of the essential characteristics have already been demonstrated by the Silicon Valley luminaries. For example, their much shorter planning cycles, 18 months or so, have been reduced to only 90 days. New products are at the heart of Silicon Valley planning. Companies take great care and as much time as necessary over design, but they move very quickly to get the result into production and out to the market. They experiment constantly, 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.

I call these 5F managements – Fast, Flexible, Focused, Friendly and Flat. Speed is essential in a world where websites need continual development and speed of customer response is a prime competitive advantage. Flexibility is equally crucial in a world of sudden change. Focus is also imperative: 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 broaden the product and customer base. They will also take extra care over selecting their friends – the allies who can strengthen the business. Instead of treating bricks-and-mortar companies as doomed dinosaurs, enlightened e-companies have been building partnerships that will combine old and new channels at lesser expense, and with greater commercial impact, than going it alone.

An ideal plan of action would be:

1) Stay focused on the business and don’t get sidetracked.

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

3) Alleviate uncertainty through open discussion and clear decision-making.

Focus, flatness and decisiveness, of course, have always been aspects at the core of entrepreneurial success. The new management is going back to basics to move forward confidently in the midst of spectacular uncertainties. Most of the old-economy managers have forgotten (if they ever knew) the basics of entrepreneurship. Their need to relearn true management is as urgent as that of the e-kids to learn it in the first place.

About the author
Robert Heller is one of the world’s best selling authors on business management.

  Robert Heller