Strategy (100 page)

Instead of numbers, bureaucracy, control, and hard metrics, Peters and Waterman argued for people, customers, and relationships, which were much softer but could explain how things actually got done and what was accomplished. Business should be about heart, beauty, and art—not some “disembodied bloodless enterprise” but “the selfless pursuit of an ideal.” As with most revolutionaries, the creative and destructive were never too far apart. In
Liberation Management
, an explicitly countercultural title, Peters wrote: “R-I-P. Rip, shred, tear, mutilate, destroy that hierarchy.”
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In 2003 he asserted that “a cool idea is by definition a Direct Frontal Attack on the Holy Authority of Today's Bosses.”
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Peters was undoubtedly a Theory Y man. A constant theme in his many books was to emphasize the positive side of work and argue that companies that cherished and encouraged this
side would do better than those who suppressed their employee's creativity by trapping them in doleful hierarchies and assessing them against soulless metrics. Beyond that there was not a lot of consistency. He made the point himself when opening his 1987 book
Thriving on Chaos
by observing that there were “no excellent companies.”

He was hardly alone in pointing to the need for flatter structures; units with more autonomy; and attention to quality, service, and innovation—not just to cost. Nor did he even claim much influence for himself. He opened a 2003 book proclaiming himself “madder than hell.” He had “been screaming and yelling and shouting about bankrupt business practices for 25 or 30 years … mostly to no avail.” Notably this book began with the army (about to go into Iraq but not yet experiencing real difficulties) as an innovative organization. He had already shown an interest in John Boyd and now he embraced the revolution in military affairs with its combination of “greater battlefield flexibility and greater information intensity,” the decentralization and networking, the pursuit of indirection in strategy. He did not note the additional need for an operational environment that would allow the army to play to its strengths, rather than have the irritating “asymmetry” of an opponent playing to different rules.

Peters could express the frustrations of the functionary stuck in a cubicle, as he had been the neglected bright spark in a secondary regional office, too far down the management food chain to be able to exercise influence and put right all those things self-evidently going wrong. Much of his success was in expounding on the need for more humane and “cool” enterprises in countless speeches and seminars “with the exuberance and evangelistic zeal,” according to the
Economist
, “of a 19th-century cough-syrup salesman.”
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Others spoke with both awe and alarm at how he turned management theory into something “so personal, so spiritual, so impractical.”
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This quasi-religious theme was the reason why Peters, and other leading management thinkers, came to be known as “gurus” (from the Sanskrit word for a teacher who could introduce light where there was darkness). Drucker, who came to be retrospectively described as the first of this class, disliked the term, observing sniffily that “guru” was used “because ‘charlatan' is too long to fit into a headline.”
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Gary Hamel had similar targets to Peters and a similar commanding presence at high-priced seminars. He worked in business schools and as a strategic consultant, and was regularly named as one of the top—if not the top—gurus. His focus, at least initially, was much more explicitly on strategy. His starting point was the transformation of the business environment as a result of deregulation, the decline of protectionist pressures, and the impact of information technologies. These opened up markets and
introduced a new fluidity, requiring companies to be very clear about what they were good at but also agile enough to see opportunities for new types of markets and different sorts of business relationships. Those who stuck to the old models were doomed to fail; those who embraced the new had a chance.

Hamel originally gained attention with a series of articles with C. K. Prahalad, a professor at the University of Michigan, where Hamel had been a doctoral student. Together they attacked past strategic constructs, mocking the various qualities adumbrated by the consultancies and the business schools and suggesting that companies were trying to cope with the Japanese challenge by looking at surface features rather than the underlying concepts from which their competitors derived their “resolution, stamina, or inventiveness.” They cited Sun Tzu: “All men can see the tactics whereby I conquer, but what none can see is the strategy out of which great victory is evolved.” From strategic intent, once identified, could be derived a sense of direction, discovery, and destiny.
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Their notion of “core competence,” which suggested something more straightforward than turned out to be the case, was described as the “collective learning” in the organization. This was not so much about doing one thing well but about coordinating diverse skills and integrating streams of technology.
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In a 1994 article, they claimed that the discontinuity in business practice was now so great that the various strategic concepts developed during the previous couple of decades—by Porter, for example—were no longer valid. They had assumed stable industrial structures, focused on business units, relied on economic analysis, and separated strategic analysis from its execution, which was presented as an organizational matter. Instead, Hamel and Prahalad argued for an approach that recognized the major transitions in industrial structure then underway, acknowledged the interplay of economics with politics and public policy, and involved those charged with executing strategies in their original design.
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Hamel's explicitly revolutionary turn came two years later. Although the medium was the
Harvard Business Review
, Hamel invoked Martin Luther King, Nelson Mandela, Gandhi, and even Saul Alinsky. Corporations, he argued, were reaching the limits of incrementalism. Everything now was at the margins, so there might only be a bit extra market share and a bit less cost, a bit faster response to customers and a bit more quality.
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Hamel assumed his audience would not be satisfied with just getting by. They were unlikely to be the rule makers, the big companies who were the creators and protectors of industrial orthodoxy, but they would not be satisfied with being mere rule takers, those following behind for whom life was bound to be hard. Better to be among the rule breakers, the “malcontents, the radicals, the industry revolutionaries.” They could overturn the industrial order because
they were shackled “neither by convention nor by respect for precedent.” The various trends that had opened up the international economy, coming under the heading of “globalization,” meant that this was the time for the revolutionary. To those managers clinging to the status quo he raised the specter of being left behind in the revolutionary tide. In this vision, the only role for strategy was to create the revolution. “Strategy is revolution. Everything else is tactics.”

To be revolutionary, it was necessary to rethink the business. In this respect he echoed Mintzberg's castigation of strategic planning, which took the boundaries for granted and failed to look for the opportunities in new, uncontested space. With an elitism that hampered any capacity for discovery, the planners harnessed “only a small proportion of an organization's creative potential.” By not engaging the lower reaches of the organization, senior management encouraged reaction, as change became a “synonym for something nasty,” something to be feared, imposed from above. So strategy-making had to be democratic. This was where Hamel quoted Alinsky, who had decried elitist planning as anti-democratic, as “a monumental testament to lack of faith in the ability and intelligence of the masses of people to think their way through to the successful solution of their problems.”
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Hamel did not deviate from his core theme, that the old strategic model was as outdated as the business model it sought to help. His 2000 book,
Leading the Revolution
,
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developed what had become familiar themes but with the motivational, inspirational style expected of a business guru, suggesting that the only limits to what they could accomplish lay in their imaginations. This was not a book, he insisted, about “doing better” or for “people who want to tinker at the margins.” Instead, it was an “impassioned plea to reinvent management as we know it—to rethink the fundamental assumptions we have about capitalism, organizational life, and the meaning of work.”

Unfortunately, he adopted Enron as his company of choice. Enron had transformed itself over the 1990s from a pipeline company to an energy trader, using its expertise and muscle to buy and sell contracts. Hamel celebrated Enron as a company that had “institutionalized a capacity for perpetual innovation” and as “an organization where thousands of people see themselves as potential revolutionaries.” He became chair of the Enron Advisor Council. Enron's management had a suitably populist rhetoric (“power to the people”) and claimed to have empowered its employees, describing them all as fellow revolutionaries.
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It adopted Hamel-type themes, including likening its quest for free markets with the civil rights campaign of the 1960s, and challenged all conventional assumptions about how businesses should operate. Enron was celebrated as having found a way to extraordinary profits through
forms of integration and agility that had eluded others. But the company collapsed at the end of 2001, taking auditor Arthur Anderson down with it. The source of its major profits was exposed as fraud, helped by deals of such complexity that nobody quite understood what was going on. It had made a political push for deregulation of energy markets, ready to accuse any external analyst who expressed doubts about its claims as being ideologically antagonistic. Hamel expunged Enron from the second edition of his book and could argue that he was by no means alone in being caught out by the elaborate efforts undertaken by Enron's senior management to hide its debt and its vulnerability to a deteriorating trading position.
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In a 2003 book, Hamel complained that companies were being driven by “the theorists and practitioners” who had invented the rules of “modern” management a century earlier. Contemporary managers were still beholden to the ideas of Frederick Taylor and Max Weber (whose ambivalent attitude toward bureaucracy Hamel was apparently unaware of). The old management model had become dysfunctional in a world where the need was for flexibility and creativity. Instead of the “stultifying” focus on the bureaucratic values of “control, precision, stability, discipline and reliability,”
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he sought innovation, adaptability, passion, and ideology. Reflecting the traditional romantic reaction against rationalism he urged organizations to be more like communities, dependent “on norms, values, and the gentle prodding of one's peers,” offering emotional rather than financial rewards.
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Martin Luther King's most famous speech was invoked, as Hamel described his own dream in which “the drama of change is not accompanied by the wrenching trauma of a turnaround … An electric current of innovation pulses through every activity … where the renegades always trump the reactionaries.” What he was careful not to do was predict the future of management. His aim, he insisted, was “to help you invent it.” A later book, which addressed directly questions of norms and values in business, captured the underlying complaint: “There's nothing wrong with utilitarian values like profit, advantage and efficiency, but they lack nobility.” Organizations needed an uplifting sense of purpose and individuals an allegiance to the “sublime and the majestic” and a cause greater than oneself.
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Although Hamel began writing about strategy, he had veered into broad social theory. The analysis had become almost a parody of Theory X and Theory Y, pushing dichotomies to their limits, community versus bureaucracy, renegades versus reactionaries, innovation and change versus stability and order, emotional rewards versus financial rewards.

The underlying propositions could be rephrased in terms of classic radical thought, demanding the upending of obsolescent hierarchies so that shackles could be removed, productive energy and imagination could be released, and
all could realize their potential. But this was always a strange revolution, certainly more bourgeois than proletarian. As it was never a real movement, it lacked institutional expression. It reflected the counterculture's revolt against rationalism and bureaucracy, a yearning for passion and the play of imagination, and the urge to trust in feelings and experience, assuming that the best things happened spontaneously. But, as with the counterculture, this was a false prospectus. It exaggerated the democratic possibilities of a business organization. There was also the same presumption that participatory democracy would not lead to reactionary and myopic policies but instead to the most progressive, in this case the sort that a sagacious strategic consultant might advise.

Work could be fun and exciting; full of challenge and innovation; with congenial, stimulating, and supportive colleagues; it could also include essential but boring tasks, pressing deadlines and tight budgets, angry customers and slipshod suppliers, irritating co-workers and myopic bosses. It was one thing to recognize the value of a workforce and regret that too much of it was left untapped; it was quite another to suggest that the inspired subordinate, with drive and imagination, could subvert power structures, recast cultures, and reshape institutional systems. Common sense argued for engaging employees earlier in company decisions and drawing upon the expertise of those actually running the key processes before overhauling them. Only at the top, however, was it possible to take an overview of all aspects of a company's activities, make authoritative decisions, allocate resources, and accept responsibility.