The management model framework also allows us to identify four archetypes (Greenwood and Hinings, 1993), by separating out the “means” (coordinat- ing activities and making decisions) from the “ends” (defining objectives and motivating employees).
Figure 5.2 provides a graphical depiction of the four archetypes. The horizontal axis refers to the means of management (coordinating activities, making decisions); the vertical axis refers to the ends of management (set- ting objectives, motivating people). For each axis, the scale runs from tight to loose, with the traditional principles of management at the tight end and the alternative principles of management at the loose end.
The Planning Model
Many large firms operate with narrow, short-term objectives, clearly defined management processes, and with strict hierarchical decision making. And importantly these are often among the highest-performing firms on the stock market—most people would place ExxonMobil and Wal-Mart in this quad- rant of the matrix. While less “progressive” than the other models, it is evi- dently a viable model in certain business settings, typically those that are slower moving or where the benefits of scale and scope are significant.
The Quest Model
One alternative to the planning model is to loosen up the “means” of manage- ment while retaining tight control over the “ends”—telling employees what to do, but not how to do it. This is one of the hallmarks of high-growth com- panies, where the founder has a clear view of what she is trying to achieve and encourages her employees to pursue those objectives through a variety of means. It is also increasingly popular in large firms that are seeking to recap- ture their vitality. In such cases, the intention is typically to simplify or get rid of the bureaucratic and hierarchical elements that are getting in the way.
Science model
Discovery model
Quest model Loose Tight
Tight Loose ENDS
MEANS Planning
model
Figure 5.2 Four management model archetypes
The Scientific Model
The other alternative path away from the planning model is to free up the ends, while keeping control of the means. This is how science makes progress: there is a canon of knowledge, taught through texts and through university lectures;
and there are clear rules of engagement, in the form of peer review, citation of others, open disclosure of results, and so on. But the objectives of science are deliberately framed in the broadest possible sense: the pursuit of knowledge.
Many organizations use a version of the scientific model. For example, Arup, a world-leading consulting engineer, provides enormous scope to its employees to bid for projects that they believe are interesting and consistent with the values of the firm, while also expecting them to apply their shared understanding of how high-quality engineering work should be conducted.
The Discovery Model
If both the means and ends of management are deliberately loose, there is a risk of chaos and confusion, but for certain activities, and for certain periods of time, it can be effective. The discovery model is suitable for many start- up ventures operating in highly ambiguous environments, where there are multiple potential ways forward, of varying levels of potential, and success is achieved through trial and error. Google, for example, used the discovery model for perhaps the first ten years of its existence, though as it has grown it has moved closer to the quest model.
As with any such framework, the interesting part of the story is how a given firm shifts its management model from one archetype to another over time.
This process of change has a proactive component, as we will discuss later, but there is also an implicit life-cycle at work. When a firm is founded, its com- petitive environment usually feels highly ambiguous, and progress depends a great deal on trial and error. As a result, goals are typically vague and flexible, people work long hours for little pay, and work gets coordinated and defined through informal mechanisms. As it grows and becomes more successful, its positioning in the marketplace becomes established, and its positioning vis- à-vis competitors becomes clear. Internally, operations tend to become more structured, decision making more formalized, and objectives more clearly defined. There is, in other words, a natural drift over time from the discovery model toward the planning model, typically via the quest or science model.
Management Model Innovation
The challenge of innovation at various levels of analysis has long attracted aca- demic and managerial attention. For example, Ahuja, Lampert, and Tandon
(2008) provide an overview of innovation across four broad headings—indus- try structure, firm characteristics, intra-organizational attributes, and insti- tutional influences. Under the rubric of firm characteristics, they consider the many externally observable attributes of a firm such as its size, scope, access to external sources of knowledge (such as through alliances), and performance.
Under the heading of intra-organizational attributes, they look at the inside of the firm, the firm’s organizational structure and processes, corporate gov- ernance arrangements including compensation and incentive structures, the backgrounds of managers, and organizational search processes.
Management model innovation is therefore one useful way of characterizing innovation at the intra-organizational level, and it is a topic that has attracted a reasonable amount of research attention over the years (Birkinshaw, Hamel, and Mol, 2008).
How does management model innovation manifest itself in practice? Using our terminology, it should involve significant changes on one or more of the four dimensions of management. For example, Gary Hamel (1999) argued that most large firms have management structures inspired more by Soviet- style central planning than by free-market principles, and that we should develop Silicon Valley-style internal markets for allocating people and capital to ideas—in essence by moving from “bureaucracy” to “emergence” on the coordinating activities dimension, and from “hierarchy” to “collective wis- dom” on the making decisions dimension. Many companies have picked up on this idea—for example, Hamel (1999) described GameChanger, Royal Dutch Shell’s successful process for seed-funding innovative technology projects. But Enron also followed a variant of this model, by giving its employees enormous freedom to pursue opportunities and jobs within the company’s internal mar- ket, with disastrous consequences. Management model innovation, just like other forms of innovation, doesn’t always have successful outcomes.
Similarly, management models may influence why some Western compan- ies underperform in non-traditional markets. Even high-performing com- panies such as Google and eBay have failed to make significant inroads in mainland China. Non-relational Western models may face difficulties in mar- kets characterized by guanxi (networks of trust, mutual obligation, and shared experience); non-linear temporal orientations, and holistic worldviews (Chen and Miller, 2011). For example, the founder of Alibaba.com (the company eBay faltered against) terms his company a customer-to-business operation (exist- ing to solve social problems) rather than the more conventional business-to- customer designation (existing to seize business opportunities). His emphasis is on facilitating good relationships between buyers and sellers of goods, fos- tering enriching and enduring relationships among employees, and maintain- ing a more peripheral relationship with “opportunistic” investors (Chen and Miller, 2011). This is in stark contrast to traditional Western models.
Changes in a management model need to be considered alongside other changes such as those in the firm’s business model. Consider, for example,
the case of Linux, the open-source software movement. Linux’s management approach has been described as “centrally facilitated yet organizationally dis- tributed” based on interactions among contributors across space and time (Garud, Jain, and Tuertscher, 2008; Lanzara and Morner, 2005). A combina- tion of technological and social rules worked in concert to keep its innova- tive business platform from falling apart. These mechanisms were buttressed by an “overarching meritocracy” within the community in which developers focus on providing new code and modules that added features and functional- ity to the platform. Others, based on their reputation and prior contributions, assumed the task of maintenance which involved evaluating code submit- ted by developers for inclusion into new versions (Garud and Kumaraswamy, 2005). The management model developed by Linux has enabled access to know ledge, encouraged constant adaptation, and curbed private appro- priation and free riding—aspects that are necessary for its business model to work. A more tightly controlled bureaucratic model would have been less appropriate, given the challenges of accommodating the contradictory requirements of Linux’s heterogeneous community.
Another example is innovative business models for new ventures in the Bottom of the Pyramid (BoP)—the part of the world’s population that lives on less than two dollars a day (Ansari, Munir, and Gregg, 2012; Prahalad, and Hammond, 2002). Current literature has extensively addressed the issue of business model innovations required for such ventures; the products or services offered should be affordable and relevant to the local population (Anderson and Markides, 2007), products should address a fundamental need of the poor (Garrette and Karnani, 2010), and businesses should include the poor not as passive customers but as partners (London, 2007). Most cur- rent debates in this area center around external barriers that could prevent a more widespread adoption of such ideas, for example, lack of infrastruc- ture, corruption of local governments, problems with distribution networks, low educational levels, and lack of buying power. Yet there are likely to be significant organizational ramifications to these initiatives, and the success- ful players will surely be looking for innovative ways of setting objectives, motivating their employees, and coordinating their activities, given the very distinctive business challenges they are facing.
When companies seek to enhance their competitive advantage through efforts to implement new sustainability initiatives, they may inadvertently overlook the need to develop or adapt their management model, and this in turn may hamper the implementation of some of the most novel and promis- ing business initiatives. Moreover, aspects of their existing management mod- els may prevent cognitive shifts and skill acquisition, which are required for organizational learning to take place, for new routines to emerge, and for capa- bilities to develop. In short, innovative business models need to be accompa- nied by appropriate management models if they are to gain traction. Figuring out the “how” is just as important as figuring out the “what” and the “why.”
Conclusion: A Research Agenda
By formalizing and operationalizing the management model concept, we are opening up some potentially interesting avenues for future research, and in this final section we explore what some of these might be.
First, it would be useful to study management models as a phenomenon in their own right. Building on the methodologies used in configuration theory and in studies of organization culture, it would be possible to operationalize the various dimensions of a firm’s management model and to examine how they fit together to enable a firm to generate superior performance. It would also be interesting to examine how a firm’s management model changes over time, by collecting data over multiple time periods. It is often the case, for example, that executives express a desire to shift their management model to the right side of the framework (i.e., toward the alternative principles), but our hunch is that few actually make the intended transition. A careful academic study of this phenomenon would be very promising.
Second, there is scope for linking analysis of a firm’s management model to its business model, and indeed for studying management model innovation and business model innovation as linked processes. A promising exercise to adapt business models in response to external or internal drivers for change is to map the elements of the business model and the processes that underlie them (Chesbrough, 2010). Here, innovation is about creating a superior value proposition, a business system to deliver that value proposition, and a revenue model to specify the ways in which these activities accrue profits for the firm (Itami and Nishino, 2010).
As noted earlier, the crux of business model innovation is not necessarily the reconfiguration of the objective elements of the business model (Chesbrough, 2010). Rather, firms are generally well aware of the changes required to their business model but encounter significant organizational barriers when carry- ing them out. The literature on organizational change and strategic renewal, including changes in organizational structure and culture, provides insights into how organizations move through change processes (Lewin, 1951; Schalk, Campbell, and Freese, 1998; Todnemby, 2010). However, the concept of a management model may help to explain the linkages between organizational change and business models, and how the cognitive elements need to undergo change in order to accommodate new business models. For example, working in the BoP or other novel contexts may involve collaboration with external partners, relationships with local producers, and public–private partner- ships. However, the firm’s management model may simply be ill-equipped or ill-configured to manage these new and evolving relationships that a new business model may require.
When pursuing innovative business models, firms frequently encounter organizational conflicts that pose barriers to business model innovation. Some of these are structural in nature, such as poorly suited evaluation targets and
counterproductive incentive structures and discrepant mandates (Olsen and Boxenbaum, 2009). Few studies have, however, addressed the entire process by which firms innovate their management model and/or provided a holistic picture of the innovation journey. More theorization is therefore, needed on management model innovation in novel environments. In commercializing new products and services, the management model may require thorough reconfiguration such that the model, the objectives of the innovation, and the business model elements to deliver this innovation are well aligned.
Finally, it is interesting to consider the phasing of change in organizations in terms of our notions of business and management models. One logic might be for a firm to change its business model first, and then to adjust its man- agement model accordingly, so that it supports the business model. But the opposite sequencing is equally plausible. For example, one could argue that Google’s distinctive management model, with a high degree of individual freedom to experiment with new business ideas, has made it possible for new businesses to emerge, some of which have very different business models to traditional Google businesses. In this case, an innovative management model caused the emergence of an innovative business model, rather than vice versa.
While there have been some studies on the relative timing of management vs technological innovations (e.g., Damanpour, 1987), there have not been any studies, to our knowledge, on this related question.
What methodologies are appropriate for studying management models?
For the most part, a case study design is most appropriate (Marshall and Rossman, 1995), because the intention is to understand an organizational phenomenon where events are linked across time toward the attainment of a goal. Studying processes can result in an articulation of routines and practices that remain relatively constant over time or of diachronic changes that emerge chronologically across time. Case-based research is particu- larly appropriate for capturing processes which are fluid across both space and time and hard to isolate (Pettigrew, 1992). Management model devel- opment is such a process, where individual phases are hard to separate from each other and likely to manifest themselves on multiple levels of analysis (Langley, 1999, 2007). Furthermore, organizational context is a crucial element of management model development and innovation and process research accommodates the inclusion of such a context (Pettigrew, 1992).
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