Main 100+ Management Models: How to Understand and Apply the World's Most Powerful Business Tools
100+ Management Models: How to Understand and Apply the World's Most Powerful Business ToolsFons Trompenaars, Piet Hein Coebergh
100+ Management Models offers a quick overview of the key features and potential applications of each of the most important models in nine different categories: sustainability, innovation, strategy, diversity, customers, human resources, benchmarking, leadership, and implementation. Each section concludes with a summary of the key dilemmas that tend to emerge from the particular function, along with analysis of potential solutions.
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“Innovation, reverse innovation in particular, offers the key to creating a more sustainable global society. This powerful book on classic and emerging management theories puts the dilemmas of innovation in perspective for the leaders of today and tomorrow.” VIJAY GOVINDARAJAN, COXE DISTINGUISHED PROFESSOR, TUCK SCHOOL OF BUSINESS Fons Trompenaars is the world’s leading cross cultural management expert. He is founder and director of Trompenaars Hampden-Turner (THT), a renowned consulting firm in the field of intercultural management. Fons is the author or co-author of eleven books on culture and business, including the global bestseller, Riding the waves of culture. His books have been translated into a dozen languages. “I highly encourage students, academics and leaders in business and government to take note of the latest sustainable business models, theories and best-practices set out in this book. The reason is straightforward: we all have a responsibility to make the much needed transformational change towards a more sustainable and equitable world.” PAUL POLMAN, CEO UNILEVER AND CHAIRMAN WORLD BUSINESS COUNCIL FOR SUSTAINABLE DEVELOPMENT (WBCSD) Management Models How to understand and apply the world’s most powerful business tools Management Models How to understand and apply the world’s most powerful business tools Fashions in business thinking change abruptly, and a wide range of management theories has been developed to attempt to codify the shifting components of business theory. Hundreds of models have emerged to track, measure and forecast business solutions, but many of them have been buried in academic journals or are explained in such theoretical terms that they are all but useless for busy practitioners. 100+ Management Models gives an overview of each of the most important of these models in eight categories: sustainability, innovation, strategy, diversity, customers, human resources, benchmarking and leadership. The ninth section of the book covers the most powerful models for implementation in business. Each of the 100 models is analysed consistently with: ● ● ● ● ● ● ● Each section closes with reflections on the key dilemmas that tend to emerge in each category. Fons Trompenaars & Piet Hein Coebergh Piet Hein Coebergh is an expert in formulating and communicating corporate strategy. He teaches at the University of Applied Sciences, Leiden, and is managing consultant at Coebergh Communications & PR. He is the author or co-author of a dozen books and articles on communication, governance and e-commerce. 100+_Man_Models_proof1.indd 1 36 St Giles, Oxford, OX1 3LD, UK T: 01865 514888 E: email@example.com www.infideas.com UK £50.00 A tailor-made illustration of the essence of the model, as an adaptation or interpretation of the original academic source A problem statement, explaining what the model is designed to do Explanation of the essence of the model, describing what the model is about General and specific guidelines on how to use the model Identification of typical results when the model is applied Comments on the limitations of the model A list of the three most useful academic references for the model 100+ Management Models: How to understand and apply the world’s most powerful business tools is an essential resource for managers at all levels of their careers. Fons Trompenaars & Piet Hein Coebergh 31/07/2014 08:25 Management Models How to understand and apply the world’s most powerful business tools Fons Trompenaars and Piet Hein Coebergh Copyright © Fons Trompenaars and Hogeschool Leiden The right of Fons Trompenaars and Hogeschool Leiden to be identified as the authors of this book has been asserted in accordance with the Copyright, Designs and Patents Act 1988. First published in 2014 by Infinite Ideas Limited 36 St Giles Oxford OX1 3LD United Kingdom www.infideas.com All rights reserved. Except for the quotation of small passages for the purposes of criticism or review, no part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of the publisher. Requests to the publisher should be addressed to the Permissions Department, Infinite Ideas Limited, 36 St Giles, Oxford, OX1 3LD, UK, or faxed to +44 (0) 1865 514777. A CIP catalogue record for this book is available from the British Library ISBN 978–1–908984–22–7 Brand and product names are trademarks or registered trademarks of their respective owners. Designed by GRID Typeset by Kerrypress Printed in Italy ‘There is nothing so practical as a good theory.’ KURT LEWIN Contents Preface xi Introduction 1 The goals of this book 1 Evolution of management theories 4 Conceptual models: handle with care 10 Applying models in practice 13 Dilemmas 13 PART 1 SUSTAINABILIT Y 25 Model 1 Stakeholder Management, Edward Freeman (1984) 29 Model 2 Seven Levels of Sustainability, Richard Barrett (1998) 31 Model 3 The Seven Faces of Mount Sustainability, Ray Anderson (1999) 33 Model 4 The Bottom of the Pyramid, C.K. Prahalad (2002) 36 Model 5 Cradle to Cradle, William McDonough and Michael Braungart (2002) 38 Model 6 The Sustainable Value Framework, Stuart Hart and Mark Milstein (2003) 40 Model 7 Multiple Stakeholder Sustainability, Fons Trompenaars and Peter Woolliams (2010) 43 Reflections on sustainability 47 PART 2 INNOVATION AND ENTREPRENEURSHIP 73 Model 8 Flow, Mihaly Csikszentmihalyi (1975) 77 Model 9 Adaption–Innovation Inventory, Michael Kirton (1976) 79 Model 10 The Entrepreneurial Process, Jeffery Timmons (1989) 81 Model 11 Disruptive Innovation, Clayton Christensen (1995) 84 Model 12 Serious Play, Michael Schrage (1999) 86 100+ MANAGEMENT MODELS Model 13 Open Innovation, Henry Chesbrough (2003) 88 Model 14 Reverse Innovation, Vijay Govindarajan (2009) 91 Reflections on innovation and entrepreneurship PART 3 STR ATEGY AND POSITIONING 93 123 Model 15 Product/Market Growth Matrix, Igor Ansoff (1957) 127 Model 16 3C: Company, Customer, Competition, Kenichi Ohmae (1975) 129 Model 17 Crafting Strategy, Henry Mintzberg (1978) 132 Model 18 Five Forces, Michael Porter (1979) 134 Model 19 7S: Tom Peters, Robert Waterman, Julien Phillips (1980) 136 Model 20 Core Competencies, Gary Hamel and C.K. Prahalad (1990) 138 Model 21 Brand Equity, David Aaker (1991) 141 Model 22 Value Discipline, Michael Treacy and Fred Wiersema (1993) 143 Model 23 Blue Ocean Strategy, W. Chan Kim and Renée Mauborgne (2005) 145 Reflections on strategy and positioning 149 PART 4 DIVERSIT Y OF CULTURES 177 Model 24 Myers–Briggs Type Indicator (MBTI), Isabel Briggs Myers and Katharine Cook Briggs (1962) 181 Model 25 Corporate Culture, Charles Handy and Roger Harrison (1976) 183 Model 26 Hofstede’s Cultural Dimensions, Geert Hofstede (1980) 186 Model 27 Belbin’s Team Roles, Meredith Belbin (1981) 188 Model 28 Competing Values Framework (CVF), Robert Quinn and Kim Cameron (1981) 190 Model 29 Three Levels of Culture, Edgar Schein (1985) 193 Model 30 Developmental Model of Intercultural Sensitivity (DMIS), Milton Bennett (1986) 195 Model 31 Spiral Dynamics, Don Beck and Chris Cowan (1996) 198 Model 32 Seven Dimensions of Culture, Fons Trompenaars and Charles Hampden-Turner (1993) 201 Model 33 The Colour Theory of Change, Léon de Caluwé and Hans Vermaak (2006) 204 Reflections on diversity and culture vi 207 CONTENTS PART 5 CUSTOMERS Model 34 Rokeach Value Survey (RVS), Milton Rokeach (1973) 241 Model 35 Consumer Behaviour, John Howard and Jagdish Sheth (1969) 243 Model 36 3Rs – Retail, Reputation, Relationship, Corstiaan Marinus Storm (1987) 246 Model 37 Strategic Purchasing, Peter Kraljic (1983) 248 Model 38 Total Perceived Service Quality, Christian Grönroos (1984) 250 Model 39 Customer Satisfaction, Noriaki Kano (1984) 252 Model 40 Elaboration Likelihood Model (ELM), Richard Petty and John Cacioppo (1986) 254 Model 41 Service–Profit Chain, James Heskett, Thomas Jones, Gary Loveman, Earl Sasser and Leonard Schlesinger (1994) Model 42 Customer Loyalty, Thomas Jones and Earl Sasser (1995) 257 259 Model 43 Six Stages of Social Business Transformation, Charlene Li and Brian Solis (2013) 261 Reflections on customers 265 PART 6 HUMAN RESOURCE MANAGEMENT 291 Model 44 Gainsharing, Joseph Scanlon (1948) 294 Model 45 Two-Factor Theory, Frederick Herzberg (1959) 296 Model 46 Theory X and Theory Y, Douglas McGregor (1960) 299 Model 47 Evolutionary Growth of Organizations, Larry Greiner (1972) 301 Model 48 AMO: Abilities, Motivation, Opportunities, Thomas Bailey (1993) 303 Model 49 HRM Roles, David Ulrich (1997) 306 Model 50 The Happiness Factory, Maurits Bruel and Clemens Colson (1998) 309 Model 51 Contextually Based HR Theory, Jaap Paauwe (2004) 311 Model 52 Competence-Based Employability, Claudia van der Heijde and Beatrice van der Heijden (2006) 314 Reflections on human resource management 317 PART 7 BENCHMARKING AND RESULTS 343 Model 53 Management By Objectives, Peter Drucker (1954) 346 Model 54 BCG Matrix, Bruce Henderson (1968) 348 vii 100+ MANAGEMENT MODELS Model 55 GE–McKinsey Matrix, General Electric and McKinsey Consulting (1971) 350 Model 56 The Value Chain, Michael Porter (1985) 352 Model 57 Identity and Image, Klaus Birkigt and Marinus Stadler (1986) 354 Model 58 Business Process Management (BPM), Michael Hammer (1990) 357 Model 59 Balanced Scorecard, Robert Kaplan and David Norton (1992) 359 Model 60 Social Media ROI Pyramid, Jeremiah Owyang (2010) 361 Reflections on benchmarking and results 365 PART 8 LEADERSHIP AND COMMUNIC ATION 395 Model 61 Managerial Grid, Robert Blake and Jane Mouton (1964) 398 Model 62 Situational Leadership, Paul Hersey and Kenneth Blanchard (1969) 401 Model 63 Servant-Leadership, Robert Greenleaf (1970) 403 Model 64 8-Step Change, John Kotter 405 Model 65 Situational Crisis Communication Theory, Timothy Coombs (1995) 408 Model 66 Level 5 Leadership, Jim Collins (2001) 411 Model 67 Cynefin, David Snowden and Mary Boone (2007) 413 Model 68 Communication and Employee Engagement, Mary Welch (2011) 416 Reflections on leadership and communication 419 PART 9 MODELS FOR IMPLEMENTATION 455 Model 69 Ethos, Pathos, Logos, Aristotle (350 BC) 458 Model 70 AIDA, Elias St. Elmo Lewis (1898) 460 Model 71 DuPont Model, Frank Donaldson Brown (1914) 462 Model 72 Continuous Improvement, William Edwards Deming (1948) 464 Model 73 Brainstorming, Alex Osborn (1953) 466 Model 74 Leary’s Rose, Timothy Leary (1957) 468 Model 75 Bi-sociation, Arthur Koestler (1964) 470 Model 76 Small Group Development, Bruce Tuckman (1965) 472 Model 77 360-Degree Feedback, Edward Lawler (1967) 474 Model 78 Lateral Thinking, Edward de Bono (1967) 476 viii CONTENTS Model 79 The Conscious Competence Ladder, Lewis Robinson (1974) 478 Model 80 FCB Grid, Richard Vaughn (1980) 480 Model 81 SWOT, Heinz Weihrich (1982) 482 Model 82 Means-End Analysis, Jonathan Gutman (1982) 484 Model 83 Learning Style Inventory, David A. Kolb (1984) 486 Model 84 Six Principles of Influence, Robert Cialdini (1984) 488 Model 85 Scrum, Hirotaka Takeuchi and Ikujiro Nonaka (1986) 490 Model 86 The Seven Habits of Highly Effective People, Stephen Covey (1989) 492 Model 87 Benchmarking, Robert Camp (1989) 494 Model 88 EFQM Excellence Model, The European Foundation for Quality Management (EFQM) (1991) 496 Model 89 Strategic Dialogue, Mathieu de Vaan, Steven ten Have and Wouter ten Have (1996) 498 Model 90 Strategic Personnel Planning, Gerard Evers and Cornelis Verhoeven (1999) 500 Model 91 Mapping, Bridging, Integrating (MBI), Joseph DiStefano and Martha Maznevski (2000) 502 Model 92 Yellow Box, Mark Raison (2002) 504 Model 93 Elements of Website User Experience, Jesse James Garrett (2002) 506 Model 94 MDA Design for ‘Gamification’, Robin Hunicke, Marc LeBlanc and Robert Zubek (2004) 508 Model 95 Business Model Canvas, Alexander Osterwalder (2008) 510 Model 96 Sustainability Roadmap, Ram Nidumolu, C.K. Prahalad and M.R. Rangaswami (2009) 512 Model 97 Balancing Transparency, Piet Hein Coebergh and Edi Cohen (2009) 514 Model 98 Blue Leadership, Jan Moen and Paul Ansems 516 Model 99 The Blue Economy, Gunter Pauli (2010) 518 Model 100 Eight Routes for Culture Change (2013): Jaap Boonstra 520 Reflections on models for implementation 523 Conclusion 525 About the authors 531 Our thanks 532 ix 100+ MANAGEMENT MODELS Bibliography 533 Sources for the visualizations of models 559 Index 567 x Preface In the past, aspiring managers usually learned their profession by trial and error over many years of experience. If there was little opportunity for job rotation or changes in departments, these experiences might be very limited. Today’s students and managers can benefit from a wide range of research studies, from which various management theories have been assembled. These help explain and capture the essential components of many different aspects of business management. Reading, understanding, exploring and learning about such theories can accelerate the process of becoming an effective business and management professional. However, when these research outcomes are published, they usually appear in formal academic journals and, while scientifically sound, they don’t immediately lend themselves to professional practice. The author team for this book has sought to mine this wealth of ideas and to assemble a collection of powerful, key models and theories into one volume. Together, they cover the main areas of management common to many organizations, and thus provide a foundation for a future career across diverse business sectors in a variety job function areas. Each model is described and discussed in the context of the relevant thematic area it supports. It should be remembered that a ‘model’ is a representation of certain elements of a system, selected for experimenters to explore and/or describe specific aspects of the system for a particular purpose. They are not built to represent the complete system. Thus we might build a scale model of a motor car specifically to explore how air flows over different body-shape designs in a wind tunnel; another model to see how it deforms when crashed; and another to test how it drives around corners. Physical models like these are called ‘iconic models’, but models can take other forms. Thus ‘symbolic models’ are constructed from mathematical (symbols) equations, such as a macro-economic model that links unemployment, government spending and growth, or a micro-economic model that links selling price and advertising to sales volume. Models can also be diagrammatic, like office layout plans. Multidimensional matrix models can represent the competing demands of customers, shareholders, employees and society at large. Today, many models are developed and made operational in computer software. Such models are created by researchers to try to represent the results of their research, or to predict new systems behaviours to work out what research should be done to test them and to explain how the system works xi 100+ MANAGEMENT MODELS Recalling that models are created for a selected purpose explains why, for example, there are many different models of leadership rather than just one ‘perfect model’. Some leadership models have been created to represent leading diverse teams; some are task-focused; some relationship-focused contingency models propose the optimal course of action depending upon the internal and external situation; and servant-leadership reconciles what is good for the organization, and what is good for the individual. Each in turn helps us learn and understand different aspects of leadership. The only single total model of leadership is a good leader. Models that behave consistently are said to be ‘reliable’, which is why they are useful in practice. But this does not mean that they are true. The watch on your wrist is probably a sufficiently reliable model of passing time, and you can use it to enable you to be on time for an event or to catch a train. But your watch is not telling the exact time (it might be a thousandth of a second fast!). Other models are ‘valid’, which means they are exactly true for the circumstances of the research. A broken watch is obviously not reliable and is little use if you want to catch a train on time, but it does read the exact time, twice every 24 hours. Thus building a model from research from a single case study of one manager in one department in one organization at one point in time may be true (and thus ‘valid’) for the actual study, but may not apply to other managers in other organizations, or even the same manager in different situations. By testing and improving models to see if they are both reliable and valid, we can try to build models that work in a wide range of situations, over and above where they were first developed. These help us to manage because we know ‘which levers to pull’. Models of motivation, for example, tell us that just paying people more money does not necessarily increase performance or motivation, but praise given in front of others and more responsibility generally do in a global context. But remember that models that describe human interactions in teams may work well in many situations, but might not work (and thus either need to be extended, or a new model created) for new situations – such as a small team of astronauts on the International Space Station trapped together for weeks on end. So ultimately, the aim of research is ‘generalizability’. That is, explanations of system behaviours that apply with reliability and validity in situations more general than the limited areas where they were developed and tested. This generalizability is expressed in what is called ‘theory’. As Kurt Lewin said, ‘there is nothing as practical as good theory’, and for the purpose of this book, we can extend this by suggesting that there is nothing as practical as good theory and using models for learning about management and business to develop your professional practice. Reading the models in this book, and finding opportunities where you can test them out in different situations, can give you learning experiences that you might not come across readily ‘on the job’. Airline pilots learn about flying through thunderstorms on the ground xii PREFACE using simulation models rather than waiting until they are faced with a real threat in midflight. This book will be invaluable to managers in helping them to understand and secure the best from their people, for individuals for their own personal development, and for a broad spectrum of business and management students. Fons Trompenaars Piet Hein Coebergh Amsterdam/Leiden, July 2014 xiii Introduction The goals of this book This book is compiled and written for anyone who is interested in applying powerful models and theories to help individuals and organizations become better: more sustainable, innovative, strategic, diverse, internally and externally engaged, leading, communicative and, last but not least, profitable. In the following pages, we bring together an overview of both classical and newer business management models. This alone is already available in several books and on websites that present their selections of ‘greatest hits’. What we aim to offer is more than a typical collection of management models in the following ways. We have chosen 100 models that have strengths in how they conceptually explain or predict how organizations function, and/or are popularly used for guiding organizations towards implementing some form of change. Further, we have tried to connect and present these models in an integrated framework or logical whole, according to eight common areas or themes of business management, which also provides a perspective that can be applied to any model. For each of the 100 models selected, we provide the reader with an overview, identifying its essence and results, but also supplying insights into its uses and implementation and comments on its place in social science. In addition, per business area we present a reflection on seleceted models to help users consider the implications of how our world perspective affects how and when models are used, and thereby may help challenge us to consider this critically before, during and after implementation of the models we choose to use. Throughout the book, we have set a variety of the 100 selected models in contrast with comparable or even conflicting models, thereby putting many more than 100 models in perspective for the reader – hence the title of the book: 100+ models. Strengthening the bridge between theory and practice through applied science The management theories and models we have selected for this book are designed to solve real management issues and have stood the test of rigorous academic peer review, 1 100+ MANAGEMENT MODELS preferably internationally. They are now presented in a more easily digestible and practical form with the objective of strengthening the connection between academia and practice. For these reasons, the book is structured in a way that we hope will allow readers to approach the materials in two different ways, depending on their needs. Readers might dip in and out of the book, only referring to specifically relevant sections by way of an introduction or refresher. Or they may go through the book sequentially to better understand how models are influenced by the predominant world perspectives or paradigms in which they are applied, in order to consider a new perspective for looking at business issues and how to solve organizational challenges. As such, the book is organized around a new, integrated framework of excellence, which sequentially focuses on eight different areas, or elements of business that all need to be developed for a company to grow and develop in the long term. Within the context of a globally changing world that is under serious pressure of environmental degradation, the framework provides a structure for approaching and integrating various elements of business and attempts to highlight how we might build and grow organizations in a broad sense. In each of the first eight chapters, we provide a selection of conceptual models that may be relevant for the improvement of that business area, though often also for other areas. For each section, we provide an introduction to the models we have selected, which are then presented in chronological order. This has been done for ease of quick reference and to allow readers to see how relevant models may have emerged over the years. Models do not only develop over time, however, but more importantly, in relation with other models and theories and along different lines of thought. The illustrated tree at the end of each section’s introduction clusters the selected models by a common approach or focus and thereby provides another means to conceptualize the way in which the chosen models have developed. In the second part of each section, we provide a reflection piece, which addresses selected models relevant to the section in order to illustrate or highlight how the approach of understanding dilemmas can impact the application of a model. Finally, in the ninth section of the book, we provide the reader with an introduction to common and powerful process of implementation models used in business. For each of the 100 models highlighted in this book, we provide an overview that is consistently classified and presented as follows: 1. A tailor-made illustration that expresses the essence of the model, as an adaptation or interpretation of the original academic source. 2. A problem statement, explaining what the model is designed to do. 3. The essence of the model, describing what the model is about. 4. General and specific guidelines on how to use the model. 5. Identification of the typical results. 2 INTRODUC TION 6. Comments on the limitations of the model. 7. Literature, listing three valuable academic references for the model. This structure efficiently allows the reader, whether student, trainee, seasoned manager or teacher, to get a basic feel for the potential of the model. Improving problem-solving through reconciling dilemmas Modern society increasingly sets paradoxical challenges: think globally and act locally, make a profit while being sustainable, maintain a convincing grand strategy and yet be responsive and agile, nurture innovation while maintaining tradition, encourage diversity as well as a coherent culture. To some, these pairs of goals may seem to present irreconcilable differences. To us, they are reconcilable dilemmas. As Jack Welch put it in his book Winning (2005): ‘The granddaddy of them all is the short-long paradox, as in the question I often get: “How can I manage quarterly results and still do what’s right for my business five years out?” My answer is: “Welcome to the job!” ’ Our book contains models that help in pursuing a variety of goals. These goals might be in conflict with competing goals, or with other parts of the context. The challenge is to avoid a zero-sum game, where one entity wins and one loses; to reconcile dilemmas through a creative and intellectual dialogue, creating a win-win situation. We put the selected models in perspective by offering an overarching sequential model that connects as well as contrasts the eight dominant themes in management theory we have identified. In a reflective section at the end of each part, we discuss, in depth, what the key dilemmas are for each of the eight themes. And finally, we use the ‘comments’ section in the presentation of each model to pinpoint the inherent limitations. This should help the reader to better reconcile the power of the model with competing challenges. Evolution of management theories and models Theories are developed to understand the world. Models are the testable summaries of theories, functioning in social science as instruments to improve organizations. As explained in the Preface, the rationale of this book is to bring together a series of management models in a practical form that embraces the best of theory and practice. In clarifying the aims and structure of this book, it is helpful to understand how the field of business management and the study of associated models originated. Anyone reviewing the historical sweep of business thinking over the last 150 years will have noticed abrupt and key changes of trends, or ‘fashions’. We need to examine the most important fashions that influenced business scholarship in the order of their occurrence and consider why they occurred when they did and why subsequent changes became necessary. To some extent, all of these fashions or phases have left their mark on global business, and all are, to some degree, still with us today. The majority of well-known business models are 3 100+ MANAGEMENT MODELS American (since most business scholarship originated there), but American business practice is not necessarily the best. For better or for worse, however, it is the most influential. 1. The genius of the Great Entrepreneurs (most prominent 1850–1940) The earliest studied version of ‘business excellence’ celebrated the feats of the ‘great entrepreneurs’, men like John Davidson Rockefeller, Andrew Carnegie, Henry Ford, J.P. Morgan, Sebastian Kresge, Meyer Guggenheim and Alfred Sloan. These American economic giants were famed for their innovative genius. Most of the writing on them either promoted them to management sainthood through extravagant praise, or portrayed them as ‘robber barons’ who were criticized for attempting to create monopolies. However they were regarded, what made them successful seemed almost wholly mysterious and it was hard to explain their brilliant business accomplishments. Although most business schools did not yet exist during their time, the very first business school that later emerged tended to focus on the particular successes of these men, and we have been trying to learn from their successes ever since. Collectively, these are often described as ‘Great Man’ theories (note, there is no mention yet of ‘great women’), citing men from history such as Gandhi and Napoleon, and even going as far back as Caesar. 2. Measuring results through ‘scientific management’ (most prominent 1900– 1930, yet still with us) At the turn of the nineteenth century, the great entrepreneurs who had mobilized millions in resources were beginning to pass away. This created a crisis of legitimacy as people began to ask: why should the sidekicks of great men manage so much money and inherit so much power? These heirs had simply done as they were told and were not founders but placemen. These and other large businesses were also being heavily criticized because many had formed themselves into trusts and were fixing prices (and the Great Depression soon led an indignant population to further question the failures of business). Business was in search of respectability. The Harvard Business School was founded in 1928, confirming the new trend of making business into a professional discipline like law or medicine. In the space of two years, students could ‘master’ Business Administration. The quest for legitimacy and respectability gave rise to a movement frequently called ‘scientific management’. Frederick Winslow Taylor is often seen as the father of this discipline, although he preferred to describe his approach as ‘managing scientifically’. Taylor treated human behaviour as a branch of engineering. Workers were expected to comply precisely with orders and were treated like machines. Different ways of producing goods were measured and compared to one another in ‘time and motion studies’ in order to ‘scientifically’ measure the most efficient production processes. While managing scientifically and mass production raised productivity by 100% or more, it ran into the problem that human beings rarely do precisely as they are told and often arrange to defy expectations. 4 INTRODUC TION 3. Acknowledging human potential and human relationships (since the 1920s) Between 1927 and 1932, a number of scientific management experiments were conducted at a company called Western Electric under the leadership of Professor Elton Mayo, of Harvard Business School. This began as a routine experiment to study the link between output and physical and technical variables such as lighting levels. A group of women were taken off the factory floor and assembled telephone relays, around a table and in isolation from the other factory workers. Various changes were made to their working conditions, such as more frequent breaks and variable work hours. To the great surprise of the researchers, productivity improved by as much as 38% as a result of each change to working conditions, regardless of the variable being tested. Interestingly, however, when everything reverted to the starting point, productivity remained high. The conclusion drawn was that the group of women had grown to like and trust each other and the researchers, so that regardless of the variables, it was better human relations that had transformed the situation. The women in the study felt unusually well respected as they were interviewed by the researchers, and close attention was paid to their responses. They also felt more in control of their working environment. Mayo concluded that people don’t behave like machines. Today, management theorists refer to this phenomenon as the Hawthorne effect, named after the location where these studies were first conducted. The irony was that these results were accidental, but they changed business practices profoundly and underlie the rationale of HR departments to this day, marking a swing in business management studies from a science perspective to the humanities and arts. 4. Strategic planning envisioned in terms of ‘the art of war’ (prominent 1960– 1980) By the 1970s, America was experiencing major competitive pressures, mostly from Japan, which was making major inroads into the world market. The Cold War was also an ongoing challenge for the Americans, and this had an impact on business scholarship. America needed to show its superiority to the Soviet Union and prove that it could ‘deliver the goods’ better than its rival. The imperative was to win. Economic development was war by another means, and strategy was the method by which leaders marshalled and engaged their followers and which would lead the USA to victory. If everyone knew the objective, they could come up with clever initiatives designed to get there. The notion that economic rivalry was in some respects a military-style engagement grew in popularity. Just as Alexander the Great and his strategos (commanders of a phalanx) had conquered most of the known world in ancient times, modern American managers, having been scientists and developers of potential, now came to be seen as commanders-in-chief and bold generals in a modern-day battle to conquer the world. 5 100+ MANAGEMENT MODELS 5. Putting the customer first (since the 1980s) The next stage of business scholarship had to do with how Americans came to see and interact with consumer goods. In the late 1940s, the American consumer considered ‘made in Japan’ a warning. By the late 1980s, it had become a mark of high quality, not only in the final product, but also in ways of working. When a Japanese joint-venture partner took over the Fremont plant in California from General Motors, it went from being the worst plant in that company to the best within six months. In a period of over 30 years, there had been a quality revolution in Japan, and Japanese cars had become so popular that President Ronald Reagan put a restrictive quota on their import. The focus of management theories now shifted towards the customer. The idea was to get really close to the customer and stay there. The relationship manager became the norm. Tom Peters, who had celebrated such closeness in the pages of In Search of Excellence (1982), now promoted this with increasingly evangelical fervour in a series of publications. Customers would be the first to warn you if things were not up to standard. By the time profits sank, it might be too late. The introduction of numerically controlled machine tools into factories meant that short production runs could be instituted at much lower cost, since settings could be changed in seconds rather than hours. This ushered in the age of mass customization, in which quite finely segmented markets could be served at affordable cost. It became all the more important to know just what the customer wanted and get this to him/her. Six Sigma quality circles became the norm, with defects falling to one in a million. 6. Globalism and diversity (gained prominence from the late 1980s onwards) By the late 1980s, Soviet Communism was crumbling. The Berlin Wall was breached and dismantled by thousands of hands in November 1989. Germany was united a year later. Now, America had no equal in power in the whole world and the process of globalizing American hegemony could begin. It was said to be ‘the end of history’. Free-market liberal democracy had triumphed over communism. Because of globalization, several multinational corporations were larger and certainly richer than many nations. Privatization spread across the world, spurred on by American and British financial institutions. International organizations like the IMF, the World Bank and the World Trade Organization were safely in American hands, and bailed out nations on condition that they cut back state expenditure on social projects and embrace free-market ideologies. In business circles, there were two reactions to these events. There were those who sought to impose American practices on the whole world and spread its business scholarship – purely on the grounds that they had won the argument with communism. But there was a second school of thought which has better survived recent crises. This was that there are many paths to economic development, that countries excel in the supply of what those national cultures most value and that we must bridge the diversity between nations, cultures, levels of development and belief systems. The best leader was an internationalist, part diplomat, part 6 INTRODUC TION translator, part intermediary, part negotiator. He or she needed cross-cultural competence, thinking globally while acting locally. 7. “Greed is good” (very prominent from the 1980s until 2007) Management is much influenced by political developments. The fall of the Soviet Union released a wave of euphoria. At long last, ‘real capitalism’, without let or hindrance, could take over the world. It was no longer necessary to tolerate trade unions or gross government interference in mixed economies. The 1980s saw the culmination of the Thatcher-Reagan influence. The theory was that the economy was lagging in the Seventies because of the lack of ‘supply side’ investment. The owners of capital must be set free, privatization must pervade the globe. What then occurred was a very sharp rise in the salaries of chief executive officers, who were also given share options. This was done to ensure that the leader was on the side of the shareholders and benefited in the same manner from dividends or a rise in the share price. The phrase ‘greed is good’ is taken from the speech that fictional character Gordon Gekko delivered in the movie Wall Street to explain why he wanted to take over an inefficient company: ‘The point is, ladies and gentleman, that “greed” – for lack of a better word – is good. Greed is right. Greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms – greed for life, for money, for love, knowledge – has marked the upward surge of mankind.’ This quote, as well as Gekko’s character in the movie, became a symbol of the business spirit at the end of the twentieth century. The whole purpose of business was to make money. The bottom line was the ultimate embodiment of all other concerns. Well-rewarded shareholders would invest more, spend more on contracts and the West would recover its position in the world. In the meantime, ‘light-touch’ regulation would remove the remaining obstacles to a rebirth of economic freedom. It all came to grief in the financial crash of 2007 and the ensuing recession. However, none of this detracts from the importance of managing an economy for the results this achieves. Financial performance is an important result, but by no means the only one. There are ‘results’ for all parties to an enterprise. The idea was that benefits to shareholders would assure benefits to everyone else. The flaw here is that shareholders may find ways of siphoning off more than their fair share. In this case, we need to compare what various parties receive and try to make sure that their relative contributions are matched by what they gain. In any event, we cannot afford to ignore the results of our economic activities. To examine this feedback is absolutely vital. Pragmatism is essential. 7 . 100+ MANAGEMENT MODELS 8. 3Ps: People, Planet, Profit (since the 1970s, but dominating since the twentyfirst century) The latest challenge to leaders and business scholarship on leadership is perhaps the broadest, the most comprehensive yet. Leaders face the challenge of leaving the environment more fruitful and diverse than they found it. It’s becoming imperative to understand the systems and life cycles which replenish the earth’s resources and leave a legacy to future generations. Increasingly, there is demand for a new kind of leadership that can deal with a wide variety of stakeholders, managing the triple bottom line: harmonizing the interests of people, the planet and corporate profit. In order to do this, leaders must innovate – not just new products, but new industrial processes; in new factories, with new machines, new business and production models in which every material/component is utilized in an ever-functional cycle, rather than using up finite resources, in order to be attentive to the needs of all parties. A comprehensive sequential excellence framework It should go without saying that the business fashions of the past, as described above, also live on in management thinking today. Characters like Steve Jobs, Richard Branson and Bill Gates are good imitations of the great and innovative entrepreneurs of the early twentieth century. Scientific management lives on in mechanical approaches like re-engineering and lean manufacturing and, arguably, in the aspirations behind measuring the world through big data. The human relations movement lives on in HR departments, in programmes on employee engagement and in developing new ways of working. The capacity to develop and communicate a corporate strategy has become a necessity for every leader to ensure support from stakeholders. Customer focus is found in modern treatises on co-creation with customers, in supply-chain management that becomes demand-driven and in the increased information exchange with customers. As the world becomes ever more interconnected, dealing with diversity – young and old, male and female, Eastern and Western, religious or not, individualistic or communal, highly or poorly educated – is increasingly seen as a necessary source of strength, rather than an exotic challenge. Finally, the notion that sustainability is a fundamental concept for the well-being of humanity is being widely accepted among leaders in government and in business. In what follows, we intend to include all the changing fashions we have described in an ‘excellence framework’ or cycle, whereby the models we have selected are addressed in eight areas critical to business leaders of today. Our excellence framework suggests a necessary sequence of activities. Every fashion was relevant, but was not enough on its own, and might even spell disaster if obsessed over. All elements are needed and must work in harmony and reconciliation. No element of the cycle is less vital than another. 8 INTRODUC TION Figure 0.1 The excellence famework We can see from the excellence framework that there are eight fashions in management science that are restructured in seven elements, which are bound and guided by an eighth element : Business fashions Parts of the excellence framework that focus on models of Fashion 1 – the creative power of entrepreneurship has become Part 2 – innovation and entrepreneurship Fashion 2 – focusing on results through scientific management has become Part 7 – benchmarking and results 9 100+ MANAGEMENT MODELS Fashion 3 – discovering human potential as crucial for success has become Part 6 – human resource management Fashion 4 – the CEO as strategist of a large organization becomes Part 3 – strategy Fashion 5 – the customer is king and quality is crucial becomes Part 5 – customers Fashion 6 – the rise of internationalization and globalization has become Part 4 – diversity of cultures Fashion 7 – leaders functioning on behalf of shareholders Is combined with Part 7 – benchmarking and results Fashion 8 – people, planet, profit has become Part 1 – sustainability The reason for altering the historical sequence is that some tasks must logically precede others. For example, until the full challenge of our deteriorating environment is acknowledged, the necessary innovation may not be forthcoming. Until the strategy has been implemented, there is nothing to measure scientifically. Until delighted customers buy more, there are no profits for shareholders to receive. 10 INTRODUC TION Finally, if we look at the centre of our excellence framework, we find the characteristics that pattern the whole. This is shaped by leadership and communication, an eighth element, and the theories and models that have been developed around these themes. All elements have a series of pressing values that must be reconciled to bring about a process of continuous improvement in results that include nature’s natural cycles. This entire process is learned through interactions with other stakeholders, and every element in the cycle must be balanced, aligned and synergized with every other element in a series of dilemmas. Conceptual models: handle with care What do the ‘fashions’ in business scholarship mean for the models they produce? Good theories can help to solve real-life problems. For organizations, theories can contribute to answering questions such as: How can we improve working together? How do we merge sustainability with profitability? What leadership and communication do we need? Scientific theory strives to make the appropriate answers objective, standardized and generalizable. The arguments behind these answers are compiled in theories. These theories are made digestible through conceptual models, offering a general idea (a concept) in a simplified form of reality (a model). Conceptual models typically suggest how a selection of variables define the result in a certain field of management. They thereby facilitate understanding and test or apply their underlying theory. Theories on organizational issues come from social science. This umbrella term comprises academic disciplines like economics, psychology, sociology, communication, business administration and other schools of thought that try to explain and predict aspects of human behaviour. There is high demand for theories and conceptual models that help to improve individual or organizational effectiveness. Which manager or company doesn’t want to be successful, preferably in only a few steps? This high demand for roadmaps to improvement breeds a large supply of authors and gurus who suggest that they know at least some of the secrets of success, be it for individuals, organizations or even nations. However, it is clear that there is ample room for improvement if social science is to be effective, or even just to avoid disaster. Crisis and failure are not yet eliminated in modern society. Theories or models can give guidance, but they don’t give guarantees. It is always wise to exercise caution in using models for solving problems, especially when the model suggests a mathematical precision that characterizes harder sciences, particularly physics – a phenomenon that is known as ‘physics envy’. In spite of the promising character of many management theories, human nature is still too complex, diverse and dynamic to completely capture in theories and models. It is not only very difficult to model how individual people think and behave, it is also very complicated to understand our relationship with the environment. All theories and models in this book arguably work out differently in different cultures and political systems. This is not a reason to avoid theories and models but rather a reminder that we need to understand their limitations and invest in research and testing to make promising theories more robust. 11 100+ MANAGEMENT MODELS Evidence, relevance, guidance Authors of management theory, scientific or not, come in a wide variety, and they do not necessarily agree with each other. So which theories should we follow? We selected the models in our book using the following criteria and questions: 1. Evidence: Is the conceptual model supported by convincing empirical proof, or is it just a compelling idea? We can summarize the characteristics of the scientific approach from the 3Rs perspective: results are reliable, reproducible (you get the same result each time for a given set of conditions) and often come from reductionism (reduce the system to a manageable subset e.g. keep the temperature constant and see how pressure changes with volume). Later, more research can bring a fourth R – refute, where new evidence reveals that the earlier theory is refuted and needs to be replaced by a newer theory. This is the scientific approach, and scientists welcome new research and developments that challenge existing knowledge. 2. Relevance: Does the conceptual model touch upon the global challenges of today and tomorrow? Is the model valid, meaning that the problem is worth solving, the model fits the problem and the approach is generalizable? Is the model open enough for use and improvement? 3. Guidance: Does the conceptual model have substantial explanatory or predictive power? To what extent is the model’s scope comprehensive and inclusive? Does the model pass the test of parsimony, meaning that it provides logical simplicity, thereby strengthening its usability? The scientific method works well for deterministic (so-called hard, closed) systems. But organizations contain people, who are open, adaptive, probabilistic ‘systems’ and don’t follow a hard-science paradigm, but instead come within the umbrella of social science. Giving one person a pay rise affects them differently than it might somebody else. What worked last year doesn’t necessarily work this year. When new research evidence reveals new insights, it builds upon knowledge with new management theories rather than simply replacing extant theory. Models can be very popular and widely used without having substantial evidence, relevance or guidance. A well-known example is Abraham Maslow’s ‘hierarchy of needs’ (see also Barrett’s model, discussed in Part 1), which is typically represented in the form of a pyramid that contains five progressive steps. But where is the evidence? Maslow never even used a pyramid to represent his ideas. And his notion of a hierarchy originally came with considerable caution: ‘if I may assign arbitrary figures for the sake of illustration, it is as if the average citizen is satisfied perhaps 85% in his physiological needs, 70% in his safety needs, 50% in his love needs, 40% in his self-esteem needs and 10% in his self-actualization needs’ (Maslow, 1943, pp. 388–389). Apparently, people just started framing this hierarchy by using the popular shape of a pyramid as though the Maslow had presented it like that. 12 INTRODUC TION Maslow himself lamented the widespread use of his ‘model’ and its lack of proper testing, as he commented in 1962: ‘My motivation theory was published 20 years ago, and in all that time nobody repeated it, or tested it, or really analysed it or criticized it. They just used it, swallowed it whole with only the most minor modifications’ (Lowry, 1979). Apart from the meagre evidence, the relevance and guidance of this model can and should be questioned. Obviously, the model greatly appeals to common sense, but the question remains as to which problems it can actually solve and which steps and mechanisms are to be considered in using it. Critiquing theories or models like this belongs to the tasks of applied science. In our selection of conceptual models, we identified the strengths and weaknesses of the evidence, relevance and guidance of each model to the best of our knowledge. This work is never complete, and we look forward to working on continuous improvement of our selection and assessment. Models that support implementation The conceptual models, described in the first eight sections, were chosen because of their explanatory and predictive power. These models are best used to understand management challenges and define solutions. In addition, we selected a series of supporting or implementation models, in section nine, that primarily order and frame reality or provide a roadmap for improvement, without detailed explanations as to how relevant variables interact. These models are also known as taxonomies: they mainly help to classify information. The models in the implementation chapter are to be used to support the conceptual models in two main ways. Firstly, they can be used in selecting and categorizing relevant information, typically as a checklist. An example is the well-known SWOT model (see Part 9), suggesting that contrasting the (internal) organizational strengths and weaknesses with the (external) opportunities and threats helps to identify and prioritize challenges. The second way implementation models can help is to offer practical and robust methods to get things moving in the chosen direction, typically in the form of an action plan. One example is the Scrum (see Part 9), a planning method for IT or communication projects. It is not a conceptual model of how people learn or innovate, but rather a tested and practical method of effectively working together. The difference between conceptual models and models for implementation is not always clear. Typically, conceptual models have more explanatory and predictive power and are tested with academic rigour. By contrast, models for implementation are less complex; they are geared more towards practical use and are less concerned about academic rigour. Some models can serve in both categories; in this book, we have classified the models according to how we think they will prove most useful. 13 100+ MANAGEMENT MODELS Applying models in practice Not only are business models influenced by the fashions of scholarship, but also by the dominant (cultural) perspective or mindset of the originators and users. For the most part, business scholarship has been developed in an academic environment that is looking for the single answer that can be applied broadly with the same results. However, most of the genuinely important issues are paradoxical. The problems arising from paradox are complex and seem to keep on recurring. If and when we solve these tensions, large gains become possible – the ‘pain’ turns to ‘gain’. This doesn’t mean that management theories and models are invalid or not useful because results are not always reproducible. Rather, we have to think of a different approach when learning about management models and how to apply them. Because of the elusive nature of organizations, being complex adaptive systems, various management theories and conceptual models point in different, sometimes conflicting directions. Choosing a direction and a supporting model inevitably raises dilemmas and paradoxes, containing values which, at first glance, are opposed to one another and seem difficult, if not impossible, to combine. To answer the question of which models are to be chosen and how they are to be used, we can follow a paradigm of structuring and resolving these challenges using ‘dilemma thinking’. This will enable us not just to compare models, with a view to acceptance or rejection, but also to combine the different and sometimes opposing views of the various models so we get the best from each. Seeing dilemmas is a form of critical thinking, contrasting the real with the ideal. It assumes that everything is not as good as it could be and that improvements or even radical changes are needed. Dilemmas The word ‘dilemma’ originates from the Greek, ‘di-lemma’ which literally means ‘two propositions’. We define a dilemma as: ‘two propositions in apparent conflict’. In other words: a dilemma describes a situation whereby one has to choose between two good or desirable options. For instance: we need flexibility and we also need consistency. So a dilemma describes the tension that is created due to conflicting demands. What is not a dilemma? Here are some business examples: ll ll ll A description of a current and ideal state: ‘We have good communication tools, but we need to use them better.’ An either/or option: ‘Should we start hiring new employees now or wait till next year?’ A complaint: ‘We make good strategic plans, but due to lack of leadership, we are not able to follow them through.’ How are we to formulate a dilemma? First: describe the dilemma by using the words: ‘On the one hand… / and on the other hand…’ Second: describe positive elements of both sides of 14 INTRODUC TION the dilemma (e.g. individual versus group; objective versus subjective; logic versus creativity; analytical versus intuitive; formal versus informal; rules versus exceptions; and so on). In general, most managers and people are afraid of dilemmas, which are more difficult to solve than problems with a clear ‘yes’ or ‘no’ response. Dilemmas necessarily entail a respect and valuation of both sides of the issue and demand more creative and innovative solutions. This in turn requires a closer awareness of and attention to the values underlying different business models and the contexts in which they are used. Values are differences, not things ’What are values?’ is a most profound question. Because we live in a material society, most people get the answer wrong. Many think of values as being things like a pocket full of money or jewels. Money is equated with strength and competitiveness: the more money you have, the more possessions, the bigger your bonus, the more you eat, the stronger your country, the more competitive you are, the higher national GDP, the better. However, there is no evidence in favour of these propositions. If values are not things, then what are they? Another way of seeing values is as differences on a mental continuum. We are by turns strong and vulnerable, selfless and self-seeking, courageous and cautious, loyal and dissenting, vigilant and trusting, and so on. We cannot even define values unless we know with what an attribute is being compared. Courage is opposed to caution in the sense that you cannot take risks and not take risks in the self-same moment of time. You must choose. Indeed, we do not know what the speaker means by courage unless we also know the contrast he or she has in mind. To say we must be courageous, not cowardly, suggests that the very highest levels of risk-taking are now needed. To say we must be cautious, not reckless, suggests the very highest levels of risk avoidance. Understanding what is being contrasted is vital to sensemaking. We are now in a position to define virtue, and this is important because generations of social scientists have claimed to be ‘value free’, but can we be? Philosophers of science have told us that courage means ‘this person takes risks – presumably a good thing’. Caution means ‘this person avoids risks – presumably a good thing’. Why not avoid such ‘exclamations of preference’, which have no testable meaning, and stick to the description of risk-taking? Recognizing and understanding values in relation to each other Courage is true courage when it turns out in the long run to have been the most cautious action possible. Caution is true caution when it turns out to have served courage by ‘keeping our powder dry’ and making later courage possible and effective. Consider a very difficult dilemma: attempting to save someone from drowning, as shown in Figure 0.2 (opposite). Roughly one third of all persons attempting such rescues drown themselves, so that two persons, not one, die. What is required to effect a rescue is enough courage to enter the water and enough caution not to let him or her drown you too by hugging you so tightly you cannot move. 15 100+ MANAGEMENT MODELS Life-saving drill teaches you how to break the frantic clutches to your body that could kill you both. Indeed, those taught to save lives are counselled to be very cautious. The lesson is first row (up to the drowning person) then throw (him/her a life belt) then go into the water only as a very last resort. In other words, let your caution precede your courage, but not impede it. Figure 0.2 Caution versus courage We are now in a better position to understand negative value judgements. What cowardice means is allowing caution to overcome courage completely. What recklessness means is allowing courage to overcome caution completely. Reckless and cowardly conduct both lead you to stick to one end of a value dimension and stay there, not moving between opposed solutions. A good definition of a courageous soldier is someone who wants to go home and wants the people he is protecting to stay safe. The reason he may lead a heroic charge is because, in the end, this is the safest course. Perhaps, if he does not, the enemy will charge him instead. It was Pericles, a prominent and influential Greek statesman, orator and general of Athens during the Golden Age, who defined true courage as one who knows how sweet life is and how tenaciously it must be defended, but goes out to face peril nonetheless. Egoism versus altruism Or consider the reconciliation between egoism and altruism. You are travelling on a plane with a small child. The cabin depressurizes and oxygen masks fall from the ceiling. The airline begs you to put the mask to your own face first, before helping your child, or to put egoism before altruism. The point is that if the adults pass out and the children start screaming, then 16 INTRODUC TION evacuating the plane will not be easy. Altruism and child rescue are vital, but you cannot do this if you are not breathing yourself. Only the strong can help the weak. In the case of our heroic soldier, it was the other way around. Altruism was put before egoism. He wanted to survive, but might not. Figure 0.3 Egoism versus altruism Note that these sequences are tactical, not moral. Saving the child may be more important to you than saving yourself, but only a breathing adult can do the saving. Caution on the aeroplane comes before courage in time, not necessarily in importance. Throughout this book, we will encounter similar juxtapositions of values, or dilemmas. The important thing about values is not to lose sight of either side of the differences, but to keep them connected. Focusing on only one side leads to a pathology. When both sides are integrated or reconciled, they strengthen each other. Reconciling dilemmas that come out of value tensions What does this mindset look like in business? Take the example of an organization when it is an error-correcting system which seeks to learn and to discover. It corrects the faults of individuals, of teams and groups, and of organizations, thereby helping to steer them in chosen directions. 17 100+ MANAGEMENT MODELS Often within organizations, we begin with the all-too-familiar vision of a tug-of-war between right and wrong, error and correction, the bad guys versus the good guys. This is going to get us nowhere and condemns us to strife. Admittedly, there are people who err repeatedly and deliberately, and these we must contain and if necessary, imprison. Figure 0.4 The tug-of-war between error and correction But for those whose errors are inadvertent and are capable of learning better, we need to create a culture space in which improvement can occur. In this case, our next step is to turn our piece of rope into a continuous loop by tying the ends together. This will enable us to err and correct by turns. Figure 0.5 Create a learning loop by joining error to correction But beware of punishing an individual. You will learn far less than you would otherwise. Simply blaming the person nearest to the trouble will obscure the system’s faults. You need to ask why it was not anticipated, why safeguards were not in place, why it was not caught earlier and whether the erring person had been properly trained and instructed. 18 INTRODUC TION The road to improvement can be modelled like a helix, with each error corrected and one improvement building on the next. A helix is the synthesis between a line and a circle. If the company is at all innovative, then the errors will be far more frequent. Thomas Edison famously failed more than a thousand times, but saw each error as a learning experience. Figure 0.6 The helix as a synthesis between line and circle, showing continuous improvement This, in summary, is how an organization improves its people, its teams and its whole ethos and develops them over time. We reflect on our practice and improve. Examples of reconciled values In our daily lives, perhaps the most obvious example of reconciled values is the humble stop light or traffic signal. The highly contrasting colours of red and green have been borrowed from the far ends of the colour spectrum to make them as different as possible, with yellow in the middle. Note, and this is important, red by itself or green by itself are not just useless, but dangerous. If one light were to fail, accidents would multiply. What makes for virtue and effectiveness is the ceaseless movement between contrasts. What controls traffic is the knowledge that you have but to wait and you will soon be allowed to proceed. A final metaphor to illustrate the reconciliation of dilemmas is given by the image of a frisbee, which spins as you throw it. Figure 0.7 (opposite) is both a frisbee and a dual-axis diagram. The frisbee is a metaphor for the circular path taken between the two axes, with errors top left and bottom right. The frisbee must be thrown to the top right-hand corner on an even keel. Profits and the environment must be balanced. 19 100+ MANAGEMENT MODELS Figure 0.7 There are always two opposite ways of messing up There are always two opposite ways of messing up; in this case, insisting that profits override every other consideration at top left and insisting that the environment is a divine legacy against which industry plots with devilish cunning at bottom right. In the reflection sections at the end of parts 1–8, we look at a range of models to demonstrate how this kind of circular thinking can be applied or understood. We have selected models that are considered classics in their fields, some that are practical in their approach, and a few that we consider to offer a conceptual window to the future. Models were also selected according to their potential to provide a more in-depth understanding of the appropriate segment. For each of the models, we provide an illustration to help visualize the ideas of thinking in cycles, dilemmas and reconciliations. The dual-axis diagram (Figure 0.7) helps to highlight the elements or values that are in tension, and their extreme positions if taken too far. 20 INTRODUC TION Figure 0.8 Axis The 10x10 grid allows us to measure both axes and to plot different positions to show where an individual or organization might be. Figure 0.9 10x10 grid 21 100+ MANAGEMENT MODELS The circular frisbee reminds us how different perspectives, when connected, can build on and strengthen each other; it also reminds us that you can enter circling ideas from any position in the cycle. Figure 0.10 Cycling frisbee Reconciling management theories We believe that rather than looking at the world and all its aspects in isolation or extremes, the models of business management would be better served if we recognized that models are an attempt to simplify parts of reality and therefore, necessarily, are limited in their explanation of the truth, as exemplified by the fable of the blind men and the elephant. Figure 0.11 The blind men and the elephant 22 INTRODUC TION The blind men and the elephant It was six men of Indostan To learning much inclined, Who went to see the elephant (Though all of them were blind), That each by observation Might satisfy his mind. The First approached the elephant, And happening to fall Against his broad and sturdy side At once began to bawl: ‘God bless me! but the elephant Is very like a WALL!’ The Second, feeling of the tusk, Cried, ‘Ho, what have we here, So very round and smooth and sharp To me ‘tis mighty clear This wonder of an elephant Is very like a SPEAR!’ The Third approached the animal, And happening to take The squirming trunk within his hands, Thus boldly up and spake: ‘I see,’ quoth he, ‘the elephant Is very like a SNAKE!’ The Fourth reached out an eager hand, And felt about the knee, ‘What most this wondrous beast is like Is mighty plain,’ quoth he: ‘‘Tis clear enough the elephant Is very like a TREE!’ The Fifth, who chanced to touch the ear, Said ‘E’en the blindest man Can tell what this resembles most; Deny the fact who can, This marvel of an elephant Is very like a FAN!’ The Sixth no sooner had begun About the beast to grope, 23 100+ MANAGEMENT MODELS Than seizing on the swinging tail That fell within his scope, ‘I see,’ quoth he, ‘the elephant Is very like a ROPE!’ And so these men of Indostan Disputed loud and long, Each in his own opinion Exceeding stiff and strong, Though each was partly in the right, And all were in the wrong! John Godfrey Saxe (1816–1887) While models are created to simplify, this tale should remind us that everything is more complex, variegated and differentiated than it seems to be. We know in part, and for the larger truth, we must keep on groping, must keep sharing other people’s mental models of the elusive shapes we are searching for. Such people may be every bit as right as we are. Note the insights of these verses. Everyone thinks the elephant is either an inanimate object or a simpler organism. Everyone is reductive, confusing a part-truth with the whole truth. Each man denies the validity of the others’ perceptions and takes an adversarial stance, assuming he alone is correct. The lesson of this poem, based on an Indian fable, is one of perspective or point of view. We have a persistent habit of reducing everything to its supposed fundamentals. We assume the truth is simple, a seed at the centre of everything which is packed with information. Even in cases where this is true, the seed is no more important than the fully grown creature or organism we are studying. The idea that we learn only from analysis is cultural bias. We also learn from synthesis, from seeing the role which the various parts of the elephant play in its survival and proper functioning. The tale of the blind men and the elephant forms a clever satire on the current state of academia, in which we reduce everything into facts, objects and atoms, fail to see the big picture and blame each other. The big picture can be derived from assembling popular models, which is what we intend to do, while a dirty great pile of bricks will never make a house in the absence of an architect and someone looking for meaning. The excellence model, which structures this book, similarly looks at the eight perspectives on management theory as interdependent. They are true in their wholeness. In their parts, they can be positively dangerous, like a spear or a snake. Most academics come from Western cultures, that are individualistic, competitive, specific and analytical. As academics, we have an inherent capacity to take things to pieces and live amongst the rubble. In this book, we intend to break with this habit and try to see things as a whole, interdependent and interrelated. 24 Part 1 Sustainability We start our excellence framework cycle with sustainability. As a term, this word means many things to different people. At its essence, however, sustainability is the capacity to endure. For humans, sustainability is the long-term maintenance of well-being, which has environmental, economic and social dimensions, and encompasses the concept of stewardship and responsible resource management. Increasingly, profit and not-for-profit organizations acknowledge that they need to integrate the growing body of knowledge about sustainability into their strategies. 25 Sustainability Consider for a moment the greatest forthcoming challenges to business as we know it and, as a consequence, what ‘business excellence’ will mean in the future. As the world population is estimated to keep on growing to eleven billion by the end of the century, the pressure on the earth’s natural resources will only continue to grow. Our ability to deal with diminishing finite resources and deal effectively with the waste we generate in increasing quantity has important consequences for our survival in industry, but also for us as a species. If we, for instance, consider the availability and correlated price of petroleum as it becomes more scarce across the globe, we will have to find more mindful ways in which to conserve it, substitute it, or find new ways to engineer energy sources. In fact, in order for our industries to become genuinely sustainable, nearly everything about them is going to have to change. Rachel Carson’s book Silent Spring, in 1962, was one of the first triggers to awaken and inspire widespread public concerns about pollution of the environment in the United States. The Club of Rome, a global think tank, further sparked global awareness of sustainability with the publication of The Limits to Growth in 1972. Although widely criticized for its methodology and conclusions, environmentalist thinking has been on the international agenda ever since, reinforced by NGOs like Greenpeace and the United Nations Intergovernmental Panel on Climate Change. These reports have been countered by the work of environmental sceptics like Bjørn Lomborg. Nonetheless, they have still had large-scale impacts on legislation, which at various levels impacts industry. That organizations have to consider interests other than those of shareholders was not en vogue before the end of the twentieth century. A prominent example of the dominant laissez-faire thinking was expressed by Milton Friedman in his 1970 article in the New York Times, bearing the telling title ‘The Social Responsibility of Business is to Increase its Profits’. It was only in 1984 that the American philosopher and professor of business administration R. Edward Freeman developed and championed stakeholder theory, built on the insight that more individuals and groups are important for the survival of an organization than just the shareholders. In the 1990s, the term ‘triple bottom line’, abbreviated as TBL or 3BL, also known as ‘People, Planet, Profit’, became a popular formula for sustainability, which itself was first defined officially by the Brundtland Commission of the United Nations in 1987. Current commitments to corporate social responsibility (CSR) imply a commitment to some form of TBL reporting. In 1998, British author Richard Barrett extended TBL to what he calls fullspectrum sustainability, a concept for measuring corporate performance. It takes account of internal factors such as organizational effectiveness, employee fulfilment and customer satisfaction, as well as external factors such as environmental and social responsibility. In 1999, entrepreneur Ray C. Anderson published Mid-Course Correction: Toward a Sustainable Enterprise: the Interface Model, a book on his insight that he and his carpet-making company were ‘plundering the earth’. Anderson radically changed course towards ‘Mission Zero’, the company’s promise to eliminate any negative impact it may have on the environment by the 26 Sustainability year 2020. Anderson identified seven ‘faces’, or key hurdles, to climb, before reaching the top of Mount Sustainability: eliminate waste; benign emissions; use renewable energy; close the loop; resource-efficient transportation; sensitize stakeholders; redesign commerce. In 2009, two years before he passed away, he estimated his company was halfway towards this goal. Elaborating on the ‘people’ element in TBL, scholars and renowned consultants C.K. Prahalad and Stuart Hart published ‘The Fortune at the Bottom of the Pyramid’ in 2002. The article was followed by a book with the same title that discusses new business models targeted at providing goods and services to the poorest people in the world. The idea is that by offering poor people the three As: Affordability, Access and Availability, of important goods and services – ranging from salt to soap, banking to cell phones, healthcare to housing – all stakeholders will benefit. The success of Muhammad Yunus in organizing microcredit and microfinance on a large scale is comparable with this line of thinking. Elaborating on the ‘planet’ element of TBL, William McDonough and Michael Braungart published Cradle to Cradle in 2002, describing how recycling can be taken to the next level. Their concept suggests that industry must protect and enrich ecosystems and nature’s biological metabolism, while also maintaining a safe, productive technical metabolism for the high-quality use and circulation of organic and technical nutrients. The work of Stuart Hart and Mark Milstein (2003) on sustainable development offers an integrative approach that individuals and organizations can use to respond effectively to the challenges of our time. They offer a framework within which businesses can grow profitably and sustainably at the same time. 27 Sustainability More recently, scholars and business consultants Fons Trompenaars and Peter Woolliams (2010) put the dilemmas between profit, people and planet in a broader and deeper perspective by identifying the golden dilemmas between contributions to society, operational efficiency, employee development and learning, customer satisfaction and shareholder returns. Because thinking on sustainability is the youngest fashion in management theory we have identified, there is only a limited number of robust conceptual models. By nature, models of sustainability have a holistic approach that builds on, or extends, models that have stood the test of time since their inception in earlier waves of management theory. Altogether, the selected conceptual models for sustainability can be distinguished chronologically by their focus on either People, Profit or Planet as illustrated in the tree diagram on the previous page. 28 MODELS MODEL 1: Stakeholder Management, R. Edward Freeman (1984) PROBLEM STATEMENT Who determines, and to what extent, the success of the organization? ESSENCE Stakeholder theory, as developed by philosopher and professor of business administration R. Edward Freeman, holds that organizational sustainability depends on different relationships with different (groups of ) stakeholders. It contrasts the dominant view of the end of the twentieth century that corporations should basically only care for their shareholders. Stakeholder theory is thereby an ethical and organizational view of organizational management. Stakeholder management is about how business works at its best, and how it could work. The underlying theory is descriptive, prescriptive and instrumental at the same time, and it is managerial in practice. Stakeholder theory and management is about value creation and trade and how to manage a business effectively. ‘Effective’ can be seen as ‘create as much value as possible, for as many relevant stakeholders as possible’. If stakeholder theory is to solve the problem of value creation and trade, it must show how business can be described through stakeholder relationships. HOW TO USE THE MODEL The model, and especially its underlying theory, justifies the identification and analysis of various stakeholders of an organization, mainly through stakeholder analysis and stakeholder mapping. After doing so, a strategy can be developed for each group of stakeholders. Stakeholder analysis aims to identify the individuals or groups that are 29 Sustainability likely to affect or be affected by organizational behaviour, and sorts them according to the projected impact. A stakeholder is any person or organization that can be impacted by, or cause an impact on, the actions of the subject of analysis, typically an organization. Stakeholders can be categorized as: ll ll ll Primary stakeholders (being directly and mostly affected by, or having the most impact on, the organization); Secondary stakeholders (being indirectly affected by, or having indirect impact on, the organization); Key stakeholders, the influentials and decision-makers, belonging to primary or secondary stakeholders. There are various approaches to ranking the influence and interests of stakeholders, including Mendelow’s power–interest grid; Murray-Webster and Simon’s three-dimensional grouping of power, interest and attitude; Bourne’s Stakeholder Circle; and – on a more detailed level – Moreno’s sociogram. RESULTS The outcome of stakeholder analysis creates awareness and a plan for how to manage various stakeholder relationships. It helps to identify strengths, weaknesses, opportunities and threats in various stakeholder relationships and to allocate resources accordingly. It also gives a view of the organization’s contribution to the benefits of the separate stakeholders. This analysis is to be used to define how the interests of those stakeholders should be addressed in a project plan, policy, program, or other action. The better all the interests of all stakeholders are met, the more support, and less protest, an organization can expect for its ideas and actions. COMMENTS The term ‘stakeholder’ is a powerful one. This is due, to a significant degree, to its conceptual breadth. The term means different things to different people and hence evokes praise or scorn from a wide variety of scholars and practitioners. Such breadth of interpretation, though one of stakeholder theory’s greatest strengths, is also one of its most prominent theoretical liabilities. In practice, the model helps to analyse and map, but offers no guidance as to which stakeholders typically are more important to an organization than others. LITER ATURE Freeman, R. E., McVea, J. (2001) ‘A Stakeholder Approach to Strategic Management’, Darden Business School Working Paper No. 01–02. Available online at Social Science Research Network. 30 MODELS Freeman, R.E., Harrison, J.S., Wicks, A.C., Parmar, B.L., Colle, de S. (2010) Stakeholder Theory – The State of the Art, Cambridge, Cambridge University Press. Freeman, R.E. (2010) Strategic Management: A Stakeholder Approach, Cambridge, Cambridge University Press. MODEL 2: S even Levels of Sustainability, Richard Barrett (1998) PROBLEM STATEMENT How may a culture that satisfies the needs of all stakeholders be created. ESSENCE According to entrepreneur and author Richard Barrett, the world doesn’t show enough leadership to make our environment more sustainable. Barrett holds that improved consciousness of this challenge will help to change the world for the better. To this goal, Barrett adapted Maslow’s hierarchy of needs into seven levels of consciousness. Barrett follows Maslow in presuming that people have a hierarchy of needs, being: physiological, safety, love and belonging, self-esteem and self-actualization. Barrett states that when the ‘deficiency needs’ or hygiene factors (physiological, safety, love and belonging) of individuals 31 Sustainability are met, there is no sense of lasting satisfaction; there is only a sense of anxiety if these needs are not met. However, the desire to know and understand that comes with self-actualization can be perceived as ‘growth needs’: when these are fulfilled, they engender deeper levels of motivation and commitment. The more conscious individuals and groups are, the more they are inclined towards, and capable of, making their environment more sustainable. HOW TO USE THE MODEL Barrett suggests that individuals, organizations, or even communities and societies, should assess their entropy (the degree of dysfunction in a system), the alignment of values in the group and the resonance among stakeholders. Based on this assessment, an improvement programme is to be undertaken, whereby people are supported to increase their level of consciousness. Barrett’s website, www.valuescentre.com, offers various white papers on how to get started. RESULTS Organizations that follow Barrett’s model for improvement are supposed to become ‘full-spectrum organizations’, displaying all the positive attributes of the seven levels of organizational consciousness. They should ultimately master: 1. Survival consciousness, by focusing on financial stability and employee health and safety; 2. Relationship consciousness, by focusing on open communication, employee recognition and customer satisfaction; 3. Self‐esteem consciousness, by focusing on performance, results, quality, excellence and best practices; 4. Transformation consciousness, by focusing on adaptability, innovation, employee empowerment, employee participation and continuous learning; 5. Internal cohesion consciousness, by developing a culture based on a shared vision and shared values that engender an organization‐wide climate of trust; 6. Making a difference consciousness, by building strategic alliances with like‐ minded partners, developing mentoring, coaching and leadership development programmes for their managers and leaders, and embracing environmental stewardship; 7. Service consciousness, by focusing on social responsibility, ethics, global thinking, and keeping a long‐term perspective on their business and its impact on future generations. COMMENTS In the introduction, we showed that the evidence, relevance and guidance of Maslow’s hierarchy of needs is open to criticism, and this was even invited by Maslow himself. To build 32 MODELS a model on this widespread, yet barely tested, theory raises considerable doubt about the reliability of the approach. The value of the Barrett model arguably lies in trying to operationalize sustainability in a comprehensive and appealing way. This allows a large audience to structure work on becoming more sustainable and to test its applicability fairly easily. LITER ATURE Barrett, R. (1999) ‘Why the Future Belongs to Values Added Companies’, The Journal for Quality and Participation, vol. 22, 1: 30–36. Barrett, R. (2006) Building a Values-Driven Organization: A Whole System Approach to Cultural Transformation, Oxford, Bitterworth-Heinemann. Barrett, R. (2011) The New Leadership Paradigm, Raleigh, Lulu Press. MODEL 3: T he Seven Faces of Mount Sustainability, Ray Anderson (1999) PROBLEM STATEMENT How can industry leaders overcome a take-make-waste industrial system and reduce its environmental footprint towards zero? 33 Sustainability ESSENCE In his book The Ecology of Commerce: A Declaration of Sustainability (1993), Paul Hawken points at the negative and destructive impacts industries have on the planet. He demands that industry leaders initiate a change to create a restorative economy that will reinvent the existing take-make-waste industrial system. Ray C. Anderson, founder of Interface, Inc., worked on this vision and, in 1995, set in motion a mission of change at his company. Since then, attempts to climb Mount Sustainability and transform the company’s way of doing business have been made. Anderson understands sustainability as a ‘contingent, healthy, balanced coexistence into the indefinite future of the technosphere and biosphere’ (the technosphere is composed of humans and industrial systems, and the biosphere is nature). Currently, the technosphere is growing and extracting excessively from the biosphere, resulting in climate disruption and fading biodiversity for future generations. ‘Mission Zero’ therefore calls for a sustainable redesign of the company, resulting in zero negative impact on the earth, by engaging in the following main pillars: 1. Ecological footprint reduction: Renewable sourcing (energy, raw materials, etc.) and reduction of waste and emissions; 2. Product innovation: Innovation of new technologies and redesign of products and processes; 3. Corporate culture change: Integration of values and norms for corporate citizenship in corporate belief and identity. HOW TO USE THE MODEL Scaling Mount Sustainability requires action on seven ambitious fronts: 1. Eliminate waste 2. Benign emissions 3. Renewable electricity 4. Closing the loop 5. Resource-efficient transportation 6. Sensitizing stakeholders 7. Redesign commerce These means can be adapted by other organizations, but they require an attempt tailored to their own processes and strategies. The underlying requirement for the success of Mission Zero lies in the change of mindset that integrates shareholder value and sustainability. Full or intrinsic commitment of the organization is required if such a fundamental process of change is to be undertaken. 34 MODELS RESULTS ‘And we’ll be doing well … very well … by doing good. That’s the vision’ (Ray Anderson, 1997). In 2009, two years before he passed away, he estimated his company was over halfway towards meeting his goals. By complying with standards set by examples such as Mission Zero, companies can be enabled to make a profit while also excelling in sustainability. Following Ray Anderson’s vision of a sustainable corporate design, the ultimate achievement would be that a company takes only what is renewable and contributes to the global equality of both the technosphere and the biosphere. In such a state, the take-make-waste system would have been overcome. COMMENTS Ray Anderson’s approach to transforming his organization cannot be seen as a model that can be easily applied to, or implemented by, other organizations. Mission Zero is an approach that has been tailored to Interface Inc.’s processes and strategies. Other organizations can therefore take this as an example, but will have to find their own way of going about pollution prevention, product redesign and so on. However, a first step towards sustainability could be made by recognizing the corporate citizenship of one’s own organization, and thereby its responsibility beyond production. This major corporate culture change may hide challenges that are difficult to overcome and require strong leadership. There is the possible danger that organizations might abuse the commitment for short-term PR purposes only, while avoiding an intrinsic/real transformation. LITER ATURE Anderson, R. C. (1999) Mid-Course Correction: Toward a Sustainable Enterprise: The Interface Model, Atlanta, Peregrinzilla Press. Anderson, R. C., White, R. (2011) Business Lessons from a Radical Industrialist, Hampshire, St. Martin’s Press. Hawken, P. (1993) The Ecology of Commerce: A Declaration of Sustainability, New York, Harper Collins. 35 Sustainability MODEL 4: The Bottom of the Pyramid, C.K. Prahalad (2002) PROBLEM STATEMENT How can one create wealth by doing business with the 4 billion people at the bottom of the financial pyramid? ESSENCE In economics, the Bottom of the Pyramid (BoP) is the largest but poorest socio-economic group, comprising around four billion people who live on less than a few dollars per day. Conventional logic holds that there is little business to be done with this ‘market segment’. Together with academics Stuart Hart and Allen Hammond, C.K. Prahalad turns this logic around by analysing how the total buying power of this group could be stimulated, as long as there is access to vital resources such as money, telecommunications and energy. The simple observation is that, because there is much untapped purchasing power at the bottom of the pyramid, private companies can make significant profits by selling to the poor. Simultaneously, by selling to the poor, private companies can bring prosperity to the poor, and thus can help eradicate poverty. Prahalad suggests that large multinational companies (MNCs) should play the leading role in this process, and find both glory and fortune at the bottom of the pyramid. Prahalad suggests that there is much eagerness to do business in this sector – as long as traditional barriers can be modified. 36 MODELS HOW TO USE THE MODEL To enable poor people to use their buying power, Prahalad suggests making use of the following twelve building blocks. Solutions must: 1. Be low-priced; 2. Merge old and new technology; 3. Be scalable and transportable across countries, cultures and languages; 4. Be eco-friendly; 5. Put functionality above form; 6. Be based on innovative processes; 7. Use deskilled work; 8. Educate customers; 9. Work in hostile environments; 10. Be flexible with interfaces; 11. Be available for the highly dispersed rural market as well as highly dense urban markets; 12. Be fit for rapid evolution. RESULTS The idea behind BoP has enjoyed global acceptance since its presentation in 2002. An earlier example of how doing business with the poor can pay off for all stakeholders is given by the success story of Bangladeshi banker, economist and Nobel Peace Prize recipient Muhammad Yunus, who developed the concepts of microcredit and microfinance, small loans given to entrepreneurs too poor to qualify for traditional bank loans. Other examples include the limited success of the Tata Nano car and the success of Hindustan Lever Ltd., one of Unilever’s largest subsidiaries. COMMENTS Critics have claimed that the BoP proposition might be too good to be true. Karnani (2006) states that the BoP proposition ‘is, at best, a harmless illusion and potentially a dangerous delusion. The BoP argument is riddled with inaccuracies and fallacies.’ Other than the success of microcredit, there have not been many convincing examples of the fortune to be made at the bottom of the pyramid (Kay and Lewenstein, Harvard Business Review, April 2013). LITER ATURE Karnani, Aneel G. (2006) ‘Fortune at the Bottom of the Pyramid: A Mirage’, Ross School of Business Paper No. 1035, available at Social Science Research Network. 37 Sustainability London, T., Hart, S.L. (2011) Next Generation Business Strategies for the Base of the Pyramid: New Approaches for Building Mutual Values, Upper Saddle River, Pearson. Prahalad, C.K. (2004) Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits, Philadelphia, Wharton School Publishing. MODEL 5: C radle to Cradle, William McDonough and Michael Braungart (2002) PROBLEM STATEMENT: How may we improve the quality of products and create less waste at the same time? ESSENCE: Cradle to Cradle is both a strategy for coming up with product and process innovation and a business model. It involves designing a product while keeping its end phase in mind, so that the materials used to create a product can be used again at the end of its life cycle, without losing their integrity or quality. The model is based on viewing all necessary product inputs as nutrients in a cycle that, once they have served their purpose, maintain their value and can fulfil another function within a life cycle. In essence, this means designing for reincarnation. Architect William McDonough and chemist Michael Baumgart’s Cradle to Cradle model works in parallel with their concept ‘waste equals food’, by which they mean that the waste of one 38 MODELS system or process must be the ‘food’ or feedstock of another. With the right design, all of the products and materials of industry will feed these two metabolisms, providing nourishment for something new, thereby eliminating waste. HOW TO USE THE MODEL A general Cradle to Cradle roadmap includes the following steps: 1. Know where you are now (status quo) 2. Define smart goals 3. Set sincere milestones 4. Communicate transparently on progress 5. Invite customers and other industry partners to join 6. Secure profitability and growth of business to achieve the Cradle to Cradle goals To further explain the implications of such design systems, McDonough, Braungart and Justus Englefried developed the ‘intelligent product system’, which is a typology of three fundamental products that guides design to meet the waste-equals-food test. The product types are consumables, products of service, and unsalables. To redesign the production process, five steps are outlined in Cradle to Cradle – Remaking the Way we Make Things: 1. Get free of known culprits (problems that hurt the system); 2. Follow informed personal preferences; 3. Create ‘passive positive’ lists of the materials used, categorized according to their safety level: i. The X List – substances that must be phased out, such as teratogenic, mutagenic, carcinogenic substances ii. The Gray List – problematic substances that are not so urgently in need of being phased out iii. The P List – the ‘positive’ list, substances actively defined as safe for use; 4. Activate the positive list; 5. Reinvent and redesign the former system. RESULTS Ideally, Cradle to Cradle helps organizations to improve the quality of their products, so that they are desirable to the consumer, pose no health risk for anyone who comes into contact with them and are of both economic and ecological benefit. Through collaborating with various companies, McDonough and Braungart have proven that Cradle to Cradle design is possible. 39 Sustainability COMMENTS One of the biggest misconceptions regarding Cradle to Cradle is that it’s placed within a context of waste reduction or minimization; Cradle to Cradle is not a recycling concept, but a whole system concept. Critics have noted that McDonough and Braungart previously kept C2C consultancy and certification in their inner circle, leading to a lack of competition, which prevented the model from fulfilling its potential. LITER ATURE Braungart, M. (1994) ‘Product Life-Cycle Management to Replace Waste Management’, Industrial Ecology and Global Change, pp. 335–348. McDonough, W., Braungart, M. (2002) Cradle to Cradle, remaking the way we make things, New York, North Point Press. McDonough, W., Braungart, M., Anastas, P.T., Zimmerman, J.B. (2003) ‘Peer Reviewed: Applying the Principles of Green Engineering to Cradle to Cradle Design’, Environmental Science & Technology, 37(23), 434A–441A. MODEL 6: T he Sustainable Value Framework, Stuart Hart and Mark Milstein (2003) 40 MODELS PROBLEM STATEMENT What are the strategies that enable an organization to achieve sustainable value? ESSENCE Management professors Stuart Hart and Mark Milstein observe that ‘most managers frame sustainable development not as a multidimensional opportunity, but rather as a one-dimensional nuisance’ (2002). They argue that the global challenges associated with sustainable development are not one-dimensional but multifaceted, ’just as the creation of shareholder value requires performance on multiple dimensions’. Their model encompasses this multifaceted approach. They identify the drivers that trigger change, propose strategies to deal with these drivers, and provide aspirational outcomes of these strategies that ‘contribute to a more sustainable world while simultaneously driving shareholder value’. HOW TO USE THE MODEL Hart and Milstein recommend a three-step approach to sustainable value: 1. Diagnosis: Assess the degree of your company’s involvement in all the four strategies and determine if there is a balanced commitment evident; 2. Opportunity assessment: Exploration of unconventional, long-term activities to make use of plentiful opportunities for innovation and value creation; 3. Implementation: Translate activities into ‘discrete projects and business experiments’ (Hart and Milstein, p 65), that enable evaluation of and narrowing to the most promising projects. RESULTS The model specifically suggests that, by pursuing strategies that meet the drivers of today and tomorrow, both internal and external, the corporate payoff will include: innovation and repositioning, a growth trajectory, cost and risk reduction and improved reputation and legitimacy. The model has enjoyed wide adoption in academic and business literature on sustainability. Renowned management author Peter Senge incorporated this value framework in his book The Necessary Revolution (2008), taking a systems perspective on which transformative strategies are essential for creating a flourishing, sustainable world. Senge is best known for the groundbreaking The Fifth Discipline: The Art and Practice of the Learning Organization (1990), which Harvard Business Review dubbed ‘one of the seminal management books of the past seventy-five years.’ COMMENTS Many have been trying to provide organizations with a concept for the integration of sustainability and shareholder value. The Sustainable Value Framework makes the link that has been ignored and that should stimulate growth through sustainability. It is supported by 41 Sustainability substantial academic review, and offers a challenging yet straightforward and consistent set of strategies to make corporate strategy become more sustainable. In practice, companies increasingly implement parts of what the model su