Classic Management Stuff

Classic, hierarchical management is not dead. Liberated companies usually employ hierarchical management. There are only very few companies running pure Self-Management regimes. Most companies rely on a manager (at any level)  holding the space for some more decentralization of authority and some more local initiative to occur.

Classical Management Frameworks

Manager Tools: A best practice framework for the classical management practitioner. Hundreds of useful and podcasts for the mid-level manager. As a manager, you really should know your “Trinity of Management” by heart: One on Ones, Delegation, Feedback

Classic Business Strategy Frameworks

Porter’s five forces of competition: A classic (the 1980’s) Model to model the position a company vs. it’s competitors. Very useful to challenge established thinking inside a company.

McKinsey’s 7S Model: A classic (the 1980’s) Model to dissect a company in seven different parts. Often, simplified versions are being used for pragmatic reasons, as these are usually good enough for organizational analysis. A favorite version in consulting work is using just 4 dimensions: People, Organization, Processes, and Systems.

Business Process Reengineering: A 1990’s model of re-inventing companies from the ground up. Processes took a central position. If business objectives could be tied to business processes and these processes be optimized, dramatic improvements in business performance will follow. With business process re-engineering “process” thinking really took off, and process mapping, etc. and similar techniques are still today a dominant train of thought in any organization.

Economic Frameworks

Transaction Cost Theory: An economic theory that explains economic activity or inactivity based on the costs of exchanges of goods and services. Invented in 1937 by Noble Prize Winner Ronald Coase and further developed by yet another Noble Prize Winner Oliver E. Williamson in the 1980’s. It is an early framework which has a unique place in economic theories, as it was assuming bounded rationality of decision makers, not the usual (neoclassical) key assumption of hyper-rationality. A key element is that it explains how decisions about economic transactions under uncertainty are made – one key insight for the ever-changing nature of the digital revolution.

Behavioral Economics: A blend of an economical and psychological set of theories which is pretty much en vogue these days, as it replaces the assumed rational behavior with empirically observed behavior. Experiments are made and empirically analyzed how human actors actually perform in a given situation. This relatively modern theory is very important, as one of the five drivers of Digitalization is customer centricity. By use of behavioral economics the actions of a customer can be much better understood today than ever. A spring of knowledge that can be utilized to mutual benefits for customer and companies.

Cognitive Biases: All those things that systematically distort human decision making. Pioneered by Nobel Prize Winners Daniel Hahnemann and Amos Tversky, understanding biases is a must to devise processes that enable organizations to make sense of data, to experiment and improve.

Principal-Agent problem: A central problem of our time – and a roadblock to the profound cultural shift towards digitalization. Managers are agents, taking care of the capital of shareholders, of the well being of employees, etc. They should act as the interests of their principals, the shareholders or even the employees. But they have their own interests. In a world of asymmetric information with too much capital around, managers use the insider information available exclusively to them to exploit shareholders and employees alike. This is an important reason for today’s increasing gap between managerial and workers income. No, it is not left-wing propaganda, it is established economic theory.

Classic Change Management Basics

There is much much more to say about this topic, but I leave it here at

Business Capability: A business capability is everything a company needs to a certain outcome. It encompasses resources, time, expenditure. A business capability describes what a company is able to achieve in a certain area (say next day replenishment to stores). In contrast to a process, which specifies how a company comes up with a certain result.

For setting the targets of a digital transformation, it is much more helpful to define capabilities (i.e., expected outcomes) than processes (how outcomes are produced).

Programs: A group of interrelated projects is usually bundled into a program, that coordinates targets, resources, budget and validates progress against plan. So it is really nothing more than a higher node in the classical change portfolio of a company. The smallest organization form for change involving a group of persons is a project, many projects can be grouped into a program, and all programs together are equal to the total change agenda of a company.

Many programs are coordinated change efforts using Mc Kinsey’s 7 S Model (see above) to analytically break down the needed changes into different dimensions, e.g. People, Process, Systems. The problem is program is that they are top-down driven, analytical conjured creatures of the rational mind. They usually fail to capture hearts and minds.

Setting the seed for initiatives to grown from the bottom-up is usually a more promising idea.

Projects: “A set of coordinated activities to change something from status A to status B given a time, a budget and a resource constraint.” A Project is a classical way to approach change in an organization. There is a line organization which takes care of day to day recurring tasks and a parallel project organization.

Projects are hard to master for line organizations and traditional project management practices are generally not good enough for many aspects of digitalization.

Business Theory Compendiums

Business Strategy – Wikipedia theme series. Not all-encompassing, but a nice collection of interlinked wiki sites on the theme.

Value-Based Management – a privately maintained for profit source of short descriptions of management models. An entertaining browse and good for new ideas of a quick look-up.