13 years, 10 months ago

Capability Investment Management Revolution

Back in the early 1900s a concept called “Modern Management Practices” or “Self-Control” was all the rage.  Originally conceived at DuPont and General Motors it was a way for managers to have detailed control over employee tasks – because back then managers actually knew everything there was to know about the production line. Essentially, it was a process automation approach.  And it worked for over 50 years, until machine-based automation wasn’t enough for competitive advantage.  Computers entered the work environment and we have been trying to figure how to cope with information automation and management ever since.

So from the 1950s on, several management models have attempted to harmonize information management with process management. The first of these was Deming’s Total Quality Management (TQM).  It was greeted with such skepticism that he had to go to Japan to try it in practice. Drucker followed with “Management By Objectives” (MBO) in late 50s, which was essentially a rehash of Self-Control with a twist – rather than managing by task, the approach allowed for some creativity and knowledge to be used by giving employees objectives and letting them come up with optimal way to satisfy those objectives.

The 1980s brought a slew of management approaches.  Porter’s “Strategic Management”, a revival of TQM based on Deming’s success with Japanese industries, and Cooper, Johnson, and Kaplan’s “Activity Based Costing” (ABC).  The1990s brought Hammer, Davenport, and Short’s “Business Process Reengineering” (BPR) plus Kaplan and Norton’s “Balanced Scorecard”.

All of these approaches, save Porter’s “Strategic Management,” are focused on how things get done. Most of them allow for a feedback loop for strategic decision making, but that’s hardly enough for consistent practices in identifying, developing and defending their Sustainable Competitive Advantage (SCA) – the purpose of Porter’s work.  Everyone provides ideas on strategic management, but inherently omits “how” information processing affects strategic decisions.  To be fair, this is consistent with a deterministic view of management, where causality rules the day.  And yet, if there’s anything information processing has shown us in the past 50 years, it is that business is not deterministic.  Hence, entering the 21st century where velocity of information is approaching the speed of light and coherence of that information is questionable, correlating information to make the appropriate decisions has never been more challenging.  We see the effects of this in how often projects fail to deliver to expectations and continuous turmoil in strategy and planning functions like Enterprise Architecture and Portfolio Management.

So while the main challenge for Capability Based Management is to provide a consistent method for correlating diverse data to increase fidelity of information used in decision making, it will have an uphill climb without breaking the deterministic view of management that is so built into our business management school curricula.