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Toward Public Led Innovation

Quotes from the Original Sources

[In one of the books quoted here, we read that "Change occurs only
when there is a confluence of changing values and economic necessity."
(Naisbitt and Auburdene, 1985) The values changed long ago, as these
excerpts attest. But until now most public libraries haven't changed. They
haven't had to face a financial threat to their existence, apart from
governmental budget-cutting strictures. Public libraries have enjoyed a
monopoly in their field -- the field of making "information" (words, sounds,
and images) available to anyone -- with the cost borne by the citizens as
a whole through taxes. But now the internet has broken the monopoly,
with its relatively low cost of entry. In fact, the public library is rapidly
becoming an internet enterprise itself, now in competition with other
internet enterprises offering much of the same material to the local
citizenry. Not everyone can afford a personal computer and an internet
service provider account, and those who cannot are being served
appropriately by their public library. But by and large those in the middle
class can afford to pay the price. In droves, they are going to their PCs at
home and at work to access information they used to go to the library for.
As of this writing (2001) fiction and film have yet to fall to the invader,
though further developments in e-books and broadband will no doubt
complete the conquest. The message to public libraries is clear: your
monopoly has come to an end. You must fight for your life. You must
learn the same management practices that the successful knowledge
enterprises have learned.]


Henri Fayol, "Speech at the Closing Session," 1900.

Frederick Winslow Taylor, The Principles of Scientific Management,


Mary Parker Follett, Dynamic Administration, 1925.

Elton Mayo, The Human Problems of an Industrial Civilization, 1933.

Chester I. Barnard, The Functions of the Executive, 1938.

Peter F. Drucker, Concept of the Corporation, 1946.

Peter F. Drucker, The Practice of Management, 1954.

Peter F. Drucker, Landmarks of Tomorrow, 1959.

Douglas McGregor, The Human Side of Enterprise, 1960.

Peter F. Drucker, The Effective Executive, 1967.

Peter F. Drucker, The Age of Discontinuity, 1968-1969.

Robert Townsend, Up the Organization, 1970.

M. Scott Myers, Every Employee a Manager, 1970.

Albert O. Hirschman, Exit, Voice, and Loyalty, 1970.

Peter F. Drucker, Managing in Turbulent Times, 1980.

John Naisbitt, Megatrends, 1982.

Thomas J. Peters and Robert H. Waterman, Jr.,

In Search of Excellence, 1982.

John Naisbitt and Patricia Aburdene, Re-inventing the Corporation, 1985.

Tom Peters and Nancy Austin, A Passion for Excellence, 1985.

Tom Peters, Thriving on Chaos, 1987.

Richard C. Whitely, The Customer Driven Company, 1991.

Tom Peters, Liberation Management, 1992.

Robert H. Waterman, Jr., What America Does Right, 1994.

James C. Collins and Jerry I. Portas, Built To Last, 1994.

David Packard, The HP Way, 1995.

John Hagel III and Arthur G. Armstrong, Net Gain, 1997

Tom Peters, The Professional Service Firm 50, 1999.

David Siegel, Futurize Your Enterprise, 1999.

Peter F. Drucker, Management Challenges for the 21st Century, 1999.

Rick Levine, Christopher Locke, Doc Searls, David Weinberger, The

Cluetrain Manifesto, 2000.

Gary Hamel, Leading the Revolution, 2000.

Fayol, Henri,
"Speech at the Closing Session of the International Mining and
Metallurgical Congress, June 23, 1900," in Fayol, Industrial and
General Administration,
London, Sir I. Pitman & sons, 1930.
[Before the 20th Century the in-depth study of organizational
management was practically unknown, aside from some texts on political
and military administration. The first person to systematize the accepted
knowledge of the day on the subject was Henri Fayol, a French mining
engineer and director. When he retired he started building his theory of
"administrative science." His mature work emphasized five elements of
management: planning, organizing, command, coordination, and control.
Among his 14 principles were division of labor; each worker reporting to
only one supervisor; centralization and chain of command; initiative and
team spirit. These elements and principles are recognizable as the bases
of today's classical management practices. Fayol's detractors tend to boil
down his theory into the term "command and control." There's no doubt
he had great respect for disciplined hierarchy. But he was no fanatic. His
mind was capable of understanding the subtleties that any manager must
deal with in order to carry forth the organization's purpose. He knew that
centralization must be combined with decentralization. The short
excerpts that follow are taken from the speech in which he announced
his intention to begin formulating an analysis of administration in all its

Every employee in an organization ... takes a larger or smaller role in
the work of administration, and has, therefore, to use and display his
administrative faculties.

The proper utilization of the physical, moral, and intellectual gifts of men
is just as essential for the good of mankind as the proper utilization of
mineral wealth. While we are trying to master matter ... we must try to
master ourselves, to discover and apply the laws which will make the
organization and running of administrative machinery as perfect as

Administration, which calls for the application of wide knowledge and
many personal qualities, is above all the art of handling men, and in this
art, as in many others, it is practice that makes perfect.

Taylor, Frederick Winslow,

The Principles of Scientific Management ,
New York, Harper & Row, 1911.
(page numbers from the 1998 Engineering & Management Press edition)

[Taylor's methods had an enormous influence on industrial management

throughout the Twentieth Century. Who hasn't heard of time study and
motion study analysis of the work of factory employees? The myth of the
efficiency expert with a stopwatch reducing human beings to robots has
energized anti-business forces for almost a hundred years. The image of
Charlie Chaplin caught in the cogs haunts us still. By the time Taylor
wrote this book, he was aware of the abuses to which his system had
been put. So he took pains to amplify upon his personal motivations for
devising it. In doing so, he introduced principles that other management
consultants would later claim credit for, while denouncing Taylor.
However, a revision might be in the works, led by Peter Drucker's recent
suggestion that Taylor's methods won the World War for the Allies.
Perhaps most interesting for this anthology's puposes is Taylor's
prediction that the customers of an enterprise would become the most
important party in the determining of its policies. This is not to say,
however, that all of his pronouncements sound sweet to our ears.]

In the past man has been first; in the future the system must be first.

... the best management is a true science, resting upon clearly defined
laws, rules, and principles ...

... prosperity for the employers cannot exist through a long term of years
unless it is accompanied by prosperity for the employee ...

... in the case of any single individual the greatest prosperity can exist
only when that individual has reached his highest state of efficiency ...

... maximum prosperity can exist only as a result of maximum

... the most important object of both the workmen and the management
should be the training and development of each individual in the
establishment, so that he can do (at his fastest pace and with the
maximum of efficiency) the highest class of work for which his natural
abilities fit him.

In order that the work may be done in accordance with scientific laws, it
is necessary that there shall be a far more equal division of the
responsibility between the management and the workmen than now
exists under any of the ordinary types of management.

And each man shall daily be taught by and receive the most friendly help
from those who are over him, instead of being, at the one extreme,
driven or coerced by his bosses, and at the other left to his own unaided

At least 50,000 workmen in the United States are now employed under
this system; and they are receiving from 30 per cent. to 100 per cent.
higher wages than are paid to men of similar caliber with whom they are
surrounded, while the companies employing them are more prosperous
than ever before.

Several papers have been written ... But unfortunately most of the
readers of these papers have mistaken the mechanism for the true
essence. Scientific management fundamentally consists of certain broad
general principles, a certain philosophy, which can be applied in many
ways ...

37 passim.
The writer came into the machine-shop of the Midvale Steel Company in
1878, after having served an apprenticeship as a pattern-maker and as a
machinist ... After about three years ... he decided to make a determined
effort to in some way change the system of management, so that the
interests of the workmen and the management should become the same,
instead of antagonistic.

In preparation for this system the writer realized that the greatest
obstacle to harmonious cooperation between the workmen and the
management lay in the ignorance of the management as to what really
constitutes a proper day's work for a workman. He fully realized that,
although he was foreman of the shop, the combined knowledge and skill
of the workmen who were under him was certainly ten times as great as
his own.

The question which naturally presents itself is whether an elaborate
organization of this sort can be made to pay for itself; whether such an
organization is not top-heavy.

... when workmen are herded into gangs, each man in the gang becomes
far less efficient than when his personal ambition is stimulated ...

Personal ambition always has been and will remain a more powerful
incentive to exertion than a desire for the general welfare.

... in practically all of the mechanic arts the science which underlies each
workman's act is so great and amounts to so much that the workman
who is best suited to actually doing the work is incapable, either through
lack of education or through insufficient mental capacity, of
understanding this science.

At the first glance we see only two parties to the transaction, the
workmen and their employers. We overlook the third great party, the
whole people, -- the consumers, who buy the product of the first two and
who ultimately pay both the wages of the workmen and the profits of the
The rights of the people are therefore greater than those of either
employer or employee.

The writer is one of those who believes that more and more will the third
party (the whole people), as it becomes acquainted with the true facts,
insist that justice shall be done to all three parties.

Follett, Mary Parker,

"The Giving of Orders", 1925, and "How Must Business
Management Develop In Order To Possess the Essentials of a
Profession?", 1925, from Dynamic Administration: The Collected
Papers of Mary Parker Follett , edited by H. C. Metcalf and L. Urwick,

New York, Harper & Brothers, 1940? 1941?.

(page numbers from the 1982 Hippocrene Books edition)

[Follett understood what Taylor was getting at in his Scientific

Management better than anyone else -- perhaps better than Taylor
himself. She was able to draw out the human touch at its core and make
that the foundation of her approach. A gifted essayist and public speaker
whose style is reminiscent of Ralph Waldo Emerson's, Follett left a
successful career in community organizing to take on the problems
management faced in the 1920s. Her writing is vivid, anecdotal, and
wide-ranging, reflecting her education in philosophy and psychology and
her practical experience in simply talking with thousands of people about
their lives in business and industry. The two excerpts that follow, taken
from the two above-noted essays respectively, afford a glimpse of her
characteristic mode of thought. After her passing in 1933, Follett's fame
faded for a decade. But since then, she has influenced every significant
management trend.]

From one point of view, one might call the essence of scientific
management the attempt to find the law of the situation. With scientific
management the managers are as much under orders as the workers,
for both obey the law of the situation. Our job is not to get people to obey
orders, but how to devise methods by which we can best discover the
order integral to a particular situation. When that is found, the employee
can issue it to the employer, as well as employer to employee. This often
happens easily and naturally. My cook or my stenographer points out the
law of the situation, and I, if I recognize it as such, accept it, even though
it may reverse some "order" I have given.

I have left to the last what seems to me the chief function, the real
service, of business: to give an opportunity for individual development
through the better organization of human relationships. Several times
lately I have seen business defined as production, the production of
useful articles. But every activity of man should add to the intangible
values of life as well as to the tangible, should aim at other products than
merely those which can be seen and handled. What does "useful" mean,
anyway? We could live without many of the articles manufactured. But
the greatest usefulness of these articles consists in the fact that their
manufacture makes possible those manifold, interesting activities of men
by which spiritual values are created. There is no over-production here.
Mayo, Elton,
The Human Problems of an Industrial Civilization ,
New York, The MacMillan Company, 1933.

[Taylor had assumed that employees are motivated only by the prospect
of higher wages. Follett discovered deeper drives. Mayo, who admired
Follett's thought, found in his own work that the quality of human
relations in industrial society at large, including the workplace, is the
major factor affecting worker productivity. He based his conclusions on
the results of lengthy, rigorous tests conducted by others in factories in
England, and by Mayo at a textile mill near Philadelphia and at Western
Electric's Hawthorne plant in Chicago. The excerpts that follow refer in
particular to the Hawthorne tests, in which productivity kept increasing
every time a new plan was introduced, and even when the initial plan
was reinstated.]

67 passim.
[from a private Western Electric report, May 11, 1929:]
There has been a continual upward trend in output which has been
independent of the changes in rest-pauses ... There has been an
important increase in contentment among the girls working under test-
room conditions ... Output is more directly related to the type of working
day ... Important factors in the production of a better mental attitude and
greater enjoyment of work have been the greater freedom, less strict
supervision and the opportunity to vary from a fixed pace without
reprimand from a gang boss ... there is a feeling that better output is in
some way related to the distinctly pleasanter, freer, and happier working
conditions ... much can be gained industrially by carrying greater
personal consideration to the lowest levels of employment.

... the experimental room was in charge of an interested and sympathetic
chief observer ... he took a personal interest in each girl and her
achievement; he showed pride in the record of the group. He helped the
group to feel that its duty was to set its own conditions of work, he helped
the workers to find the "freedom" of which they so frequently speak.

Before every change of programme, the group is consulted. Their
comments are listened to and discussed; sometimes their objections are
allowed to negative a suggestion. The group unquestionably develops a
sense of participation in the critical determinations and becomes
something of a social unit.

... they are getting closer supervision than ever before, the change is in
the quality of the supervision.

[Western Electric formed an Industrial Research Division in 1929. Their
first project was "To interview annually all employees to find out their
likes and dislikes relative to their working status." Interviewers were
trained to listen sympathetically and not guide the workers' thoughts.]
The practical consequence of such interviewing was generally admirable;
both supervisors and employees displayed enthusiasm. "This is the best
thing the Company ever did" or "the Company ought to have done this
long ago" were expressions that were frequently encountered.

The interviewing programme showed that the major difficulty was no
mere simple error of supervision, no easily alterable set of working
conditions; it was something more intimately human, more remote.

Apparently it is not enough to have an enlightened Company policy ... To
... merely administer such a plan ... If an individual cannot work with
sufficient understanding of his work situation, then, unlike a machine, he
can only work against opposition from himself ... he finds it difficult to
persist in action for an end he cannot dimly see.

Human collaboration in work, in primitive and developed societies, has
always depended for its perpetuation upon the evolution of a non-logical
social code which regulates the relations between persons and their
attitudes to one another. Insistence upon a merely economic logic of
production ... interferes with the development of such a code and
consequently gives rise in the group to a sense of human defeat.

The industrial worker, whether capable of it or no, does not want to
develop a blackboard logic which shall guide his method of life and work.
What he wants is more nearly described as, first, a method of living in
social relationship with other people and, second, as part of this an
economic function for and value to the group. The whole of this most
important aspect of human nature we have recklessly disregarded in our
"triumphant" industrial progress.

Barnard, Chester I.,

The Functions of the Executive ,
Cambridge, Mass., Harvard University Press, 1938.

[President of New Jersey Bell Telephone and later President of the

Rockefeller Foundation, Barnard was no stranger to the details of the
daily functions of the executive. However, when he came to write this
book, he displayed a philosophical and theoretical depth that to this day
distinguishes his contribution. Many readers have complained about his
rather long-winded and pedantic style, only to return to the book for fresh
draughts of genius. Barnard knew Elton Mayo. He took Mayo's lessons,
and Follett's, and Taylor's, and joined them in the first systematic study of
management since Fayol's.]

... in the current thought of many ... man is an "economic man" carrying a
few non-economic appendages ... it seems to me ... non-economic
motives, interests, and processes, as well as the economic, are
fundamental in behavior from the boards of directors to the last man.
On the one side, those philosophies that ... deny freedom of choice or of
will, that make of organization and socialism the basic position, are found
to rest upon facts that are widely observed ... On the other side, those
philosophies that grant freedom of choice and of will, that make of the
individual an independent entity ... are also consistent with other facts of
behavior and thought. I undertake no reconciliation of the opposition ... It
is precisely the function of the executive to ... reconcile conflicting forces,
instincts, interests, conditions, positions, and ideals.

A cooperative system is incessantly dynamic, a process of continual
readjustment to physical, biological, and social environments as a whole.

In this book, therefore, systems of cooperation which we call
organizations I regard as social creatures, "alive," just as I regard an
individual human being, who himself on analysis is a complex of partial
systems, as different from the sum of these constituent systems ...

Thus the executive process ... is one of integration of the whole, of
finding the effective balance ... The common sense of the whole is not
obvious ... A formal and orderly conception of the whole is rarely present
... except to a few men of executive genius, or a few executive
organizations the personnel of which is comprehensively sensitive and
well integrated.

The ethical ideal upon which cooperation depends requires the general
diffusion of a willingness to subordinate immediate personal interest for
both ultimate personal interest and the general good, together with a
capacity of individual responsibility.

Inspiration is necessary to inculcate the sense of unity, and to create
common ideals. Emotional rather than intellectual acceptance is

Scarcely a man, I think, who has felt the annihilation of his personality in
some organized system, has not also felt that the same system belonged
to him because of his own free will he chose to make it so.

Such a story calls finally for a declaration of faith. I believe in the
power of the cooperation of men of free will to make men free to
cooperate; that only as they choose to work together can they achieve
the fullness of personal development; that only as each accepts a
responsibility for choice can they enter into that communion of men from
which arise the higher purposes of individual and cooperative behavior
alike. I believe that the expansion of cooperation and the development of
the indvidual are mutually dependent realities, and that a due proportion
or balance between them is a necessary condition of human welfare.
Because it is subjective with respect to a society as a whole and to the
individual, what this proportion is I believe science cannot say. It is a
question for philosophy and religion.

Drucker, Peter F.,

Concept of the Corporation ,
New York, Harper & Row, 1946.
(page numbers from the 1983 New American Library edition)

[Drucker's report on the corporate culture of General Motors established

management studies as a discipline suitable for academic instruction.
Taking his cue from his predecessors, he saw the corporation "as a
social institution organizing human efforts to a common end." This book
has been credited with reviving the postwar fortunes of crumbling giants
-- including Ford, General Electric, Michigan State University, and the
Catholic Archdiocese of New York.]

The questions we shall deal with in this book are the traditional questions
of politics and political analysis. What is new in this book is their
application to the large corporation.

... the institution must be able to arouse the loyalty of its members. To
produce leaders an institution must have an esprit de corps which
induces its members to put the welfare of the institution above their own
and to model themselves upon an institutional idea of conduct.

The efficiency of an institution depends both on the efficiency with which
it organizes individuals for a community effort and on the extent to which
it organizes man for his moral victory over himself.

Next, any institution has to be organized so as to bring out talents and
capacities within the organization; to encourage men to take the initiative,
give them a chance to show what they can do, and a scope within which
to grow; and finally, to offer them rewards in the form of advancement
and of social and economic standing which put a definite premium on the
willingness and ability to assume responsibility.

Finally the problem of leadership also demands an organization in which
power and responsibility are divided in balance between final authority
and lieutenants, and between central management and executives in the
field. Without strong strong central management no institution can be
unified; but without a strong and autonomous local leadership, willing to
assume responsibility on its own, no institution could properly function.
The division of power is thus a problem which every institution has to
... an institution which cannot produce its own leadership cannot survive
... This involves obviously two things: the development of independent
command at the lowest possible level and the development of an
objective yardstick to measure performance in these commands.

In every large-scale organization there is a natural tendency to
discourage initiative and to put a premium on conformity.

Because the corporation is an institution it must have a basic policy.
For it must subordinate individual ambitions and decisions to the needs
of the corporation's welfare and survival. That means it must have a set
of principles and a rule of conduct which limit and direct individual actions
and behavior. It must be possible for the individual who acts as a organ
of the corporation to ascertain without much doubt whether his actions
are in accord with the long-term interests of the corporation he serves.

Divisional managers too must have the authority and standing of real
Hence General Motors has become an essay in federalism -- on the
whole, an exceedingly successful one. It attempts to combine the
greatest possible corporate unity with the greatest divisional autonomy
and responsibility; and like every true federation, it aims at realizing unity
through local self-government and vice versa. This is the aim of General
Motors' policy of decentralization.

Decentralization in General Motors is not confined to the relations
between divisional managers and central management but is to extend in
theory to all managerial positions including that of foreman; it is not
confined to its operations within the company but extends to the relations
to its partners in business ...

Decentralization means the absence of "edict management" in which
nobody knows why he does what he is ordered to do.

Such a union cannot rest on blind obedience to orders. It must be based
on an understanding of each other's problems, policies, approaches,
mutually between central management and divisional managers.

There must thus be an objective, impersonal frame of reference to make
possible if not mandatory the freedom of decentralized management.
This objective frame is given in the use of modern methods of cost
accounting and market analysis as an impersonal yardstick to measure
achievement of both policy makers and production men.
That would make it possible for superiors freely to admit mistakes to their
subordinates -- perhaps the most important thing in human relations.

... by erecting strong barriers of fact against action based on nothing but
seniority and rank.

The corporate organization itself, the concrete organs, the concrete
organs, the concrete policies, the concrete decisions, were developed
gradually and in dealing with concrete situations and concrete

The purpose of such a concept [decentralization] is never to serve as a
rigid rule. Rather it is to be used like a compass bearing taken across
rugged mountains.

This should result in a genuine federation in which authority is based on
function instead of on rank, and in which decisions are based on the
impersonal criterion of a supreme law rather than on power.

... the individual must be able to realize through his work in industry that
satisfaction which comes from one's own meaningfulness for society and
which expresses the basic conviction of the uniqueness of the person.

Drucker, Peter F.,

The Practice of Management,
New York, Harper & Row, 1954.

[Drucker wasn't satisfied to leave it at a single book. He went on

prolifically, adapting and of course innovating, to become the pre-eminent
management guru of the 20th Century. Of particular interest to public
library administrators: he applied his ideas to non-profit and
governmental organizations. By the end of the century, that was to be his
major concern.]

There is only one valid definition of business purpose: to create a

It is the customer who determines what a business is.

It is not necessary for a business to grow bigger; but it is necessary that
it constantly grow better.
What is our business is not determined by the producer but by the

The first step toward finding out what our business is, is to raise the
question, "Who is the customer?" -- the actual customer and the potential
customer? Where is he? How does he buy? How can he be reached?

[Is a library patron a typical citizen or a member of a special group? Can

a library add ways for its patrons to make use of its services? Should a
library advertise in newspapers or on television, send out mass mailings,
provide speakers at meetings of local groups?]

The next question is: "What does the customer buy?"

[Do library patrons want books, or an easy way to get information? Do

they want film programs, or a chance to get out of the house and

Finally, there is the most difficult question: "What does the customer
consider value? What does he look for when he buys the product?"

[Is the low cost of library service our only advantage? How much does
the quality of our service -- the quality of staff interactions, the quality of
the things we lend, the quality of the content of our programs and special
events, the quality of our building and website -- matter to patrons?
Should we be constantly asking the patrons what they value about us, or
what they want us to provide that we don't?]

The concept of the executive as a personal delegate of the owner has
been replaced by the concept of the manager whose authority is
grounded in the objective responsibility of the job. Arbitrary orders have
been replaced by performance standards based on objectives and

What the business enterprise needs is a principle of management that
will give full scope to individual strength and responsibility, and at the
same time give common direction of vision and effort, establish team
work and harmonize the goals of the individual with the common weal.
The only principle that can do this is management by objectives and

Managers should not be driven, but they should drive themselves.

Instead of output norms imposed from above, each worker develops with
his own foreman his own rates of production.
Drucker, Peter F.,
Landmarks of Tomorrow ,
New York, Harper & Row, 1959.

[The New Perception of Order]

We do not, indeed, believe any more in the inevitability, let alone the
automaticity, of progress. But we practice innovation -- purposeful,
directed, organized change.
Innovation, as we now use the term, is based on the systematic,
organized "leap into the unknown." Its aim is to give us new power for
action through a new capacity to see, a new vision. Its tools are scientific;
but its process is of the imagination, its method the organization of
ignorance rather than that of known facts.
The impact of this new power on our lives is already great. It changes
our technology and gives us new opportunities to make technological
advance to order. It is giving us an altogether new ability for
nontechnological innovation in society and economy.
Our basic institutions of human society -- the government, the armed
forces, the school -- have been converted from organs of preservation
into organs of innovation. And new institutions expressly designed for
innovation, such as business enterprise and research organization, have
become of central importance.
But innovation is more than a new method. It is a new view of the
universe, as one of risk rather than of chance or of certainty. It is a new
view of man's role in the universe; he creates order by taking risks. And
this means that innovation, rather than being an assertion of human
power, is an acceptance of human responsibility.

We shifted first from a traditional view of selling as the specialized effort
that persuades an individual customer to buy whatever it is the business
produces, to one of marketing, which is a business-wide function aiming
both at creating customer and market for the company's product and at
adapting the product to customer and market. And now we are shifting
again from this product- focused to a customer-focused concept which
sees marketing as the "demand half" of the economy, that is as the sum
of all efforts and activities necessary for the fullest and yet most
economical satisfaction of customer wants.

Mendeleev asked instead: What unknown and as yet undiscovered
elements must we assume to make order out of those we know? ... it
was the blank spaces that ordered the known sixty-three elements rather
than the known sixty-three that provided the blanks.

What, that is today unknown, do we have to assume to make order out of
the chaos of our fragments of knowledge? What, in other words, are the
specifications for future knowledge?

But the essential things are not the new tools but the new concept. It
assumes that there is order -- order in the universe, order to our
imagination and order in the development of knowledge. It further
assumes that this order is one of pattern, so that it can be perceived
before it is known. It assumes that this perception of order is the basis of
innovation. It finally assumes that we can "leap-frog" to this perception
through the systematic organization of our ignorance from which we can
then develop the specific new knowledge and tools.

[The Power of Innovation]

We can increasingly decide what products we want and then find the raw
materials for them.

We need social innovation more than we need technological innovation.
The new frontiers of this post-modern world are all frontiers of innovation.
Neither reform nor revolution can solve these great problems; only
genuine social innovation can do the job.

Innovation can best be defined as man's attempt to create order, in his
own mind and in the universe around him, by taking risk and creating

... no human being can possibly predict the future, let alone control it.
Innovation must therefore have a high failure rate.

Innovation is thus not only opportunity. It is not only risk. It is first and
foremost responsibility. No one is responsible for chance; no one can do
anything about it. One can only welcome inevitable progress or bemoan
it; at most one can attempt to delay it. But innovation is deliberate choice;
and we are responsible for its consequences.

Innovation is therefore always ethics -- as much as it is intellectual
process and aesthetic perception.

McGregor, Douglas,
The Human Side of Enterprise ,
New York, McGraw Hill, 1960.
(page numbers from the 1985 edition)

[Harvard and MIT professor, president of Antioch College, McGregor

admired Peter Drucker's contributions (and Drucker's habit of indenting
whole paragraphs for emphasis). His great advance was to bring the
psychological theories of Abraham Maslow to bear on organizational
systems. Specifically, the concept of "self actualization" inspired Douglas
to come up with his Theory Y. This book, as with others before and after,
has been credited by many with having "started it all," with being "the
fundamental text," and so on. In this case, the praise is well deserved.
McGregor not only laid down the broad outlines of his idea, as quoted
below, but also applied it to many specific business practices (not
quoted), which outraged the old guard and delighted the young turks.]

Many managers would agree that the effectiveness of organizations
would be at least doubled if they could discover how to tap the unrealized
potential present in their human resources.

Human behavior is predictable, but, as in physical science, accurate
prediction hinges on the correctness of underlying theoretical

The conventional principles were derived primarily from the study of
models (the military and the Catholic church) which differ in important
respects from modern industrial organizations.

If there is a single assumption which pervades conventional
organizational theory it is that authority is the central, indispensible
means of managerial control ... a hierarchy of authoritative relationships
... Most of the other principles of organization, such as unity of command,
staff and line, span of control, are directly derived from this one.

Conventional organization theory gives full recognition to dependence
upward, but it fails to recognize the significance of interdependence.

In United States industry today, employees are in a relationship of partial
dependence. Authority, as a means of influence, is certainly not useless,
but for many purposes it is less appropriate than persuasion or
professional help. Exclusive reliance upon authority encourages
countermeasures, minimal performance, even open rebellion.

33-34 passim.
[Theory X:]
1. The average human being has an inherent dislike of work and will
avoid it if he can.
2. Because of this human characteristic of dislike of work, most people
must be coerced, controlled, directed, threatened with punishment to get
them to put forth adequate effort toward the achievement of
organizational objectives.
3. The average human being prefers to be directed, wishes to avoid
responsibility, has relatively little ambition, wants security above all.

... for many wage earners work is perceived as a form of punishment
which is the price to be paid for various kinds of satisfaction away from
the job ... Unless there are opportunities at work to satisfy ... higher-level
needs, people will be deprived; and their behavior will reflect this
The philosophy of management by direction and control -- regardless of
whether it is hard or soft -- is inadequate to motivate because the human
needs on which this approach relies are relatively unimportant motivators
of behavior in our society today. Direction and control are of limited value
in motivating people whose important needs are social and egoistic.
People, deprived of opportunities to satisfy at work the needs which
are now important to them, behave exactly as we might predict -- with
indolence, passivity, unwillingness to accept responsibility, resistance to
change, willingness to follow the demagogue, unreasonable demands for
economic benefits.

47-48 passim.
[Theory Y:]
1. The expenditure of physical and mental effort in work is as natural as
play or rest.
2. External control and the threat of punishment are not the only means
for bringing about effort toward organizational objectives. Man will
exercise self-direction and self-control in the service of objectives to
which he is committed.
3. Commitment to objectives is a function of the rewards associated with
such achievement.
4. The average human being learns, under proper conditions, not only to
accept but to seek reponsibility.
5. The capacity to exercise a relatively high degree of imagination,
ingenuity, and creativity in the solution of organizational problems is
widely, not narrowly, distributed in the population.
6. Under the conditions of modern industrial life, the intellectual
potentialities of the average human being are only partially realized.

If employees are lazy, indifferent, unwilling to take resonsibility,
intransigent, uncreative, uncooperative, Theory Y implies that the causes
lie in management's methods of organization and control.

... opportunities for "self-actualization" are the essential requirements of
both job satisfaction and high performance.

Theory Y assumes that people will exercise self-direction and self-control
in the achievement of organizational objectives to the degree that they
are committed to those objectives.

Theory Y is an invitation to innovation.

The principle of integration requires active and responsible participation
of the individual in decisions affecting his career.

The capacities of the average human being for creativity, for growth, for
collaboration, for productivity (in the full sense of the term) are far greater
than we have as yet recognized.

Drucker, Peter F.,

The Effective Executive ,
New York, Harper & Row, 1967.

... the executive is, first of all, expected to get the right things done.

... effectiveness is the specific technology of the knowledge worker within
an organization.

One can indeed never be sure what the knowledge worker thinks -- and
yet thinking is his specific work; it is his "doing."

Knowledge work is not defined by quantity. Neither is knowledge work
defined by its costs. Knowledge work is defined by its results.

An organization is an organ of society and fulfills itself by the contribution
it makes to the outside environment. And yet the bigger and apparently
more successful an organization gets to be, the more will inside events
tend to engage the interests, the energies, and the abilities of the
executive to the exclusion of his real tasks and his real effectiveness in
the outside.

The truly important events on the outside are not the trends. They are
changes in the trends. These determine ultimately success or failure of
an organization and its efforts.

In a technical industry such as telecommunications, the future lies in
better and different technologies. The Bell Laboratories which grew out of
this insight were by no means the first industrial laboratory, not even in
the United States. But it was the first industrial research institution that
was deliberately designed to make the present obsolete, no matter how
profitable and efficient.
When Bell Labs took its final form, during the World War I period, this
was a breath-taking innovation in industry. Even today few businessmen
understand that research, to be productive, has to be the "disorganizer,"
the creator of a different future and the enemy of today.
Drucker, Peter F.,
The Age of Discontinuity: Guidelines to Our Changing Society ,
New York, Harper & Row, 1968, 1969

Neither the modern mathematics of symbolic logic nor the perception of
configuration is what is normally called "science." Yet both are central to
the new technologies and, as a result, to the new industries. This is
something new, something that sets the new industries sharply apart
from those of the first half of the century. The technology of the twentieth
century embraces and feeds off the entire array of human knowledge,
the physical sciences as well as the humanities. Indeed in these new
technologies there is no distinction between the two. In these new
technologies the split between the universe of matter and the universe of
the mind -- the split introduced into Western thought by Descartes 300
years ago -- is being overcome.

The fact that the new technologies are not based on science alone but
on new knowledge in its entirety also means that technology is no longer
separate and outside of culture, but an integral part thereof.

But the new industries ahead represent a qualitative rather than a merely
quantitative shift. They are different in their structure, in their knowledge
foundations, and in their sociology. They represent, therefore, not just a
stepping up of the rate of change. They represent a discontinuity fully as
great as that of the industries that came into being between the 1860's
and 1914.
They will not, therefore, be amenable to policies, whether those of
business or government, that are in effect more of the same. They
demand basic changes from both businessman and politician. They
require both new policies and the sloughing off of deeply entrenched
practices of our industrial society today.

The businessman will have to acquire a number of new abilities, all of
them entrepreneurial in nature, but all of them to be exercised in and
through a managerial, and usually a fairly large and complex,

The first indicator of the need for major innovation is one with which
economists have been familiar for well over a century: declining
productivity of capital in a major industry. Whenever a major industry
requires increasing investment to produce the same quantity, especially if
the higher capital requirements are not more than offset by savings in
labor, the industry is in sharp decline.

A major industry will rarely put its best brains to work on basic changes. It
will rather tend to fritter away its energies on desperate efforts to keep
yesterday going a little longer.
... the insider, who tends to become a prisoner of the familiar.

One can therefore anticipate technology by systematically looking for
new knowledge -- and by being alert to the first sign that it is being
transformed into technology.

To understand the dynamics of technology, therefore, one always starts
out with areas of knowledge other than one's own.

Vision, as a rule, comes before action, and understanding comes even

Perceptions have greater impact, as a rule, economically, socially, and
culturally, than have many "new" things or even "new" ideas.

The market is the most potent source of ideas for innovation.

As long as one thinks of "our product," one is still thinking in terms of
selling rather than in terms of marketing. What matters is the customer's
behavior, his values, and his expectations.

They have to learn that the truly new does not, as a rule, satisfy
demands that already exist. It creates new expectations, sets new
standards, makes possible new satisfactions. "Innovative marketing"
therefore creates markets. New technology always needs new markets
which were not even conceivable until the new technology created new

Only under acute shortage conditions do goods sell themselves.

It takes innovative marketing to create a new perception for the customer
so that he can use the new to expand his horizon, to raise his
expectations and aspirations, and to derive new satisfactions.

Businessmen will have to learn to build and manage an innovative

We now need to make possible organizations that can innovate.
55. is futile to expect the truly new to come out of the existing product
divisions within the company.

In the managerial organization, the top people sit in judgment; in the
innovative organization, it is their job to encourage ideas, no matter how
unripe or crude. It is the job of the top people in the innovative
organization to try to convert the largest possible number of ideas into
serious proposals for effective, purposeful work. It is their job to say:
"What would this idea have to be for it to be taken seriously?" It is not
their job, as it is in the managerial organization, to say: "The is not a
serious proposal."
No idea for the really new ever starts out as a realistic, serious,
thought-through, worked-out proposal. It always starts out as a groping, a
divining, a search.

A top management that believes its job is to sit in judgment will inevitably
veto the new idea. It is always "impractical." Only a top management that
sees its central function as trying to convert into purposeful action the
half-baked idea for something new will actually make its organization --
whether company, university, laboratory, or hospital -- capable of genuine
innovation and self-renewal.

Townsend, Robert,
Up the Organization ,
London, Michael Joseph, 1970.

[Ten years after McGregor, Townsend exploded another bomb in the face
of the authoritarian bureaucrats.]

All decisions should be made as low as possible in the organization. The
Charge of the Light Brigade was ordered by an officer who wasn't there
looking at the territory.

Myers, M. Scott,
Every Employee a Manager ,
New York, McGraw Hill, 1970
(page numbers from Second Edition, 1981)

[In his quiet way, Myers said the same thing Townsend was saying. This
book was less notorious, but perhaps had a more lasting influence on the
managers who read it.]

Involvement of individuals and groups in the goal-setting process of
company systems results in the application of more talent, in the
development of better systems, and in better understanding and
acceptance by the users. Though the involvement of employees in
planning and control functions results in what might be perceived by
traditionalists as "non-productive" time away from their jobs, it is found in
practice that systems introduced top-down by upper levels often create
more misunderstanding and hence more resentment and nonproductive
efforts than systems designed through the involvement of the users.

Tomorrow's manager will shun the use of authority and will organize
physical resources and manpower to enable human talent at all levels to
find expression in solving problems and achieving goals.

All management is the management of innovation. People who are
simply perpetuating the status quo, then, are not managers but, rather,
are puppets or automatons and are replacable by programmable

Staying out of the way to let people manage their work does not mean
abandoning the group and heading for the golf course, but it does mean
being sensitive to the needs of individuals in regard to their desire and
ability to be responsible for many planning and control functions of their

Hirschman, Albert O.,

Exit, Voice, and Loyalty: Responses to decline in firms,
organizations, and states,
Cambridge, Harvard University Press, 1970.

[It was no best seller. But Hirschman's book laid down a fundamental
principle. He emphasized the "seemingly irrational" function of loyalty to
a group in stimulating its members to give "voice" to their complaints
about the group. Hirschman considered that a form of "democratic
control." His study of declining fortunes through the "exit" of members
can shed some light on today's situation in public libraries, where patrons
are substituting home and workplace internet use for classic library

The deterioration in performance is reflected most typically and generally,
that is, for both firms and other organizations, in an absolute or
comparative deterioration of the quality of the product or service
provided. Management then finds out about its failings via two alternative
(1) Some customers stop buying the firm's products or some members
leave the organization: this is the exit option. As a result, revenues drop,
membership declines, and management is impelled to search for ways
and means to correct whatever faults have led to exit.
(2) The firm's customers or the organization's members express their
dissatisfaction directly to management or to some other authority to
which management is subordinate or through general protest addressed
to anyone who cares to listen: this is the voice option. As a result,
management once again engages in a search for the causes and
possible cures of customers' and members' dissatisfaction.

Firms and other organizations are ... permanently and randomly subject
to decline and decay, that is, to a gradual loss of rationality, efficiency,
and surplus-producing energy, no matter how well the institutional
framework within which they function is designed.

... the propensity to resort to the voice option depends also on the
general readiness of a population to complain and on the invention of
such institutions and mechanisms as can communicate complaints
cheaply and effectively.

... the management of a public enterprise, always fairly confident that it
will not be let down by the national treasury, may be less sensitive to the
loss of revenue due to the switch of customers to a competing mode that
to the protests of an aroused public that has a vital stake in the service ...

... to develop "voice" within an organization is synonomous with the
history of democratic control through the articulation and aggregation of
opinions and interests.

... the likelihood of voice increases with the degree of loyalty ... the two
factors are far from independent.

As a rule, then, loyalty holds exit at bay and activates voice.

The importance of loyalty from our point of view is that it can neutralize
within certain limits the tendency of the most quality-conscious
customers or members to be the first to exit. As has been shown in
Chapter 4, this tendency deprives the faltering firms or organization of
those who could best help it fight its shortcomings and its difficulties. As a
result of loyalty, these potentially most influential customers and
members will stay on longer than they would ordinarily, in the hope or,
rather, reasoned expectation that improvement or reform can be
achieved "from within." Thus loyalty, far from being irrational, can serve
the socially useful purpose of preventing deterioration from becoming
cumulative, as it so often does when there is no barrier to exit.

... loyalty is at its most functional when it looks most irrational, when
loyalty means strong attachment to an organization that does not seem
to warrant such attachment because it is so much like another one that is
also available. Such seemingly irrational loyalties are often encountered,
for example, in relation to clubs, football teams, and political parties.
The greatest interest centers here naturally on those "perverse" or
pathological cases where an organization is in effect equipped with a
reaction mechanism to which it is not responsive: those who are affected
by quality decline do vent their feelings in one way or another, but
management happens to be inured or indifferent to their particular
reaction and thus does not feel compelled to correct its course.

In order to retain their ability to fight deterioration those organizations that
rely primarilty on one of the two reaction mechanisms need an
occasional injection of the other.

Drucker, Peter F.,

Managing in Turbulent Times ,
New York, Harper & Row, 1980.

In turbulent times, managers cannot assume that tomorrow will be an
extension of today.

In turbulent times the enterprise has to be kept lean and muscular,
capable of taking strain but capable also of moving fast and availing itself
of opportunity.

Sloughing off yesterday is particularly important these days for the non-
business public service institution.

It is all but impossible for most of them to accept that success always
means organizing for the abandonment of what has already been

By and large, few service institutions attempt to think through all the
changed circumstances in which they operate. Most believe that all that
is required is to run harder and to raise more money.

... to be marginal means to become extinct.

We must therefore learn how to make the existing companies, and
particularly large companies, capable of innovation. We need a strategy
that will enable existing businesses first to identify the opportunities for
innovation and then to give effective leadership in such innovation. It will
no longer be sufficient to extend existing technologies, to broaden them,
modify them, or attempt to adapt them. From now on, the need will be to
innovate in the true sense of the word, to create truly new wealth-
producing capacity, both technical and social.
Innovation means, first, the systematic sloughing off of yesterday.

It means the willingness to organize for entrepreneurship, to aim at
creating new businesses rather than new products or modifications of old

It means, finally, the willingness to set up the innovative venture
separately, outside the existing managerial structure, to organize proper
accounting concepts for the economics and control of innovation, and
appropriate (very different) compensation policies for innovators.

What is "value" for "our" customers? This question, it should be
emphasized, is as important for the public service not-for-profit institution
... as it is for a business. Every institution needs to think through what its
strengths are. Are they the right strengths for its specific business? Are
they adequate? Are they deployed where they will produce results? And
what specifically is the "market" for this particular business, both at the
present time an in the years immediately ahead?

Most businesses manage innovation by promise; the competent
innovators manage by feedback from results.

Naisbitt, John,
Megatrends: Ten New Directions Transforming Our Lives,
New York, Warner Books, 1982.

[Computer technology entered the public's everday lives, and books like
Naisbitt's made it onto the popular bestseller lists. Management theory
was no longer for executives only.]

As our top-heavy, centralized institutions die, we are rebuilding from the
bottom up.

We are shifting from a managerial to an entrepreneurial society.

The new leader is a facilitator, not an order giver.

Hierarchies remain; our belief in their efficacy does not.

The failure of hierarchies to solve society's problems forced people to
talk to one another -- and that was the beginning of networks.
Networks offer what bureacracies can never deliver -- the horizontal link.

The "Old Boy Network" is elitist; the new network is egalitarian.

We will restructure our businesses into smaller and smaller units, more
entrepreneurial units, more participatory units.

204. In the network environment, rewards come by empowering others,

not by climbing over them.

The computer will smash the pyramid: We created the hierarchical,
managerial system because we needed it to keep track of people and
things people did; with the computer to keep track, we can restructure
our institutions horizontally.

Peters, Thomas J. and Robert H. Waterman, Jr.,

In Search of Excellence: Lessons from America's Best-Run
Companies ,
New York, Harper & Row, 1982.
(page numbers from 1984 Warner Books edition)

[This is the all-time number one business management bestseller --

much read, but less practiced. It might be said that Peters and Waterman
offered nothing new. They gave full credit to their forebears. But their
infectious style and the overwhelming weight of their evidence made this
book a revolutionary manifesto of the first order.]

... unusual effort on the part of apparently ordinary employees.

... "product champions" -- those individuals who believe so strongly in
their ideas that they take it on themselves to damn the bureaucracy and
maneuver their projects through the system and out to the customer.

... little teams of people going to extraordinary lengths to get results ...

... small, competitive bands of pragmatic bureaucracy-beaters, the
source of much innovation.

... closeness to the customer ...

... unusual commitment to product quality ...
Whatever the business, by and large the companies were doing the
same, sometimes cornball, always intense, always repetitive things to
make sure all employees were buying into their culture -- or opting out.

Customers reign supreme.

The excellent companies require and demand extraordinary performance
from the average man.

He needs to be at one at the same time to be a conforming member of a
winning team and to be a star in his own right.

... ability to manage ambiguity and paradox ... irrational product
champions ... product-line proliferation and duplication ... intense internal
competition ... extensive and purposeful overlap ... mistakes ... not
knowing what everyone is up to ... treating people decently and asking
them to shine ... producing things that work ... first names, shirtsleeves,
hoopla, and project-based flexibility ... shaping values and reinforcing
through coaching and evangelism in the field ...

... it is attention to employees, not work conditions per se, that has the
dominant impact on productivity.

... a leader's role is to harness the social forces in the organization, to
shape and guide values.

[key words from Karl Weick:] ... improvisation ... opportunities ... new
actions ... arguments ... doubt and contradictions ...

We heard talk of organizational cultures, the family feeling, small is
beautiful, simplicity rather than complexity, hoopla associated with quality
products. In short, we found the obvious, that the individual human being
still counts.

... innovative companies are especially adroit at continually responding
to change of any sort in their environments.

Tools didn't substitute for thinking. Intellect didn't overpower wisdom.
Analysis didn't impede action. Rather, these companies worked hard to
keep things simple in a complex world. They persisted. They insisted on
top quality. They fawned on their customers. They listened to their
employees and treated them like adults. They allowed their innovative
product and service "champions" long tethers. They allowed some chaos
in return for quick action and regular experimentation.

[the eight attributes -- plus one]
1. A bias for action, for getting on with it.
2. Close to the customer. These companies learn from the people they
3. Autonomy and entrepreneurship. The innovative companies foster
many leaders and many innovators throughout the organization.
4. Productivity through people. The excellent companies treat the rank
and file as the root source of quality and productivity gain.
5. Hands-on, value-driven.
6. Stick to the knitting.
7. Simple form, lean staff.
8. Simultaneous loose-tight properties ... they have pushed autonomy
down to the shop floor or product development team. On the other hand,
they are fanatic centralists around the few core values they hold dear.
Above all, the intensity itself, stemming from strongly held beliefs, marks
these companies.

... the real role of the chief executive is to manage the values of the

... love the customers ... making the average Joe a hero and a consistent
winner ... workers can identify with the work they do if we give them a
little say-so ... self-generated quality control is so much more effective
than inspector-general quality control ... nourish product champions like
the first buds in springtime ... allow -- even encourage, as P&G does --
in-house product-line competition, duplication, and even product-to-
product cannibalization ... overspend on quality, overkill on customer
service, and make products that last and work ... "good managers make
meanings for people, as well as money."

The excellent company response to complexity is fluidity, the
administrative version of experimentation.

Interact, test, try, fail, stay in touch, learn, shift direction, adapt, modify,
and see ...

... Management By Wandering Around ...
The top performers create a broad, uplifting, shared culture, a coherent
framework within which charged-up people search for appropriate
adaptations. Their ability to extract extraordinary contributions from very
large numbers of people turns on the ability to create a sense of highly
valued purpose. Such purpose invariably emanates from love of product,
providing top-quality services, and honoring innovation and contribution
from all.

A company is not supposed to compete with itself. But throughout the
excellent company research, we saw example after example of that
phenomenon. Moreover, we saw peer pressure -- rather than orders from
the boss -- as the main motivator.

Division overlap, product-line duplication, multiple new product
development teams, and vast flows of information to spur productivity
comparison -- and improvements -- are the watchwords.

... business management has at least as much to do with pathfinding and
implementation as it does with decision making.

... we have to stop overdoing things on the rational side.

The central problem with the rationalist view of organizing people is that
people are not very rational.

... we like to think of ourselves as winners ... their systems reinforce
degrees of winning rather than degrees of losing.

Simply said, we are more influenced by stories (vignettes that are whole
and make sense by themselves) than by data (which are, by definition,
utterly abstract).

... keep corporate staffs small ... focus on only a few business values,
and a few objectives ... putting up with a fair amount of internal overlap,
duplication, and mistakes just so they won't have to coordinate

... the value of experimenting as opposed to merely detached study.

... that all research and development is inherently risky, that
management's primary objective should be to induce lots of tries, and
that a good try that results in some learning is to be celebrated even
when it fails.
... people must believe that a task is inherently worthwhile if they really
are to be committed to it.

[James Brian Quinn's leadership tasks:]
... amplifying understanding, building awareness, changing symbols,
legitimizing new viewpoints, making tactical shifts and testing partial
solutions, broadening political support, overcoming opposition, inducing
and structuring flexibility, launching trial balloons and engaging in
systematic waiting, creating pockets of commitment, crystallizing focus,
managing focus, managing coalitions, and formalizing commitment ...

... stories, myths, and legends appear to be very important, because they
convey the organization's shared values, or culture.
Without exception, the dominance and coherence of culture proved to
be an essential quality of the excellent companies. Moreover, the
stronger the culture and the more it was directed toward the marketplace,
the less need was there for policy manuals, organization charts, or
detailed procedures and rules. In these companies, people way down the
line know what they are supposed to do in most situations because the
handful of guiding values is crystal clear.

The world of the excellent company is especially open to customers, who
in turn inject a sense of balance and proportion into an otherwise
possibly claustrophobic environment.

... we simultaneously seek self-determination and security.

... if people think they have even modest personal control over their
destinies, they will persist at tasks.

The transforming leader ... is concerned with the tricks of the pedagogue,
the mentor, the linguist -- the more successfully to become the value
shaper, the exemplar, the maker of meanings ... the true artist, the true
pathfinder. After all, he is both calling forth and exemplifying the urge for
transcendence that unites us all.

[James MacGregor Burns:] ... elevating, mobilizing, inspiring, uplifting,
exhorting, evangelizing.

84. [Howard Head:] You have to believe in the impossible.

[Ray Kroc:] ... beauty in a hamburger bun.

... these institutions create environments in which people can blossom,
develop self-esteem, and otherwise be excited participants in the
business and society as a whole.

[James March:] ... organizational design is more like locating a snow
fence to deflect the drifting snow than like building a snowman.

... management's prime task is to select, after the fact, from among
"experiments" naturally going on in the organization.

They experiment more, encourage more tries, and permit small failures;
they keep things small; they interact with customers -- especially
sophisticated customers -- more (all functions of the organization); they
encourage internal competition and allow resultant duplication and
overlap; and they maintain a rich informal environment, heavily laden
with information, which spurs diffusion of ideas that work. Interestingly,
few are very articulate about what they're up to.

Repeatedly we found things a lot more divided up and a lot less tidy than
they should be according to conventional wisdom.

Decentralization of function was practiced where classic economics
would ordain otherwise.

We found example after example of internal competition, of various
teams working on the same thing, of product-line duplication and overlap,
of people pointing with pride to their useful mistakes.

... let them do it any way they want if it makes sense and works ...

We believe we are breaking some important theoretical ground here. We
observed more "chunking," more breaking things up into manageable
units than others professedly have...we see it as a vehicle for enhanced
efficiency as well as a vehicle to foster adaptation and survival.

Internal competition has been a formally mandated policy at P&G since
1930; Sloan explicitly used it at GM beginning in the early twenties.

Tidiness is sacrificed and efficiency is gained. In fact, more than
efficiency is gained. Through chunking, a corporation encourages a high
volume of rapid action. The organization acts, and then learns from what
it has done. It experiments, it makes mistakes, it finds unanticipated
success -- and new strategic direction inexorably emerges.
Burton Klein and others have demonstrated in scores of studies that in
industry, it is never the industry leader who makes the big leap. On the
contrary, they claim, it is the inventor or small guy who makes the big
leap, even in stodgy industries like steel and aluminum in which one
wouldn't expect to find many inventors around.

... a vast array of devices for getting everyone from the junior accountant
to the CEO in regular contact with the customer.

... a restless organizational stance ...

... the excellent companies get quick action just because their
organizations are fluid.

... informality ... open door policies ... Getting management out of the
office ... Management by Wandering Around ... simple physical
configurations ... lots of people sitting together in rooms with
blackboards, working casually on problems ... a Rally ... everybody wins;
applause and hoopla ... rich informal communication leads to more
action, more experiments, more learning, and simultaneously to the
ability to stay better in touch and on top of things.

"Do it, fix it, try it," is our favorite axiom.

... experimental ... experiments ... testing ... experiments ... test ...
experimenting ... tests ... tests ... tests ... tests ... experimentation ...
experiment ...

The customer, especially the sophisticated customer, is a key participant
in most successful experimenting processes...let the user see it, test it,
and reshape it -- very early.

156. ... the customers intrude into every nook and cranny of the business

182. ... dividing their customer base into numerous segments so they can
provide tailored products and services.

The excellent companies are better listeners ... Most of their real
innovation comes from the market.

The fact that these companies are so strong on quality, service, and the
rest comes in large measure from paying attention to what customers
want. From listening. From inviting the customer into the company. The
customer is truly in a partnership with the effective companies, and vice

... the user is supreme as a user and tester of ideas.

The product champion is the zealot or fanatic in the ranks whom we have
described as being not a typical administrative type. On the contrary, he
is apt to be a loner, egotistical and cranky. But he believes in the specific
product he has in mind.
The successful executive champion is invariably an ex-product
champion. He's been there -- been through the lengthy process of
husbanding, seen what it takes to shield a potential practical idea from
the organization's formal tendency toward negation.
The godfather is typically an aging leader who provides the role model
for championing.

... no matter how small the odds of any one thing's working, the
probability of something's succeeding is very high if you try lots of things.

... there was but one key to a people orientation: trust.

... people will respond well to being treated as grownups.

There was hardly a more pervasive theme in the excellent companies
than respect for the individual.

These companies give people control over their destinies; they make
meaning for people.

[Sam Walton:] Our best ideas come from clerks and stockboys.

The theme of fun in business runs through a great deal of the excellent
companies research.

Until we believe that the expert in any particular job is the person
performing it, we shall forever limit the potential of that person, in terms
of both his own contributions to the organization and his own personal

They are obsessed about widely sharing information and preventing
Another of the more striking characteristics of the excellent companies is
the apparent absence of a rigidly followed chain of command. Of course,
the chain of command does exist for big decisions, but it is not used
much for day-to-day communication.

Management doesn't browbeat people with numbers ... the simple act of
putting a measure on something is tantamount to getting it done. It
focuses management attention on that area. Information is simply made
available and people respond to it...we respond better and more strongly
if the information is not blatantly evaluative, beating us over the head.
Passing the information quietly seems to spur us on to greater effort.

... incentives ... The volume of contrived opportunities for showering pins,
buttons, badges, and medals on people is staggering ... When the
number of awards is high, it makes the perceived possibility of winning
something high as well. And then the average man will stretch to

Figure out your value system. Decide what your company stands for.
What does your enterprise do that gives everyone the most pride?

Persistence is vital.

Naisbitt, John, and Patricia Aburdene,

Re-inventing the Corporation: Transforming Your Job and Your
Company for the New Information Society,
New York, Warner Books, 1985.

[Aburdene, Naisbitt's wife, was responsible for much of Megatrends.

Here she got her own byline, signifying the new temper of the times.]

Douglas McGregor's Theory Y, which states, in effect, that people will be
more productive if they are treated with respect, was not wrong; it was
simply twenty-five years ahead of its time.

If you had a choice ... would you work for an authoritarian, hierarchical
company or for one which had built a reputation for respecting people
and offering them a chance to grow personally?

We will not see profits grow if we do not learn how to grow people.

[Steve Jobs:] In general, we hire people who tell us what to do.
Self-management is replacing staff managers who manage people; the
computer is replacing line managers who manage systems.

Acknowledge the informal system that really runs a company and then
throw away the hierarchical structure.

Eliminate ... special parking spots ...

The hierarchical structure where everyone has a superior and everyone
has an inferior surely is corrupting of the human spirit -- no matter how
well it served us during the industrial period.

Change occurs only when there is a confluence of changing values and
economic necessity.

The best and brightest people will gravitate toward those corporations
that foster personal growth.

The manager's new role is that of coach, teacher, and mentor.

Peters, Tom, and Nancy Austin,

A Passion for Excellence: The Leadership Difference,
New York, Random House, 1985.
(page numbers from the Warner Books edition)

[Yin-Yang pairing now neck-and-neck from the pop gurus.]

The pressure to perform in the organizations we will describe -- from
Perdue Farms to the City of Baltimore -- is nothing short of brutal: these
are "no excuses" environments, where radical decentralization frees
people to make anything happen, where training is provided, where
extraordinary results are then routinely expected because the barriers to
them have been cleared away.

We must cultivate passion and trust, and at the same time we must delve
unmercifully into the details.

Internal politics, complacency driven by bigness, and a "Members only"
mentality led to severe problems and hundreds of thousands of
permanently lost jobs.
The number one managerial productivity problem in America is, quite
simply, managers who are out of touch with their people and out of touch
with their customers.

Hewlett-Packard insists that every division get all hands together, in a
common setting, no less than once every two weeks. It's done. The cost
-- enormous. At least by some measures. It takes a lot of time, and a lot
of energy. But how good are you? No better than your people and their
commitment and participation in the business, as full partners, and as
business people.

It's not just a job. It's a personal commitment.

We simply believe that customer-satisfaction measurement --
quantitative and frequently and systematically sampled -- is the single
most significant lead indicator of the future fortunes of virtually any
organization, computer maker, retailer, or bank.

Peters, Tom,
Thriving on Chaos: Handbook for a Management Revolution,
New York, Alfred A. Knopf, 1987.

[On his own, Peters ventured into wilder territory and the crowds watched
with trembling fascination.]

The old saw "If it ain't broke, don't fix it" needs revision. I propose: "If it
ain't broke, you just haven't looked hard enough." Fix it anyway.

... excellent firms of tomorrow will cherish impermanence -- and thrive on

Five areas of management constitute the essence of proactive
performance in our chaotic world: (1) an obsession with responsiveness
to customers, (2) constant innovation in all areas of the firm, (3)
partnership -- the wholesale participation of and gain sharing with all
people connected with the organization, (4) leadership that loves change
(instead of fighting it) and instills and shares an inspiring vision, and (5)
control by means of simple support systems aimed at measuring the
"right stuff" for today's environment.

To meet the demands of the fast-changing competitive scene, we must
simply learn to love change as much as we hated it in the past.
Change in the structure of the organization and in decades-old attitudes
must precede, or at least parallel, technology's application.

What has traditionally been seen as disruptive must now be seen as the
chief source of opportunity ...

Become customer-obsessed.

... uniqueness most often comes not from a breakthrough idea, but from
the accumulation of thousands of tiny enhancements ...

Use systematic word-of-mouth campaigns as the keystone for launching
all new products and services.

What gets measured gets done.

$1.9 billion retailer Nordstrom gets by with a one-sentence policy
manual: "Use your own best judgment at all times."

Whitely, Richard C.,

The Customer Driven Company: Moving from Talk to Action,
Reading, Mass., Addison-Wesley, 1991.

[A clear pattern, and a clear consensus, emerged. Liberals and

conservatives agreed on something.]

For a long time after World War II, companies enjoyed a seller's market --
a market the likes of which we'll probably never see again. Many
businesses lost interest in working for their customers, and yet the
customers still came back ... today companies have to do right by the
customer every time.

... the companies that deliver what their customers want differ from
others in diverse but understandable ways. Perhaps most fundamentally,
they provide high quality not according to definitions they've developed
on their own but rather as the customer defines it. And they achieve that
quality in two dimensions -- product quality and service quality ...
Providing one without the other is usually a recipe for failure.

You create service quality by hiring externally focused people -- people
who like people -- then giving them a vision of service, a knowledge of
what the customer needs, and support that lets them do their job.

15. passim
Create a customer-keeping vision ... Saturate your company with the
voice of the customer ... Go to school on the winners ... Liberate your
customer champions...Smash the barriers to customer- winning
performance ... Measure, measure, measure ... Walk the talk.

A vision is the most fundamental impetus in empowering people to serve

The leader makes the vision real.

... persuading people to complain could be, in fact, the best business
move a company could make.

Smart companies make it easy to complain, and then use the complaints
to address the causes behind customers' dissatisfaction.

52. passim
Focus Groups ... visits to customers ... Customer councils ... Post-
purchase assessments ... Complaints ... Formal training in understanding
the customer.

If in the last twenty-four hours you haven't asked a customer how you're
doing, pick up the phone right now and call one.

And at Fuji Electric of Tokyo, the average employee submits 277
suggestions a year. About 98 percent are put into service, and 80 to 90
percent of those are implemented within a week by the individual's
supervisor without higher authorization.

Peters, Tom,
Liberation Management: Necessary Disorganization for the
Nanosecond Nineties,
New York, Alfred A. Knopf, 1992.

[Peters showed 'em that the outrageous was becoming the standard.]

Barking orders is out. Curiosity, initiative, and the exercise of imagination
is in.
Tomorrow's effective "organization" will be conjured up anew each day.

I don't believe top management should be in the business of strategy
setting at all, except as creators of a general business mission.

... theoretically empowered people ... will never amount to a hill of beans
in the vertically oriented, staff-driven, thick-headquarters corporate
structures that still do most of the world's business.

Just let people know, unmistakeably, that it is up to them to do whatever
is necessary -- and that they shouldn't bother to check with higher-ups
before acting.

... tearing out bureaucratic constraints that got in the way of people doing
what they had known how to do (and wanted to do) all along.

... transition from "sequential" to "simultaneous" product development ...
all key functions ... were represented on the team from the start ... early
and continuing customer (distributor, end user) involvement ...

Let customers shape the project, going beyond customer involvement to
customer leadership.

Visit customers again and again.

IBM defined "close to the customer" for years -- per all the tricks of the
trade (many of which it invented). As the customers changed, though,
IBM didn't. Why? In a word, an enormous, numbing, top-heavy
organization structure. Destroy that structure or else. That's the

The managing director of the firm is first among equals, but barely.

[Dick Liebhaber of MCI:] "We don't shoot people who make mistakes. We
shoot people who don't take risks."

Most of tomorrow's work will be done in project teams.

The customer should perceive that she/he has "created the organization"
Waterman, Robert H., Jr.,
What America Does Right: Learning from Companies That Put
People First,
New York, W. W. Norton, 1994.

[From now on, it's just a matter of looking at the same theory from
different angles.]

... learn from the best, find role models to emulate.

What makes top performing companies different, I would urge, is their
organizational arrangements. Specifically:
They are better organized to meet the needs of their people, so that
they attract better people than their competitors do and their people are
more greatly motivated to do a superior job, whatever they do.
They are better organized to meet the needs of customers so that they
are either more innovative in anticipating customer needs, more reliable
in meeting customer expectations, better able to deliver their product or
service more cheaply, or some combination of the above.

People who feel in control of at least some part of their lives tend to be
healthier, happier, and more effective. Old-style managers thought their
job was to control others. Today's leaders understand that you have to
give up control to get results. That's what all the talk of empowerment is
But we still don't go nearly as far as we could. In this book we'll
examine how Proctor & Gamble, for one, gets not only a happier
workforce but an estimated 30 percent gain in productivity through plant
workers who are essentially self-directed. These people have managers
but no daily supervision in any conventional sense.
Putting control further down the line, even in the hands of the
customer, is quite possibly the most radical departure from past
management practice. It's also the most important.

... innovating -- creating things that customers want or would want if they
could only imagine them.

... the companies that remain successful break themselves into small,
fairly autonomous units. This has the effect of shoving the market
mechanism for making decisions down into the hierarchy and keeps the
upper echelons from doing dumb things.

Organizing in conventional ways says one thing to most people in
companies: "Please the boss." The companies that stay healthy organize
to please their customers and to motivate their people.
... most people pretty much do things their own way no matter what
managers tell them to do.

Collins, James C. and Jerry I. Portas,

Built To Last: Successful Habits of Visionary Companies,
New York, HarperBusiness, 1994.
(page numbers from the 1997 paperback edition)

[Another enormous survey of the successful enterprises -- another

similar conclusion about what works and what doesn't. The revolutionary
orthodoxy had established itself.]

Contrary to popular wisdom, the proper first response to a changing
world is not to ask, "How should we change?" but rather to ask, "What do
we stand for and why do we exist?" This should never change. And then
feel free to change everything else.

... this is not a business book, but a book about building enduring, great
human institutions of any type.

The crucial variable is not the content of a company's ideology, but how
deeply it believes its ideology and how consistently it lives, breathes, and
expresses it in all that it does.

Yet, while keeping their core ideologies tightly fixed, visionary companies
display a powerful drive for progress that enables them to change and
adapt without compromising their cherished core ideals.

Only those who "fit" extremely well with the core ideology and demanding
standards of a visionary company will find it a great place to work.

Visionary companies make some of their best moves by experimentation,
trial and error, opportunism, and -- quite literally -- accident.

The youngest companies in our study were founded in 1945 and the
oldest was founded in 1812.

... we looked at companies throughout their entire life span and in direct
comparison to other companies.

... the builders of visionary companies ... concentrate primarily on
building an organization. Their greatest creation is the company itself and
what it stands for.

... we found that creating and building a visionary company absolutely
does not require either a great idea or a great and charismatic leader.

... the continual stream of great products and services from highly
visionary companies stems from them being outstanding organizations,
not the other way around.

44. [Visionary companies embrace paradox. They strive for ideals and
profits, stability and change, workers' adherence to the "way" and
workers' freedom to experiment, philosophizing and attention to detail,
tradition and innovation.]

Core Ideology = Core Values + Purpose

They articulated what was inside them -- what was in their gut, what was
bone deep. It was as natural to them as breathing ... the key word is

Preserve The Core / Stimulate Progress

Core ideology in a visionary company works hand in hand with a
relentless drive for progress that impels change and forward movement
in all that is not a part of the core ideology.

Like core ideology, the drive for progress is an internal force ... the drive
to go further, to do better, to create new possibilities needs no external

... the specific methods ... Big Hairy Audacious Goals ... Cult-Like
Cultures ... Try a Lot of Stuff and Keep What Works ... Home-Grown
Management ... Good Enough Never Is ...

Packard, David,
The HP Way ,
New York, HarperBusiness, 1995.
(page numbers from the 1996 HarperCollins edition)

[Starting in the 1930s, Packard and Bill Hewlett built a unique company
culture. While the theoreticians spun their theories, these two engineers
walked the talk. In 1957 they wrote it down as The HP Way. It was an
early instance of what Peter Drucker called the "Post-Capitalist"
management philosophy. Lest anyone think the concept is a pipe dream
of wild-eyed radicals and idealistic utopians, just take a look at the multi-
billion dollar success of Hewlett-Packard, and at Packard himself, who
served as Deputy Secretary of Defense under Richard Nixon, and who
counted among his good friends the Joint Chiefs of Staff and former
President Herbert Hoover.]

[A lesson from a high school teacher, 1920s:]
Get the best people, stress the importance of teamwork, and get them
fired up to win the game.

[At General Electric, 1935:]
These tubes were made in batches of twenty, and every tube in the
last batch had failed when I was given the job of getting the next batch
I learned everything I could about possible causes of failure, and I
decided to spend most of my time on the factory floor to make sure every
step was done properly. It soon became apparent that the instructions
the engineering department gave the factory people were not adequate
to insure that every step would be done properly. I found the factory
people eager to do the job right. We worked together to conduct tests
and identify every possible cause of failure, and as a result, every tube in
that batch of twenty passed its final test without a single failure.
That was a very important lesson for me -- that personal
communication was often necessary to back up written instructions. That
was the genesis of what became "management by walking around" at
the Hewlett-Packard Company.

In those early days Bill and I had to be versatile. We had to tackle almost
everything ourselves -- from inventing and building products to pricing,
packaging, and shipping them; from dealing with customers and sales
representatives to keeping the books; from writing the ads to sweeping
up at the end of the day. Many of the things I learned in this process
were invaluable, and not available in business schools.

Our people worked very hard, and we wanted to recognize and
encourage their contribution ... in essence it paid everyone a bonus, as a
percentage of their base pay, should production exceed certain levels ...
Bill and I thought everyone at HP should be included. We wanted to
recognize the contributions of each individual ...

... to hire top-level young graduates from around the country with the
promise that if they came to work for us and we thought it appropriate,
they could attend graduate school while on full HP salary ... an important
factor in the ultimate success of our company.

We thought that if we could get everybody to agree on what our
objectives were and to understand what we were trying to do, then we
could turn them loose and they would move in a common direction.


[The HP Way (second version, 1966):]

1. Profit. To recognize that profit is the best single measure of our

contribution to society and the ultimate source of our corporate strength.
We should attempt to achieve the maximum possible profit consistent
with our other objectives.
2. Customers. To strive for continual improvement in the quality,
usefulness, and value of the products and services we offer our
3. Field of Interest. To concentrate our efforts, continually seeking new
opportunities for growth but limiting our involvement to fields in which we
have capability and can make a contribution.
4. Growth. To emphasize growth as a measure of strength and a
requirement for survival.
5. Employees. To provide employment opportunities for HP people that
include the opportunity to share in the company's success, which they
help make possible. To provide for them job security based on
performance, and to provide the opportunity for personal satisfaction that
comes from a sense of accomplishment in their work.
6. Organization. To maintain an organizational environment that fosters
individual motivation, initiative, and creativity, and a wide latitude of
freedom in working toward established objectives and goals.
7. Citizenship. To meet the obligations of good citizenship by making
contributions to the community and to the institutions in our society which
generate the environment in which we operate.

The key to HP's prospective involvement in any field of interest is
contribution. Our objective is to expand and diversify only when we can
build on our present strengths, and with the recognition that we ahve the
proven capability to make a contribution. To meet this objective, it is
important that we put maximum effort into our product-development
programs. This means we must continually seek new ideas for new and
better kinds of products.

Upon first being approached by a creative inventor with unbridled
enthusiasm for a new idea, Bill immediately put on a hat called
"enthusiasm." He would listen, express excitement where appropriate
and appreciation in general, while asking a few rather gentle and not too
pointed questions. A few days later, he would get back to the inventor
wearing a hat called "inquisition." This was the time for very pointed
questions, a thorough probing of the idea, lots of give-and-take. Without
a final decision, the session was adjourned. Shortly thereafter, Bill would
put on his "decision" hat and meet once again with the inventor. With
appropriate logic and sensitivity, judgment was rendered and a decision
made about the idea. This process provided the inventor with a sense of
satisfaction, even when the decision went against the project -- a vitally
important outcome for engendering continued enthusiasm and creativity.
So how does a company distinguish between insubordination and
entrepreneurship? To this young engineer's mind the difference lay in the
"I wasn't trying to be defiant or obstreperous. I really just wanted a
success for HP," Chuck said. "It never occurred to me that it might cost
me my job." As a postscript to this story, this same engineer later became
director of a department ... with his reputation as a maverick intact.

The fundamental basis for success in the operation of Hewlett-Packard is
the job we do in satisfying the needs of our customers. We encourage
every person in our organization to think continually about how his or her
activities relate to the central purpose of serving our customers.

Decisions were made at the lowest possible level.

The essence of customer satisfaction at Hewlett-Packard is our
commitment to quality, a commitment that begins in our laboratories and
extends into every phase of our operations.

If an organization is to maximize its efficiency and success, a number of
requirements must be met. One is that the most capable people available
should be selected for each assignment within the organization.
Especially in a technical business where the rate of progress is rapid, a
continuing program of education must be undertaken and maintained.
Techniques that are relevant today will be outdated in the future, and
every person in the organization must be continually looking for new and
better ways to do his or her work.
Another requirement is that a high degree of enthusiasm should be
encouraged at all levels; in particular, the people in high management
positions must not only be enthusiastic themselves, they must be able to
engender enthusiasm among their associates. There can be no place for
halfhearted interest or halfhearted effort.
From the beginning, Bill Hewlett and I have had a strong belief in
people. We believe that people want to do a good job and that it is
important for them to enjoy their work at Hewlett-Packard. We try to
make it possible for our people to feel a real sense of accomplishment in
their work.
Closely coupled with this is our strong belief that individuals be treated
with consideration and respect and that their achievements be
recognized. It has always been important to Bill and me to create an
environment in which people have a chance to be their best, to realize
their potential, and to be recognized for their achievements.

The way an organization is structured affects individual motivation and
performance. There are military-type organizations in which the person at
the top issues an order and it is passed down the line until the person at
the bottom does as he or she is told without question or reason. This is
precisely the type of organization we at HP did not want ... and do not
want. We feel our objectives can best be achieved by people who are
allowed flexibility in working toward common goals in ways that they help
determine are best for their operation and their organization.
The close relationships among HP people encouraged a form of
participatory mangement that supported individual freedom and initiative
while emphasizing commonness of purpose and teamwork.

The underlying principle of HP's personnel policies became the concept
of sharing -- sharing the responsibilities for defining and meeting goals,
sharing in company ownership through stock purchase plans, sharing in
profits, sharing the opportunities for personal and professional
development, and even sharing the burdens created by occasional
downturns in business.

The rapid changes in technology make educational and training
activities a necessity for our people. Many of our corporate-sponsored
educational programs are on specific technical subjects, while others
emphasize more general skills ... allowing people time off from work and
supporting them in outside, job-related courses ...

GE was especially zealous about guarding its tool and parts bins to make
sure employees didn't steal anything. Faced with this obvious display of
distrust, many employees set out to prove it justified, walking off with
tools or parts whenever they could ... When HP got underway, the GE
memories were still strong and I determined that our parts bins and
storerooms should always be open ... the easy access to parts and tools
helped product designers who wanted to work on new ideas at home or
on weekends ... the open bins were a symbol of trust, a trust that is
central to the way that HP does business.

Perhaps the most widely publicized example of trust at HP is the
company's program of flexible work hours ... It says that we both
appreciate that our people have busy personal lives and that we trust
them to devise, with their supervisor and work group, a schedule that is
personally convenient yet fair to others.

A primary goal in setting up these divisions was to give each one
considerable autonomy, creating an environment that fostered individual
motivation, initiative, and creativity, and that gave a wide latitude of
freedom in working toward common goals and objectives. We wanted to
avoid bureaucracy and to be sure that problem-solving decisions be
made as close as possible to the level where the problem occurred. We
also wanted each division to retain and nurture the kind of intimacy, the
caring for people, and the ease of communication that were
characteristic of the company when it was smaller.

It has been my experience that most business executives are quick to
praise the concept of decentralization. But when it comes to their own
organization, many are reluctant to adopt it. Perhaps the idea of turning
over a portion of their authority to others is too unsettling.
No operating policy has contributed more to Hewlett-Packard's success
than the policy of "management by objective." ... MBO, as it is frequently
called, is the antithesis of management by control. The latter refers to a
tightly controlled system of management of the military type, where
people are assigned -- and expected to do -- specific jobs, precisely as
they are told and without the need to know much about the overall
objectives of the organization. Management by objective, on the other
hand, refers to a system in which overall objectives are clearly stated and
agreed upon, and which gives people the flexibility to work toward those
goals in ways they determine best for their own areas of
responsibility...There is much evidence, both from history and from
current business experience, to show than an organization offering
opportunity for individual initiative performs better than organizations
operating with corporate directives and tight controls.

Hagel, John III, and Arthur G. Armstrong,

Net Gain: Expanding Markets Through Virtual Communities,
Boston, Harvard Business School Press, 1997.

[The internet arrived, and with it yet another upheaval in management

tactics. But the analysis and the strategy already laid down remained
precisely the same.]

The rise of virtual communities in on-line networks has set in motion an
unprecedented shift in power from vendors of goods and services to the
customers who buy them.

In essence, virtual communities will act as agents for their members by
helping them get increased product and service information...

In addition to published content, virtual communities provide
environments for the generation and dissemination of member-generated
content. This is perhaps the single most empowering element of a virtual

The business model thus shifts from one in which the organization
"pushes" products or services on target customers toward one in which it
acts as an agent for customers, representing and championing their
interests as they seek improved access to resources.

Virtual communities are about aggregating people. People are drawn to
virtual communities because they provide an engaging environment in
which to connect with other people...

A key assumption driving the formation of virtual communities is that
members will over time derive greater value from member-generated
content than from more conventional forms of "published" content.

No combination of "published" experts could match the collective insight
and experience of a community of people who share a passionate

Peters, Tom,
The Professional Service Firm 50,
New York, Alfred A. Knopf, 1999.

[According to Peters, balancing these two -- bold assertiveness and

patient listening -- is the key to success.]

Provocative Times call for Provocative Approaches


Siegel, David,
Futurize Your Enterprise,
New York, John Wiley & Sons, 1999.

[Siegel wrote an elaborate how-to book. He admitted that hardly anybody

had dared to put it into practice. But he insisted that the future belonged
to those who did.]

... I've found that 90 percent of the problems companies have online are
caused by management, not technology.

... transform your management-led organization into ... a customer-led

... the future, in which the Internet is no longer a tool but a platform for
work, community-building, and individual empowerment.

As more companies wake up to the reality of the Internet, they will ask
not how to build a website but how to build a web business.

In the Old World, the customer had little choice. In the New World,
customers will have all the power.
... your customers can make all the strategic decisions you thought you
needed to make.

... web site into the strategy tool it should be -- not the marketing
mouthpiece it has become.

... new thinking at the top is the only way to begin ...

... let your customers lead the way ... let your customers pull you where
you need to go.

... away from products and toward customers.

The company provides ways for the customer to talk not only with the
employees but with other customers as well.

... a web site that listens.

A management-led company relies on management's vision to set the
course. A customer-led company is completely aligned with customer
groups, both internally and externally. A customer-led company
encourages conversation between customers and employees. Rather
than shifting away from personal contact, a customer-led company
actually encourages contact with the employees and facilitates
customers meeting each other. This new emphasis on listening creates
the conversations that move the company forward.

A customer-led company fosters loyalty through relationships.

... customers can send e-mail directly to almost anyone in the company

... learn how to swim in the turbulent sea of customer demands and
changing business rules.

The number one problem with most web strategies is that decision
makers exercise too much control and not enough responsibility.

... web effort not as a new business opportunity, but as a completely new
[customer groups meet in website "neighborhoods"]

Most web strategies fail because they start with the company's mission
statement and end with a call to action.

As customers work their way up the loyalty pyramid, your company must
reward them at every step.

... a management-led company has mechanisms for listening to
customers yet still has divisions based on products and service offerings.
On the other hand, a customer-led company focuses on groups of
people, rather than type of products or services.

Steve Ballmer said, "Whenever you feel lost, ask your customers."

There is only one way to do e-business: fully committed. Everyone in the
company must be dedicated to the effort. You can't have ten people for
every thousand working on it. You can't delegate it. You have to
encourage everyone. To jump into the water and support them in
teaching each other to swim. I'm asking you to make the biggest cultural
change in your company's history. Fortunately ... you don't have to do it
alone. Your customers will be more than happy to do more than their
share of the work.

... e-customers are an exponential source of energy without equal in the
offline world.

Everyone loves to express an opinion.

People naturally prefer to place themselves as anchors in their own
frame of reference.

[Divide your customers into categories of increasing responsibility and
rewards: Beginners, Intermediates, and Experts.]

For the first time in history, individuals have access to ... a mainstream
distribution mechanism, and they are starting to distribute the truth in
ways that bring new meaning to the word "underdog."

Online, customers take on a different personality: ... they ask hard
questions; they expect answers.
... break the grip of a corporate culture that insists on putting a sparkling
clean shine on every message it sends.

Online, you have no choice but to tell the truth about your product or

Consumer advocacy has much more leverage online than it does in the
world of traditional mass media.

The World Wide Web is a democracy with no constitution. No one's in
charge. It's bigger than any corporation or government. And it works.

Meritocracies will replace hierarchies. An internal labor market in your
company will run without any authoritarian control. People will assign
themselves to projects.

In the New World, hierarchies are death traps.

... when people ... can easily hook up with each other, authority shifts to
the individual.

Online, size is not an advantage. Truth is.

Managers who empower individuals will become more powerful

Internet standards -- e-mail, web pages, web servers, and so on -- are in
the public domain. They are fast becoming the dominant platform for
intracompany communication. These standards make additions and
modifications easy. Any company trying to enforce the use of proprietary
products will be unable to take advantage of all the new web-based tools.

Everyone in the company should have internet access ... The more
connected your employees are, the more they can help each other. A
web-savvy manager sends a comprehensive e-mail message to
everyone in the company once a week.

... hierarchies tend to reinforce established methods and stifle change.
The best way to blow up the org chart is to encourage people to ignore it.
The web-savvy executive knows she is the catalyst for breaking down
traditional hierarchies. The first thing she does is to make the web group

... integrate the Internet into everyone's job.

Today's web sites mirror their companies; tomorrow's companies will
mirror their web sites.

Most web projects fail for political reasons.

Too many companies see the web site as a threat, a liability, or a contest
-- not a new way of doing business.

A poor web site is a sure sign it's time to fix the company.

... patients who are sharing their stories and helping each other online ...
"Ask Your Doctor About Acid Reflux" isn't going to work anymore.
Patients will ask their search engines about acid reflux, and in a few
minutes they'll know more than their doctors do.

The company needs to learn much more about patients, so it can engage
them in a constructive dialog on new approaches.

... become proactive rather than reactive online.

... adopt a corporate lifestyle that encourages employees to take a long
term view of the Web rather than looking for quick fixes ...

Does the Internet force a ... company ... to rethink its mission statement?
Yes. That's the point of this book.

Companies that seek to improve the quality of their customers' lives ...
will thrive online. Companies that try to keep their customers in the dark
will remain blinded by their own propaganda.

... the Customer-Led Revolution ... It is time for the inmates to run the
In the face of this change, managers must remember: It is not their job to
transform their companies from management-led to customer-led. It is
their job to create the environment and set the examples that allow the
transformation to take place on its own.

Between now and 2010, customers will become ten times more powerful
than they are in 2000.

Drucker, Peter F.,

Management Challenges for the 21st Century,
New York, HarperBusiness, 1999.

[In his 90s and still going strong, Drucker showed himself equal to the
challenge of the cybernetic times.]

... the starting point for management can no longer be its own product or
service, and not even its known market and its known end-uses for its
products and services. The starting point has to be what customers
consider value ... the customer never buys what the supplier sells. What
is value to the customer is always something quite different from what is
value or quality to the supplier.

But unless it is seen as the task of the organization to lead change, the
organization -- whether business, university, hospital and so on -- will not
survive. In a period of rapid structural change, the only ones who survive
are the Change Leaders.

The more an institution is organized to be a change leader, the more it
will need to establish continuity internally and externally, the more it will
need to balance rapid change and continuity.

To try to make the future is highly risky. It is less risky, however, than not
to try to make it.

More and more people in the workforce -- and most knowledge workers
-- will have to MANAGE THEMSELVES. They will have to place
themselves where they can make the greatest contribution; they will have
to learn to develop themselves.

Managing Oneself is a REVOLUTION in human affairs. It requires new
and unprecedented things from the individual, and especially from the
knowledge worker. For in effect it demands that each knowledge worker
think and behave as a Chief Executive Officer.
Levine, Rick, et al.,
The Cluetrain Manifesto,
Cambridge, Perseus Books, 2000.

[Four authors, one megahit.]

[from the 95 Theses:]

1. Markets are conversations.
7. Hyperlinks subvert hierarchy.
55. Command and control are met with hostility by intranetworked
knowledge workers and generate distrust in internetworked markets.


... there's also a metaphorical firewall separating these conversations,
and that wall is the traditional, conservative, fearful corporation.

Conversations are where intellectual capital gets generated.

Could it be that companies are afraid the Internet and intranets will make
people smarter?

Workers have had it with repressive management that just gets in the

In healthy intranet environments, work gets coordinated via cooperation
and negotiation among colleagues. But these things happen very fast,
not in committee meetings. This why employees need more power in
organizations -- not to lord it over others, but to make intelligent decisions
on the fly and not see them overturned two days later by managers who
don't know the territory.

Top-down command-and-control management has become dysfunctional
and counterproductive.

Great intranets come from corporate basements, not from boardrooms.

It all goes back to fear of losing control.

The word that's passing like a spark from keyboard to screen, from heart
to mind, is the permission we're giving ourselves and each other: to be
human and to speak as humans.

... our daily browsing experience has a very strong flavor of individual
authorship. Inevitably, our heightened awareness of distinct, individual
voices engenders the urge to talk back, to engage, to converse. The
software and mechanisms developed helter-skelter for the Net cater to
these urges. Chat, free e-mail, automatic home pages -- all reinforce our
feeling that not only is it easy to enter into discourse with others, but also
that we're by God entitled to wade into the conversational stream.
Heaven help you if you get in my way, or try to stifle my voice.


The first markets were filled with talk.


... Aetna built into its intranet the sort of information ... employees were
looking for. You can get information about how to adopt a child, for
example, or how to arrange for a college scholarship for your kids.

[Locke and Weinberger:]

The Web got built by people who chose to build it. The lesson is: don't
wait for someone to show you how. Learn from your spontaneous
mistakes, not from safe prescriptions and cautiously analyzed


I am not a company. I am a human being.


... employees want to be able to run barefoot through the tall grass of

Controlling information is like trying to control a conversation: it can't be
done and still be genuine.

The old model of keeping drafts secret until the moment of publication
has been broken; ideas are now public from the moment of their
People are brought in not because they are in a chain of command but
because they have necessary skills, share interests, and are fun to work

... the Web lets everyone talk to everyone, in every department, across
divisions, with strategic customers and even competitors. There are no

... we seem to think having everyone vote works when it comes to
running a country...

Hamel, Gary
Leading the Revolution,
Boston, Harvard Business School Press, 2000.

[Sorry, stiffcollars, it's all over now.]

... the real story ... is not "e," but "i," not electronic commerce, but
innovation and imagination.

... only those companies that are capable of creating industry revolutions
will prosper in the new economy.

... passion is just as important as profits.

... change has changed. No longer is it additive. No longer does it move
in a straight line. In the twenty-first century, change is discontinuous,
abrupt, seditious.

In this new age, a company that is evolving slowly is already on its way
to extinction.

[The nature of change has changed from Cycles to Progress to


... we have developed the capacity to interrupt history ...

Those who live by the sword will be shot by those who don't.

By the time an organization has wrung the last 5 percent of efficiency out
of the how, someone else will have invented a new what. Inventing new
whats -- that's the key to thriving in the age of revolution.

Yet in the age of revolution it is not knowledge that produces new wealth,
but insight -- insight into opportunities for dis-continuous innovation.

In a nonlinear world, only nonlinear ideas will create wealth. Most
companies long ago reached the point of diminishing returns in their
incremental improvement programs. Continuous improvement is an
industrial-age concept, and while it is better than no improvement at all, it
is of marginal value in the age of revolution. Radical, nonlinear innovation
is the only way to escape the ruthless hypercompetition that has been
hammering down margins in industry after industry. Nonlinear innovation
requires a company to escape the shackles of precedent and imagine
entirely novel solutions to customer needs.

Industry revolutionaries take the entire business concept, rather than a
product or service, as the starting point for innovation.

Industry revolutionaries don't tinker at the margins; they blow up old
business models and create new ones.

If technology is going to become anything other than a great leveler,
CIOs will have to become Chief Imagination Officers.

Business concept innovation will be the defining competitive advantage
in the age of revolution.

... how to build a deeply embedded capacity for strategy innovation.

... climb over the walls of your Dilbert cell and take responsibility for
something more than your "job."

You've been told that a change must start at the top -- that's rubbish.
How often does the revolution start with the monarchy?

Customers are co-developers, providing real-time feedback in an endless
cycle of experiment, adapt, experiment, adapt.

Profitable growth is a derivative of innovation.
Executives must be willing to be brutally honest about the rate at which
their current strategy is decaying.

Can you think beyond new products and new services to entirely new
business concepts -- ones that meet deep customer needs in
unconventional ways?

In the new economy, the unit of analysis for innovation is not a product or
a technology -- it's a business concept.

If your company is not experimenting with radically different business
models, it's already living on borrowed time.

... innovation comes from a new way of seeing and a new way of being.

That's why you must learn to see different and be different.

Be a novelty addict.

... to teach someone in your organization... build a story ...

If you dismiss the stuff that strikes you as weird, you have virtually no
chance of finding the new. It's as important to be weird as wired.

Familiarity is the enemy.

Be a heretic.

Heretics, not prophets, create revolutions. 136.
Industry revolutionaries create strategies that are subversive, not

Analysis can help you avoid truly bad strategies, but it will never help you
find truly great strategies.

You must build a powerful grassroots constituency for business concept
If companies are going to thrive in the age of revolution, they are going to
have to become less like autocracies and more like democracies.

[Paraphrased selections from chapters:]

Chapter 5

Be relentless.
Ignore the chain of command.
Borrow resources from everywhere.
Enroll supporters from everywhere.
Put your job on the line.
Start with a bold vision.
Start with an achievable project.
If you have to, go underground.
Achieve early success, then ask permission.
Keep learning more.
Present impeccable data.
Serve a larger cause.
Give examples from your company's history.
Small successes lead to big ones.

Chapter 6

Build a point of view.

Write a manifesto.
Create a coalition.
email list, web forum
lunches, evening meetings
Target a higher-up and...
strike when you reach critical mass.
Respect management.
make reciprocal help offers
disarm, don't demean
co-opt, don't confront
Win small, win early, win often.
Go from isolation to infiltration to integration.

Chapter 7

Get inside the customer's skin.

Work from the customer to the company.
Experiment, experiment.
Innovation arrives from outside.

Chapter 8

Set outrageous goals.

Define yourself broadly.
Serve a great cause.
Bring in new, young people.
Encourage idea-birthing.
Listen to the stories.
Give people exhilirating work.
Be fast and thrifty.
Give new projects independence.
Treat your people like entrepreneurs.
Give them a share in the equity.

Libraries will never be the same.

Or else they will never be.