An Entrepreneur’s Guide to Radical Management – A Conversation with Steve Denning

I first met Steve Denning this past December at 800-CEO-READ‘s author Pow-Wow, an inspiring gathering at Milwaukee’s Iron Horse Hotel. Steve struck me as a friendly, unassuming person who didn’t want to stand out amid the bustling crowd of ambitious authors and publishing professionals.

When I asked him about his work, he calmly replied that he wanted to transform the world’s organizations — how they are constructed, led and managed.  This was my first glimpse into the audacious inner world of Steve Denning.

Since that first meeting, I’ve come to marvel at the formidable intellectual engine that runs beneath his steady exterior. In addition to having written eight books since 2000, including award-winners The Secret Language of Leadership (Jossey-Bass, 2007) and A Leader’s Guide to Radical Management: Reinventing the Workplace for the 21st Century (Jossey-Bass, 2010), Steve is a prolific blogger on Forbes.com and maintains a web site full of thoughtful, stimulating content.

I saw Steve again at a SXSW book party in March, and we discussed some intriguing connections between our areas of focus. In his book, A Leader’s Guide to Radical Management, he has taken dead aim at traditional management approaches that grew out of industrialization and corporate proliferation over the past century and a half. Most of these dysfunctional management approaches cause an organization’s entrepreneurial musculature to atrophy or die off altogether. So it’s not surprising that the spirit and core principles of Steve’s radical management framework are inherently entrepreneurial.

Steve agreed to share his thoughts with me about how his principles apply to early-stage ventures, and how the right practices can be instilled early in the life of a business:

What are the basic tenets of radical management?

Radical management is a set of managerial practices that have emerged to deal with fundamental changes in the marketplace (global competition, accelerating technological change and a power shift from seller to buyer) and in the workplace (shift from semi-skilled labor to knowledge work). Radical management involves five fundamental shifts from the traditional management that was pervasive in 20th Century organizations:

  • A shift from a “push” or “inside-out” mindset to a “pull” or “outside-in” mindset, in which the goal of both the firm as a whole and of individual units is delivering more value to clients and customers sooner. This goes beyond “adopting a customer focus” or “satisfying the customer”. It means the whole organization is focused on continuously finding new ways to delight its clients and customers. It means a recognition that the customer is the boss.
  • A shift in the role of managers from controllers of individuals to enablers of self-organizing teams.
  • A shift from bureaucratic methods of coordinating work to methods of coordination in which the work is performed by self-organizing teams in short cycles with rigorous quality testing and direct feedback from clients or  customers (or their proxy) after each cycle.. The new methods of coordinating work have been called “dynamic linking”.
  • A shift from a single-minded focus on efficiency and cost reduction to a broader set of values that will grow the business, particularly radical transparency and continuous improvement.
  • A shift from top-down communications to horizontal adult-to-adult conversations.

How do these principles apply to the process of conceiving and launching a new business?

For the most part, successful startups tend to operate naturally in a radical management mode. That’s because unless the startup is focused on delighting its initial customers, it will never get off the ground. And customers are unlikely to be delighted unless the work is done by self-organizing teams and the coordinated in an unbureaucratic fashion. However once the new business begins to take off and the firm starts to grow, the firm starts to think about establishing order and discipline by introducing “management”.

If the firm introduces the kind of hierarchical bureaucracy that is still taught in business schools and propagated by consultants, then the firm may succed in establishing order but it will lose the capacity to innovate, thus crippling its long-term future.

The alternative is to run the firm with the principles of radical management that combine disciplined execution with continuous innovation, i.e. no tradeoffs.

Which principles are most likely to impart a competitive advantage for a startup, and why?

The five shifts of radical management are systemic in nature. The principles need to be implemented in an integrated, systemic way, rather than in a piecemeal fashion.

Implementing only one or two of the principles, while operating in a traditional fashion in other areas, won’t work very well. For instance, if you deploy self-organizing teams but communicate through top-down commands and maintain a single-minded focus on improving efficiency, the teams will quickly become dispirited and customers are unlikely to be delighted. In effect, the undertow of traditional management will kill the potential of teams. It’s doing all of the shifts at once that yields the benefits.

That’s because the familiar precepts of traditional management—the goal of making money for shareholders, managers acting as controllers of individuals, coordination of work through bureaucracy, values focused on efficiency and cost reduction, communications through top-down commands—are interlocking and will contrive to undermine single-fix improvements.

That said, the most important of the principles for startups is the first—delight your customers. Unless you are delighting your customers, growing the business won’t be possible. So you need to find out as quickly as possible: what are the customers’ problems and how you can deliver more value to them sooner?

A particular danger of startups is the case of the founder who is an inspiring tyrant. When the firm is small, the founder’s charismatic character may be sufficient to overcome the dispiriting impact of the tyranny. The founder may also instinctively know what customers want and so act as an effective proxy for the real boss, i.e. the customer. If so, the firm may remain dynamic and innovative and responsive to customers, despite the founder’s tyranny. But as the firm grows and people at lower echelons have little or no personal contact with the inspirational founder, the tyranny becomes embedded in the organizational culture without any of the inspiration or the instinctive understanding of what customers really want. Then the firm risks ending up with a steep and rigid hierarchy that is unresponsive to customers and hence unlikely to thrive for long.

How might aspiring entrepreneurs benefit from “the secret language of leadership?”

The “secret language of leadership” is the title of my 2007 book. It refers to the fact that throughout history great leaders have always used to stories to inspire their followers. The book explains how leadership storytelling is a way of communicating that inspires people to embrace new ideas with enduring enthusiasm. Leadership storytelling is a key component of the fifth principle of radical management, namely, communication through adult-to-adult conversations rather than through top-down commands.

Storytelling is a key leadership technique because it’s quick, powerful, free, natural, refreshing, energizing, collaborative, persuasive, holistic, entertaining, moving, memorable and authentic. Stories help us make sense of organizations and of change.

Storytelling translates dry and abstract numbers into compelling pictures of a leader’s goals. Although good business cases are developed through the use of numbers, they are typically approved on the basis of a story—that is, a narrative that links a set of events in some kind of causal sequence.

Storytelling is a crucial tool for startups to communicate their new ideas. Often nothing else works. Charts leave listeners bemused. Prose remains unread. Dialogue is just too laborious and slow. Time after time, when faced with the task of persuading a skeptical audience of investors, customers or employees to get enthusiastic about a new idea, storytelling is the only thing that works.

How can radical management principles help a founding team mitigate and manage early-stage risks?

Radical management can help a startup keep a focus on delighting customers. By working in short cycles, and getting customer feedback at the end of each cycle, the firm is actually conducting scientific experiments as to whether it is on the right track or not.

By getting continuous feedback, you find out about problems quickly. Often the thing that goes wrong is something that no one could have anticipated would be an issue at all. You’re not going to find that out just by talking to people.

As Eric Ries, the lean startups guru, says about what might have gone wrong with Zappos. “People might say, ‘Oh, I’d love to buy shoes online,’ but actually be afraid of it. They might say, ‘Oh, I’d be happy to pay full retail,’ but actually they need a discount. Or it might be the opposite. They might say, ‘No, I definitely want discounts,’ but then maybe the discounts make the shoes look cheap.”

You can spend your days as an entrepreneur worrying about what might go wrong. Since there are an infinite number of things that might go wrong, why do that? Why not go and find out what’s actually going to go wrong as soon as possible. So you put yourself in a position for stuff to fail, so that then you can learn what will actually work.

How (why) do business leaders “lose their way” as startups grow and mature?

As a startup takes off, it grows and so the leadership is confronted with the challenge of establishing order in this bustling thriving new enterprise. If the firm gets advice from consultants or listens to what is taught in business schools or imports managers from established organizations, there is a risk that the disease of 20th Century hierarchical bureaucracy will be imported into the firm. At first, it may appear that the new management is successful, as order is established and costs are cut, but in reality, the firm has just started down a path that in the 21st Century will lead to stagnation and eventual death. The hierarchical bureaucracy that is put in place will lack the agility to thrive in today’s marketplace.

What is the single most important piece of advice you would give to a startup founder who wants to grow a healthy business over time?

The most important advice is to focus everything and everyone in the organization on delighting customers, i.e. finding ways to deliver more value to customers sooner. Anything that is not contributing to this goal should be eliminated. Anything that is contributing to this goal should be enhanced. Customer delight becomes the bottom line of the organization.

 

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