Management Innovation

The Eastern Academy of Management (EAM), an association of management educators in higher education, recently posted a call for papers for their May 2014 conference in Newport, RI. The first paragraph reads as follows:

“Much of today’s management practice comes from the last century. We saw a surge of management innovation at the beginning of the last century in the midst of the industrial revolution. We are now in the midst of an information revolution. What will become the new management practices?”

Actually, what happened in the 20th century was a surge in two forms of management innovation: one for supply-driven, seller’s market-oriented batch-and-queue material and information processing, and one for demand-driven, buyers’ market-oriented flow. Batch-and-queue management practice became the norm because it was a better fit for the dominant market type in the early 20th century. Flow became a niche management practice because demand-driven buyers’ markets were much less common.

Supply driven, sellers’ market-oriented batch-and-queue became more deeply entrenched as the preferred management practice as computer systems were developed in the 1960s to automate various business transactions. The great effort made by people to learn batch-and-queue management practice and the large financial investments in hardware and software to support batch-and-queue management practice made it very difficult to displace. As a result, Lean remains a niche management practice today – despite the predominance today of demand-driven buyers’ markets.

The management practice that will likely dominate in the near future will be batch-and-queue because few managers (or management educators) recognize the need to align management practice with the type of market served or the importance of flow. Yet, the niche 20th century management innovation, what today we call “Lean,” perfectly suits the need. The EAMs characterization of the times we live in as “an information revolution” requiring new management practices dismisses the existence of Lean. That is a big mistake that management educators, of all people, should not make.

At the behest of Taiichi Ohno, his disciples, Yoshiki Iwata, Chihiro Nako, and Akiro Takenaka started a company in 1987 called Shingijutsu Co., Ltd., to teach Toyota’s production (management) system to others. The word “shingijutsu” means “new technology,” as in new management technology. The idea was that sellers’ market-oriented batch-and-queue management practices was the “old management technology,” while buyers’ market-oriented management practices designed to achieve material and information flow was the “new management technology.”

The evolution of Lean over the last 100-plus years correctly foretold today’s management (and customer) needs. You might say the pioneers of progressive management were ahead of their time. I would say that they steadily laid the groundwork for the exact management system that we need now and into the future.

The EAM call for papers also posed the questions: “How will management education change? How might we shape the future of management practice and education?” The answer is simple. Management educators should teach demand-driven, buyers’ market-oriented flow. And they should compare that to supply-driven, seller’s market-oriented batch-and-queue material and information processing to draw sharp contrasts that will highlight the wide-ranging benefits of Lean.

In 1922, Harlow Person, a contemporary of Frederick Winslow Taylor long-time proponent of Scientific Management, said the following:

“On a sellers’ market the conduct of a business is easy and management is simple – in fact, there does not have to be any real management. But now that you appear to be face to face with a buyers’ market and the necessity of developing real management, if you are to be successful in a most intense competition, if your competitor, instead of yourself, is to be the one to disappear in some readjustment of productive capacity to consumer demand, it is expedient for you to inquire into the nature of that real management [Scientific Management]… ‘the customer is king’… we forget the source of the impulse [for industrial activity] and come to believe that it starts with the producer.”

In addition, they must also compare and contrast the leadership characteristics and routines associated with demand-driven Lean and supply-driven batch-and-queue. The two could not be more different. The former will show clear advantages that support the wants and desires of employees, customers, supplier, investors and communities. I offer management educators my research papers and books to help them get started.

Source: H.S. Person, “Shaping Your Management to Meet Developing Industrial Conditions,” Bulletin of the Taylor Society: A Society to Promote the Science and the Art of Administration and of Management, New York, N.Y., Vol. 7, No. 6, December, 1922, pp. 211-217. See also REAL LEAN, Volume Two, Chapter 5, “Managing to the Market,” 2007.

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