How The World’s Most Valuable Firms Are Upending The Concept Of Management
by Steve Denning

The Concept of Mindset - GETTY IMAGES

Why The Drucker Forum’s ‘Next Management’ Entails Changing Our Mindsets

The Drucker Forum, as part of its five-year effort to develop “the next management,” gave us a progress report last week. The theme of its conference in Vienna in November will be: “managing for new levels of value creation and innovation” with a particular focus on “knowledge workers.”

Last week’s session provided insights into flaws of current management practices. Speakers noted the need to “change our mindsets,” “invert what we give priority to,” and “upend the way we think.”

The presentations warrant reflecting on the mindsets that the world’s most valuable and fastest growing firms in the U.S. and Europe are already pursuing.

1. Our Current System Of Management Is Broken

“We have to admit,” said Drucker Forum president Richard Straub at the outset of the session, “that we need to repair institutions that are largely considered as broken. Broken in terms of performance and broken in terms of trust. And why are they broken? Because they are badly managed.”

“Over the past century,” said executive educator Tammy Erickson, “we've learned how to develop scale. We've learned all kinds of things about managing efficiency. We've learned how to drive the tiniest elements of cost out of our system. We're really good at those kinds of things. The question then becomes, are those the things we need to be good at in order to differentiate or excel in this century? And the answer is a resounding no.”

2. ‘Next Management’ Means Upending The Way We Think

“Every company today,” said Ms. Erickson, “is thinking about: how do I become more innovative, more collaborative, better able to sense my customers? So it’s a different set of skills. We have to invert what we now give the greatest priority to, because most of our organizations and leadership approaches are optimized around things like efficiency and scale. That's what they were fundamentally set up to do. And then we kind of tack on innovation and those kinds of things around the edges, like chewing gum. And it doesn't work.”

“Our organizations are optimized for efficiency,” Ms. Erickson said, ”which means things like specialization and silos and hierarchical communication. Innovation requires the exact opposite of that. And so we must be willing to upend the way we think about how we design organizations and how we lead organizations. How do I make this a broader application within my organization? It's around changing our mindsets, and I think we can do it.”

“So you've got to have collaborative networks,”
she continued. “You've got to have the agility that allows you to do it, and you've got to want to do it. People have to care. They have to choose to do it. We need thinking-related activities to succeed. Yet we continue to apply industrial ideas to managing thinking processes. And sometimes, frankly, it makes me cry because companies insist on putting in place defined processes and monitoring with various steps and using efficiency metrics. And those things just kill it. “

3. The World’s Most Valuable Firms Have Already Embraced New Mindsets

The theme of the Drucker Forum conference in Vienna in November 2024 was announced to be “managing for new levels of value creation and innovation” with particular attention to “knowledge workers.”

This is therefore an opportunity to consider and digest the extraordinary progress that the world’s most valuable and fastest growing firms have already made in upending their thinking about value creation and innovation: see Figure 1.

As Ms. Erickson anticipated, these firms have already moved towards inverting the way they think about designing and leading organizations. In these firms, management is no longer simply a set of methods, processes and structures.

These firms recognize that the world has changed in three main ways. The internet gave first, to firms, new possibilities for innovation, and then to customers, more choices, and finally to firms again, the potential of new business models that build on network effects. As a result, the fastest growing firms mostly embody different, customer-oriented mindsets that help inspire their staff, create massive value for customers, and enhance the economy.

The terminology used by the firms to describe the new mindsets varies. Apple talks of a different ‘culture’. Microsoft talks about ‘growth mindsets’, ‘empathy’ and ‘values.’ Amazon talks about “working backwards from the customer.” At LVMH, CEO Bernard Arnault talks of giving designers ‘freedom without limits’. At Novo Nordisk, CEO Lars Fruergaard Jørgensen and his team continue to generate major innovation after innovation, with extraordinary financial results.

And it’s not just large firms. Medium-sized firms like Novartis and small firms like Matt Black Systems are on a similar path of discovery at a different scale.

When we use mindsets to direct our systems, we avoid being controlled by our systems.


Purpose is the key to these new mindsets. “There is only one valid definition of business purpose,” wrote Peter Drucker in 1954: “to create a customer.” For the next half century, firms paid little more than lip service to his insight. But in the last quarter-century, the most valuable and fastest growing firms have tended to embrace generating value for customers as the primary goal of the firm.

  • Amazon talks of “customer obsession… long-term growth is best produced by putting the customer first:” Colin Bryar and Bill Carr in Working Backwards (2021).
  • Satya Nadella as CEO of Microsoft “talks of building empathy for our customers and their unarticulated and unmet needs.” Hit Refresh.
  • At Apple, “Customers rightly love Apple for the delight its products bring them:” Inside Apple

Self-organizing Teams And Individuals

Once the most valuable and fastest growing firms embraced the primacy of creating value for customers—a goal that workers could easily embrace—it was natural that they would dis-aggregate big difficult problems into small batches to be performed by cross-functional autonomous teams, with fast feedback from customers and end-users.

Networks Of Competence

In these firms, the firm tends to be seen as a network of competence, thus inverting the concept of the firm as vertical hierarchy of authority. The most valuable and fastest growing firms have tended to shift towards a flexible network of competence with defined interfaces among the self-organizing teams.

Networks of competence tend to replace hierarchies of authority - GETTY IMAGES

Mindsets Also Transform The Firm’s Processes

In industrial-era firms, traditional methods and processes had become almost sacrosanct. But in the last quarter century, the most valuable and fastest growing firms have set out to simplify every process so as to support the new mindsets, particularly in knowledge work.

4. A New Management Paradigm Is Emerging

The “next management” does not need to invent new management from scratch. As Peter Drucker wrote in 1997, “If we look out the window, we can see what is there, but not yet seen.”

What we see is a significant number of large, medium, and small firms in both the U.S. and Europe, demonstrating that different mindsets enable innovating more quickly, operating more efficiently, mobilizing more resources, attracting more talent, winning over customers more readily, and raising more money for new endeavors.

We as customers have mostly embraced the firms’ products and services, which have changed how we work, how we play, and how we live. Although no one can predict the future, and regulatory issues remain to be resolved, the changes seem destined to endure.

A related question is how, and even whether, firms being run with industrial-era management and mindsets. will be able to transition to the new paradigm.

The Drucker Forum’s effort to identify and disseminate the “next management” through value creation and innovation by knowledge workers can make a major contribution.

And read also:

How Mindsets Drive Processes In The World’s Most Valuable Firms

How To Become Agile—Without The Agile Labels


Original article from Forbes, written by Steve Denning and authorized to be published in the World Management Agility Forum by Steve Denning.

Original Article:

Figure 1: Most valuable US, European, Chinese and Japanese firms as of January 25, 2024


Steve Denning May 23, 2024
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