New giants like Amazon, Google, Apple, and Facebook, along with emerging ones like Uber and Airbnb, reap the benefits of new phenomena: the “winner take all” network effects. Advancing technology will leave no aspect of working and private life unaffected — as many more of us will learn as automation expands beyond manual and service work and into the realm of knowledge work. With this article the blog series on HBR for the Drucker Forum 2015 was kicked off.

1. Over the last 250 years, waves upon waves of scientific
and engineering advances have brought about an
accelerating rise in living standards that even the two
deadliest wars in history could not reverse. In recent
decades, the digital revolution, propelled by Moore’s
Law, has delivered the most far-reaching yet of general
purpose technologies: digital connectivity, which is
transforming the entire economy by augmenting the
power of the human brain just as surely as steam, the
internal combustion engine, and electricity transformed
the world by augmenting human brawn.
But as stunning as humankind’s technical achievements
have been, they have been only half the story of
progress. The advent of the modern organization and
the practice of management constitutes a “social tech-
nology” that has been equally transformative.
The forces of technology and management will cont-
inue to hold equal sway as the 21st century unfolds.
Just as those previous technologies brought about
dramatic changes in the human condition — including
urbanization, mass literacy, large-scale employment,
and generalized healthcare — today’s breakthroughs
will upend much of the socio-economic infrastructure
that was built over the past two centuries. Tumbling
transaction costs are altering the economics of
organizations and, at a stroke, invalidating old business
models. New giants like Amazon, Google, Apple, and
Facebook, along with emerging ones like Uber and
Airbnb, reap the benefits of new phenomena such as
“winner take all” network effects.Advancing technology
will leave no aspect of working and private life unaf-
fected — as many more of us will learn as automation
expands beyond manual and service work and into
the realm of knowledge work.
The question is: How will management advance to
influence the path and force of these revolutions? In
the past, the effects of technological change were very
much shaped by business leaders’ embrace of scientific
management with its emphasis on efficient uniformity,
and by simplifying assumptions about the behavior
of economic man and the efficiency of bureaucratic
organizations. But increasingly this industrial-age
management mindset is becoming an impediment to
our fully realizing the promise of the digital revolution’s
technologies. Our accustomed modes of thinking
are straitjackets constraining the human energy and
creativity these tools could unleash.
Consider management actions such as cutting jobs
and investment as a response to currency fluctuations
and the resulting accounting impact of those cuts on
earnings per share (EPS). These types of cuts are
applauded as canny, even heroic, by stock markets —
despite their damage to the longer-term value-creating
capacity of the enterprise. Share buybacks are pre-
ferred to investment in innovation, entrepreneurship,
and value creation. And internal innovation often
April 7, 2015
Managing in an Age of
Winner-Take-All
by Richard Straub

2. obsessively targets cost cutting instead of the search
for new waysto delight customers or to enable emplo-
yees and partners.
All such moves make sense according to the impla-
cable logic of 20th-century measurements, formulas,
and algorithms. There is just one problem: The most
important indicators — the unmeasurable ones like
trust — are missing from the equations. Our ways
of measuring success are reductive and backward-
looking. Based on an assumption that the business will
just keep doing what it has done in the past, except
more efficiently, they offer little guidance in innovation
and the creation of new value. Even worse, they
downgrade the human being to a mere resource, no
more privileged than others in the design of systems to
produce short-term gains for shareholders.
Peter Drucker observed decades ago that large
organizations and institutions are among the
“constitutive elements” of modern society — pillars,
if you will, to uphold the values and provide the bene-
fits people hold dear — and given their growing scale
this is more true today than ever. But the measures
at the heart of today’s management fundamentally
misdirect those who are supposed to act as their
stewards. This is a situation that cannot endure.
Corporations operate at the behest of societies, and
are able to do so only because of great privileges
conferred on them (not least their very status as legal
entities). The reciprocal duty of care to society is
therefore not a charitable option, but a fundamental
obligation of management.
The digital revolution — the “mother of all technology
developments”— marks a fork in the road. One path
invites us to depart from industrial-age management
practices and mindsets and use the power of informa-
tion-age technology to augment humanity’s role and
importance in business. The other tempts us to apply
the new abundance of data and expertise in creating
software routines to automate the old logic of organi-
zations, effectively hard-wiring the most dysfunctional
rules managers relied on in the past.
To assume that businesses will succeed better by
replacing more of their human factor with automated
decision-making is to ignore much of the evidence
around us. There are ample signs of the limits of
rational logic and algorithmic determinism in complex
social settings — and always, of the precious, unique
capacities of human beings. Education expert and
psychologist Howard Gardner has shown that analytical
intelligence is just one of seven intelligence skills.
The most important decisions are made where the-
re is no replicable logic or algorithm. Rather, they
consciously depend on human judgment, intuition,
creativity, empathy, and values. This is the domain of
entrepreneurial thinking and innovation, of strategy
setting, of forming partnerships full of collaboration
and trust — work that cannot be done better by what-
ever Singularity-seeking AI-creature the engineers in
Silicon Valley might come up with.
Never in human history has there been a better
opportunity to create a new world of prosperity for
all. As the ultimate general purpose technology that
pervades all aspects of life, digital technology has the
potential to unleash what researcher Carlotta Perez
calls “a new Golden Age”— one that could surpass the
achievements of the steam, electrical, and fossil fuel
revolutions. However, this outcome depends on the
choices of those in a position to allocate economic
resources. In other words, it depends on visionary
management.
As Drucker put it: “Managers are society’s major
leadership group … They command the resources of
society.” Will these leaders choose to put the “creative”
back in the process of creative destruction by privi-
leging entrepreneurial investment in customer- and
market-creating innovation over short-term profits?
Will they use big data, analytics, and artificial
intelligence in ways that augment rather than automa-
te human judgment and values, taking them as what
they are: tools and instruments to help us navigate
a complex world?
To do so will require a new synthesis of the prevalent
technocratic logic with a deep understanding of the
human condition — nothing less than a reframing of
management (along the lines traced by Drucker and
others) to combine the best of art and science, imagina-
tion and logic, as a liberal art for the 21st century.
www.druckerforum.org
Dr. Richard Straub is president of the Peter Drucker
Society Europe - a non-profit organization that he
founded after a 32-year career at IBM. He is an executive
director at the EFMD, Secretary General of the European
Learning Industry Group (ELIG), and serves the IBM
Global Education Industry in a strategic advisory role.