BCG Henderson Institute

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Sooner or later, every technological revolution gives rise to an organizational revolution. To realize the potential of new technologies, companies devise new ways of working; those that fail to adapt end up losing in the marketplace. The steam engine was fully exploited only with the development of the early factory system, the process technologies of the late 19th and early 20th centuries with the development of scientific management.

Now, business is in the midst of a wholesale digital transformation. Companies across the economy are using digital technologies and advanced analytics to unlock new sources of economic value and achieve step-function improvements in customer focus, productivity, flexibility, and speed. Parallel to this digital transformation is an organizational revolution-in-the-making, transforming not just what companies do but how they do it.

Take, for example, the recent popularity and rapid spread of agile. The term is shorthand for a variety of approaches to organizing work that emphasize small, self-managed, multidisciplinary teams with end-to-end control of product development, service delivery, and other business tasks; rapid cycles of activity known as sprints; and a test-and-iterate approach to performing work.

Agile started in software development, but as software and digital applications become more and more central to a broad array of industries — finance, retail, even industrial sectors being transformed by the Internet of Things — the approach has spread far beyond the software industry. And companies are increasingly applying the agile model to nonsoftware activities such as marketing, customer service, and other traditional business functions.

Agile is only the most recent example of work innovations emphasizing autonomous, self-managed teams. Other approaches that companies have been experimenting with in recent years go by a bewildering variety of names: lean, holacracy, the polycratic organization, and the exponential organization, to list a few.

But in this organizational revolution-in-the-making, a critical piece is missing. Companies lack a compelling model for the role of management.

Some agile champions seem to assume that the approach makes management irrelevant or even obsolete. “Why Do Managers Hate Agile?” reads the title of a commentary in Forbes by an agile consultant. His answer: because agile inevitably (and rightly) undermines their status, power, and control. In a world of self-organizing, autonomous teams, a lot of what passes for traditional management is no longer necessary. Or as the title of a webinar on the subject puts it, “(In Agile) Where Do All the Managers Go?

Such perspectives circle around the right question: how do managers create value in the new work environment? But I think they have the answer exactly backwards. They embrace a traditional concept of management only to declare it irrelevant to the new way of working.

The challenge of the organizational revolution represented by agile and other new approaches is not that they make management somehow irrelevant or obsolete. Quite the opposite: they make management more important than ever before. But they also transform what managers — from the very top of the organization to the frontline of the business — have to do and how they need to work. In some cases, they even redefine who needs to be a manager.

Until organizations develop a management model that is equal to the challenges of the organizational revolution taking place today, that revolution won’t be successful.

  • Yves Morieux

    Alum Fellow (2019-2022), Relational Productivity

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