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The challenges facing management in a rapidly changing business environment

Technology and societal changes are dramatically changing the business environment. This article argues the case for organisations to rely less on outdated hierarchical management practice, and embrace the need for adaptability and innovation.

Author(s): David Chan - Cass Business School

The external environment for all enterprises is rapidly changing. The change is fuelled by technology, particularly digital technology and increasing information processing power. Technologies in themselves change nothing but how it is empowering people is transforming enterprise's landscapes.

The 20th Century business landscape was dominated by businesses operating full-service models. The idea was to 'own the customer' and could be seen in retailing chains, TV broadcasters, manufacturing and financial services. We shopped at department stores, bought cars from the forecourt and paid-in at banks.

Full service models are being replaced by a new service framework, with either self or automated services, or, custom services becoming predominant. For example many of us do our banking online. We buy books online and watch TV through internet players. Furthermore, we expect most of these automated services to be free, perhaps paid for by advertising or the provider earning from the use of aggregated behavioural data.

This bifurcation between data and people powered services is set to continue.

Cloud computing, the availability of the world-wide web, mobile devices and good electronic communications are enabling different forms of business and making significant impacts on how we do business and even how we live. Already, 30% of the world's population subscribe to broadband services! Cheaper near field communications (NFC) technology that powers our payments (Oyster cards, smart credit cards) will enable a transformation of consumer businesses. Already three dimensional printing can allow consumers to print parts for and construct a gun. Such technologies will, when economics allow, untie our need to manufacture in specific locations. The ubiquity of technology is transforming business landscapes. Yet we must ask how well placed we are to exploit it.

This article introduces two concepts that allow us to think of organisations as 'socio-technical systems', namely the Newton system and the Darwin system. The former is a very fixed system, the latter being more adaptable. The article contends that the common business mindset of the 20th century followed the Newton system, and this is simply too rigid to perform efficiently in the modern business environment. Relatively new but successful organisations such as Google and Avaaz exhibit qualities of the Darwinian model - they value initiative and innovation, they foster self-organisation, they adapt. This article identifies the need for management to oversee a transition from the fixed to the flexible model as smoothly as possible.

The article concludes that organisations will no longer be shaped by management hierarchy, but by societal changes, globalisation and technological developments. These forces cannot be accurately predicted. The key challenge for leaders is to innovate and transform their businesses to be adaptable to these forces, whilst maintaining the integrity of the business as usual.

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