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March 1, 2004
Built for Change: Huber Examines the Necessary Nature of Future Firms
For decades, leather-good factories in Leon, Mexico, thrived by supplying products to shoe manufacturers in the U.S. and other markets. Situated near the center of Mexico’s ranching country, it was a natural industry. But when consumer tastes and styles began shifting to casual footwear and athletic shoes made of nylon and rubber, many of those once-thriving factories closed. In the words of George P. Huber, a professor of management at the McCombs School, they were “selected out” by a rapidly changing business environment.
“Others, quicker afoot, didn’t lose a step,” Huber writes in his latest book, “The Necessary Nature of Future Firms: Attributes of Survivors in a Changing World” (Sage Publications). “They shifted to serving the growing market of leather automobile seat covers.” Those companies added jobs and grew their revenues and profits. What made the difference? According to Huber,”The deciding factor between the firms that failed and those that survived and thrived was the vision, entrepreneurship, and change-management effectiveness of their top managers.”
That anecdote, which Huber discovered while teaching in an executive-education program in Leon, underscores the central points of his book. He argues that survival in increasingly complex, dynamic, and competitive business environments will require firms of any variety to identify, create, and incorporate capabilities beyond those possessed by their predecessors.
Beyond the Familiar
Corporate managers are bombarded with advice about organizational features and management practices enabling firms to keep up with the rapid changes that have re-defined the shape of businesses. But Huber, a former production manager for Procter & Gamble, award-winning organization scientist, and one of the McCombs School’s most highly cited researchers, warns that even today’s best practices may not apply tomorrow.
“Some managers might still assume that the highly dynamic environments faced by today’s business organizations represent a period of transition to a more stable era,” Huber says. “They would be wrong.”
“Other managers,” he adds, “might believe that these dynamic environments are the new era, that they represent the future. They, too, would be wrong.”
As his basis for taking a more exacting approach than pop authors and many management gurus, Huber argues that, “When predicting future environments, we must not allow ourselves to take the easy path and simply extrapolate from recent events, or even recent trends. History shows that short-term trends are often misleading as indicators of long-term change.” The focus on recent events and trends, he believes, has led to the widely and wrongly held belief that today’s dynamic environments represent the future.
Huber’s approach is to examine what turns out to be a key driver of change in business environments, advances in science and technology. Drawing on long-term patterns and research findings concerning these advances, he makes a convincing case that “in the future, scientific and technical knowledge will be increasing at an increasing rate.” Backed by decades of historical data, he also argues that, although improvements in manufacturing, information, and transportation technologies lead to the obsolescence of products, the net effect of these improvements is an increase in the number and variety of products, services, markets, suppliers, competitors, and regulators in a firm’s environment. As a result, technological advances create a more complex business environment.
As an example, Huber observes that although new technologies for conveying information over long distances (copper cable, short and long wave radios, fiber optic cable, and lasers) have superseded earlier technologies, each technology is still produced, marketed, and regulated by a large number and variety of organizations. Complexity has increased.
Working with similar patterns and findings, and with numerous examples, Huber demonstrates that a firm’s environments will also be more dynamic (faster moving, more turbulent, and less stable) because technological improvements will enable customers, suppliers, and regulators to generate threats and opportunities for the firm at increasing rates. Similarly, a firm’s environments will also become more competitive because its competitors, too, will be more numerous, more varied, and armed with improved technologies.
For example, advances in manufacturing and information technologies will enable competitors to develop and produce improved products and services more rapidly than in the past, and advances in information and transportation technologies will enable them to reach a firm’s customers more rapidly and at less cost than ever before.
In summary, the overall effect of forthcoming technological improvements is that “in the future, environmental complexity, dynamism, and competitiveness will each be greater, and will be increasing at increasing rates.”
After reminding us that, to survive, organizations must possess capabilities that match the demands imposed on them by their environments, Huber turns to identifying the attributes that firms must possess to survive in environments characterized by accelerating levels of complexity, dynamism, and competitiveness. In these chapters he draws on a goodly number of authoritative works, as well as his own research studies, to identify organizational designs and management practices appropriate for coping with future business environments and that, out of necessity, are likely to be adopted by firms striving to become “future firms.”
To make clear the connections between these organizational attributes and the forthcoming environmental features that will drive their use, Huber describes several instances where specific firms were destroyed or nearly destroyed by unanticipated changes in competitor products, instances ranging from computer chips to fire engines. In accord with these observations, Huber reasons that “sensing and interpreting” the more rapidly arriving streams of environmental threats and opportunities – many of which will be more complex and more novel than previous threats and opportunities – will require firms to employ new structures and practices, or risk not surviving.
As examples, he predicts that, “in the future, for each significant environmental component, some organizational members with the relevant expertise will be accountable for monitoring and reporting on that component.” Recognizing that such specialized accountability does not deal with the facts that new environmental components will arrive with increasing frequency and that critical events will sometimes fall between cracks in any surveillance system, he also predicts the creation of “Everyone a Sensor” organizational cultures where “all employees view themselves as potential sensors for the organization and see themselves as responsible for fulfilling this role.”
Of course sensing and interpreting aren’t sufficient. Firms must generate action options and choose among them. Arguing that heightened levels of competition and shortened windows of time for action require firms to make decisions with more thoroughness and yet with more speed, Huber describes new infrastructures and practices that satisfy these requirements and that we can expect to see more frequently in future firms. Included are
- An “uncommon” decision process that has been shown to produce superior decisions in crises.
- The idea of treating decisions as projects to be managed using project management principles such as the use of milestones, accountability for timely completion of subtasks, and a project manager.
- The independent evaluations of decisions themselves, in addition to their outcomes, as procedures for learning or for evaluating candidates for promotion.
Turning from dealing with specific instances of threat or opportunity to the ongoing business of innovation, Huber notes that “customers want either the best quality, the best service, or the best value. . . . Thus firms innovate—they make changes in their products or processes so that at least some portion of the market sees their products as best-of-class.
“How do firms achieve best-of-class products? There is only one way—they integrate into their products, or into the processes used to provide their products, knowledge not previously so used. All products contain knowledge, usually a great deal of it. For example, embedded . . . in a product such as an airplane, are millions of workdays of knowledge creation and acquisition by scientists, engineers, managers, and skilled workers.”
From the these ideas, much elaborated with examples ranging from Boeing’s systematic accumulation of knowledge during its sequential development and manufacturing of its 7X7 series of commercial jets to Dell’s development of innovative manufacturing and delivery systems, Huber concludes that “in the future, a firm’s survival will require more learning than in the past,” that “future firms will more actively manage the sharing and storage of knowledge,” and that “future firms will innovate more frequently.” Each of these conclusions and its implications are developed in the book, and numerous organization design features and management practices are described as useful devices for ensuring learning, knowledge management, and innovation in future firms.
Some of these design features and practices are unique. For example, Huber draws our attention to the increased number and variety of knowledge workers involved in the creation of the Concorde, as contrasted with those involved in with Charles Lindbergh’s The Spirit of St. Louis, as contrasted with the number and variety involved with the plane designed by Wilbur and Orville Wright.
Generalizing from this example, but building on other ideas and rebutting counter arguments, Huber reasons that increases in the world’s stock of knowledge will cause knowledge worker occupations to continue increasing in their degree of specialization, which will result in even a greater number and variety of knowledge workers being involved in the creation of tomorrow’s more knowledge-laden products. This in turn will cause larger numbers of more specialized teams to be involved in the creation of these products; the need to coordinate the actions and products of these teams will lead to new organizational structures, new coordination practices, and greater use of currently uncommon communication technologies.
He concludes, for example, that “the structure of future firms will more frequently include networks of teams” and that “future firms will more intensely employ high-telepresence communication technologies for coordinating knowledge integration.”
One of the last chapters of the book deals with the “conflicting needs for change, efficiency, flexibility, and employee commitment,” a situation that Huber sees as exacerbated by heightened levels of dynamism and competition. As a result of examining each pair of conflicts and drawing on research concerning the importance and value of knowledge workers, Huber predicts a variety of non-intuitive changes in those management practices that affect the strength and uniqueness of organizational culture, the acquisition and retention of organizational knowledge, the need for extraordinary talent, and both desired and non-desired employee turnover.
While the book was written for corporate managers and graduate students who want to be managers, Huber tosses out a provocative challenge to his colleagues in management science. “We might consider codifying our field’s considerable knowledge not only as theories, but as guidelines (or at least as predictions concerning the organizational attributes and management practices that are likely to influence which firms will do well in the future and which will not),” he writes. Otherwise, Huber warns, this wealth of research and information either will be ignored or codified by some enterprising concern that is less qualified to do it.
“The Necessary Nature of Future Firms” includes much to digest for U.S. companies of all sizes. But for those companies and for other readers, Huber reminds us more than once of a simple but sobering truth about why businesses struggle and fail: In their hearts, most people assume the future will be like the present.
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