Despite Technology’s Hype, Business Remains a Human Enterprise
How CEOs and executives should manage in an increasingly digitized world.
There is no doubt that technology is playing an extraordinary role in the transformation of business. From Uber to Airbnb, from Amazon to Netflix, business models are dramatically changing. But I worry that our fascination with technology may be distracting us from paying attention to the importance people play in the success and failure of business - even one that is highly digitized.
My sensibilities were jarred when I read a recent full-page ad in the Wall Street Journal announcing an upcoming special edition. “The Future of Everything,” the ad proclaimed. “The future of the mind, from mental health to cognition, is a fusion of mind and machine.” Are we going to be reduced to internet bots?
The page read like the hype often accompanying proclamations of technology’s ascendance in business. And I was reminded how many of my friends - particularly those engaged in the enterprises of Silicon Valley - believe technology alone will solve all problems. I doubt it.
Adam Smith believed technological innovations benefit workers and the economy. He considered advances in science and technology a force for good. With that, I agree.
There’s a Problem
We’ve seen the problematic behavior of Uber’s former CEO Travis Kalanick, his Board’s knowing tolerance of that behavior, and the poor record of technology companies broadly in the hiring and advancement of women. I’m starting to ask: is the ether in which we live so dense with technology that we are forgetting business is still a human enterprise, where the beliefs and behaviors of people are as determinant of outcomes as technology?
Businesses still rise on the backs of people. It’s the brilliance of a person that turns an idea into a successful venture. It’s the efforts of workers that keep an enterprise running. And it’s the bad behavior of a manager or executive that can still kill a business.
Learning from Zenefits
Even a business that’s fully digitized is not exempt from damage caused by a wayward CEO. There may be no better example of this than Zenefits. This “high tech” company was built to provide HR software and corporate health insurance. But it’s co-founder/CEO Parker Conrad went so far as to develop a software tool that allowed its salespeople to skirt insurance sales licensing requirements.
Zenefits was driving for high growth at any cost - but the costs turned out to be the forced departure of the co-founder/CEO, millions of dollars in fines, and a loss of reputation. Technology cannot absolve sinful behavior.
A Legitimate Concern
All businesses must, of course, be concerned with the role technology is playing. Technology has become ubiquitous in our personal and business lives. Companies that fail to leverage technology’s power are quickly being displaced - the operative word today is “disrupted.”
But our focus may be too much on technology and too little on the people who will make change happen. A re-balancing is required.
Teaching People to Behave
There is already some recognition that bad behaviors can destroy a business. Stanford’s Business School is introducing a course for would-be venture capitalist to counter some of the Valley’s wayward ways. Good to see this, but you would think these students should already know what’s right and wrong.
Making an Old Idea New Again
In the 1960’s, the Peters and Waterman book, In Search of Excellence, reintroduced an idea that had been around since the early part of that century: the theory of the whole.
It’s a simple concept: to create a well performing business, managers must pay attention to both the hard and soft side of the enterprise, the whole.
The book described two dominant parts of the whole. On the hard side were strategy, systems, and structure. On the soft side were people, skills, management style, and culture. Note the dominance of words beginning with “S”.
Soft S and Hard ASS Managers
One of the collaborators on that book was Tony Athos. Athos had been a Professor at the Harvard Business School and was a close friend. Tony described managers who were well tuned to people as “Soft S” managers.
Those focused on the hard side of the organization, without regard for the role and well-being of people, were described as “Hard ASS” managers. Looks like Hard ASS managers were running UBER and Zenefits.
The Book as Proof of People’s Importance
The In Search of Excellence book fell out of favor several years after it was written. The companies it had touted as examples of excellence, such as Xerox and NCR, experienced a phase of decline or were acquired. Critics didn’t appreciate the soundness of the book’s management practices and theories.
The failure and disappearance of those companies are simply examples of how bad decisions by managers and executives can doom a business. The theory of the whole remains a powerful idea.
The Pendulum Swings
What followed in the 1990’s was an outpouring of attention to the human side of business. “Human potential” became the subject of most management books.
But the focus of managers today is on profitability and “change or die” - not the human potential of their people. The pendulum of management thinking always swings between emphasis on hard and soft. And Hard ASS managers are now in charge.
Investors Assert Their Power
The demands of public company investors are driving this behavior. Institutional investors are fixated on profits and growth. A CEO who does not deliver is not long for the job.
But I would remind investors that if a company pays the right amount of attention to its customers and its people, investors will do just fine.
On Becoming Digital
The challenge today is increasingly to digitize work while still paying attention to the skills and values of the people who will make the enterprise work. Technology alone will not create a new enterprise or invigorate an old one.
There may be fewer people in digitized enterprises, but I can assure you they will have to be more skilled. And if they misbehave, their bad actions will impact the enterprise all the more quickly.
The masters of the digital enterprise must become contemporary masters of the whole - and learn to balance the hard and the soft.
[Originally Published in July 2017]