Where the only constant is change, leading business thinker Prof Gary Hamel believes management must be dynamic - or die, reports John Collins

Ask any employee who runs the firm they work for and they will probably tell you it's the chief executive or some other member of senior management.

What's more, this small group of of management patriarchs are using tools of management invented decades ago. Those tools are now poorly suited to the challenges faced in a world where the only constant is change.

As a result, managers need to throw out the traditional paradigm of top-down control and focus entirely on making their staff, and ultimately their organisation, as innovative as possible.

That's the view of Prof Gary Hamel, director of the Management Innovation Lab at the London School of Business and a highly respected management author and consultant.

Hamel believes management faces three key tasks in the current environment: adapting to change; implementing innovative business models and management practices; and ensuring their employees are fully engaged.

"The laws of management are not eternal," Hamel told executives at one of his rare European speaking engagements in Stockholm last month.

"The way we have managed for the last 100 years is now groaning under the strain of a new set of challenges. Why is management in the 21st century so like management in the 20th century?"

Given the fact that mega-successful organisations such as Google typically tear up the management rulebook, Hamel wonders are we seeing the end of management.

Not surprisingly his answer is no, but current accepted management practices need to be totally rethought and redesigned.

Based on a study of businesses over the last century, Hamel has concluded that large shifts in competitive advantage are only delivered by major innovations in the practice of management.

Innovations in areas such as product design and operational efficiency can be quickly copied by competitors. A step up from that is business model innovation which is how he characterises Apple's success with the iPod.

"That success has very little to do with a physical product," says Hamel. "It has instead to do with some very smart lawyers - the invention of a new digital rights management system and their ability to get the entire music industry to sign up to it."

Hamel likes to draw on examples from other disciplines such as biology, political science and economics rather than management. In Stockholm he suggested that it is military history that can shine a light on why some organisations get a "persistent and asymmetric competitive advantage".

Rather than advances in military technology, it has been changes in management that have allowed certain armies and naval services to become successful for long periods. Hamel's historic examples include the British invention of the regimental structure and Napoleon's ability to mobilise the citizens of France to fight for their own country.

"Most of us as managers, we don't think about management as a technology that is just as open to innovation as anything else in our organisation," he says.

Hamel's speech in Sweden was based on his upcoming book The Future of Management which is due to be published in September this year. In it, he illustrates his theories with examples of well-known businesses he believes are getting it right or wrong.

For example, Hamel suggests that Bill Gates made a major error appointing himself as chief software architect when he stepped down as chief executive.

"Given that title, what does that tell people about the organisation? If I have an idea for a fundamentally new business model or software architecture, whose permission am I going to have to get to invest and experiment with that? It's very clear all the new ideas have to go through Bill Gates," says Hamel.

It is as a direct result of this style of management that Microsoft initially dismissed the importance of the internet, the move to software as an ad-supported service and the impact of search engines.

In contrast, Google - one of Hamel's stars - is organised into small autonomous teams that have a minimum of supervision. Engineers are also entitled to spend 20 per cent of their time on projects of their own choosing.

This approach has already led to the introduction of new products and services including Google News, Google Suggest, and social networking site Orkut.

"I'm not joking when I say that you need a process that generates thousands of new ideas every year," says Hamel. "The chance of finding that next big idea is an arithmetic probability based on the number of ideas you generate in the first place."

Hamel also has little comfort for Dell, the former world number one PC maker who has languished with poor sales, management reorganisations and financial investigations. It is clinging to its belief in only selling direct and struggling with the idea of retail stores, while rival Apple gets a big share of its earnings from its own shops.

"It wasn't very long ago that Dell was being celebrated as an industry revolutionary," he says. "But no strategy stays unique forever and now Dell is struggling to reinvent itself."

Dell is not unique in being a former revolutionary who is struggling to update their business model - The Body Shop, CNN and Southwest Airlines are facing the same challenge of staying innovative, according to Hamel.

WL Gore, the maker of the Gore-Tex waterproof fabric and other industrial products, is an extreme embodiment of Hamel's new management principles. The company has no hierarchy or corporate titles. Ten per cent of the staff are nominated as leaders by their peers.

One of the firm's principles is that no one can order anyone else to do something and every staff member can spend 10 per cent of their time on a personal project. While it may sound like a recipe for disaster, Gore counts demanding companies like Nike and Procter & Gamble amongst its customers and has had 50 years of increasing earnings.

"Big companies . . . think if you let people choose what they want to work on you are going to have chaos. But it turns out people are pretty smart. They know that companies are there to make products and to satisfy customers, so generally they chose to work on things that add value," says Hamel.

Hamel has written best selling management tomes including Leading the Revolution, which introduced the concept of "core competency", and Competing for the Future. His current riff around innovation plays well and did so at the conference in Sweden, organised by US software company SAS.

However, he has got it wrong in the past. His consultancy business Strategos worked with Enron and he devoted a glowing chapter of Leading the Revolution to the disgraced energy company which was later dropped from subsequent editions.

One also has to wonder whether most managers will have the appetite for something so radical. After all, he is effectively calling for the death of management as we currently know it.

HAMEL IN SOUNDBITES

"If the CEO is the choke point on strategy and innovation, it is too late" on old-style, top- down management

"We are all going to be employing Chinese prison labour or you're going to have to find a way to create an organisation where every day people bring higher order capabilities to work." on the need to get employees fully engaged

"Innovation is challenging what everyone else takes for granted; that there's one way to run an airline, one way to sell music on CDs, one way to build a university, whatever it may be." on why innovation is important