The Changing Role of Management

Within business ecosystem managers learn to move beyond traditional responsibilities of corporate strategy and designing hierarchical structures and control systems. Managers have to look beyond the boundaries of their own company and build relationships with a network of partners.

For example, Tesla Motors owns much of its success to its managers’ ability to establish successful partnerships. When TeslaOpens in new window began selling its first all-electric Roadster in 2008, the company had to build a market and a reputation from scratch. Tesla’s production was also plagued by technical problems and a shortage of cash.

Managers overcame these problems by turning rivals into partners. Tesla managers worked out an alliance with DaimlerOpens in new window (the maker of Mercedes) in 2009 that gave the new organization access to first-class engineering, along with an infusion of cash that helped save the start-up from bankruptcy.

An alliance with ToyotaOpens in new window the following year enabled Tesla to buy the only remaining large-scale auto manufacturing plant in California, as well as gave it the chance to learn large-scale auto manufacturing from one of the best. More recently, Tesla has joined with Panasonic CorporationOpens in new window to jointly invest in a $5 billion lithium-ion battery plant.

If top manager looks down to enforce order and uniformity, the company is missing opportunities for new and evolving external relationships. In this new world, managers think about horizontal processes rather than vertical structures.

Important initiatives are not just top down; they cut across the boundaries separating organizational units. Moreover, horizontal relationshipsOpens in new window now include linkages with suppliers and customers, who become part of the team.

Business leaders can learn to lead economic co-evolution. Managers learn to see and appreciate the rich environment of opportunities that grow from cooperative relationships with other contributors to the ecosystem.

Rather than trying to force suppliers into low prices or customers into high prices, managers strive to strengthen the larger system evolving around them, finding ways to understand this big picture and how to contribute.

This is a broader leadership role than ever before. Managers in charge of coordinating with other companies must learn new executive skills. For example, investigations found that the inability of managers to collaborate and communicate effectively across organizational boundaries played a significant role in the 2010 BP-Transocean Deepwater Horizon oil spillOpens in new window. One question raised by investigators concerned an argument between a BP manager and a Transocean manager that occurred on the rig the day of the explosion. BP and Federal agency managers also had trouble collaborating effectively in clean-up efforts.

A study of executive roles by the Hay Group distinguished between operations roles and collaborative roles.

Most traditional managers are skilled in handling operations roles, which have traditional vertical authority and are accountable for business results primarily through direct control over people and resources.

Collaborative roles, on the other hand, don’t have direct authority over horizontal colleagues or partners, but are nonetheless accountable for specific business results.

Managers in collaborative roles must be highly flexible and proactive. They achieve results through personal communication and assertively seeking out needed information and resources.

The old way of managing relied almost exclusively on operations roles, defending the organization’s boundaries and maintaining direct control over resources. Today, though, collaborative roles are becoming more important for success. When partnerships fail, it is usually because of an inability of the partners to develop trusting, collaborative relationships rather than due to the lack of a solid business plan or strategy.

In successful alliances, people work together almost as if they were members of the same organization. Consider the U.S. war against terrorism. To fight terrorism, the U.S. government not only collaborates with governments of other countries but also with numerous private security companies.

At the Pentagon’s National Military Command CenterOpens in new window, employees of private contracting firms work side-by-side with military personnel monitoring potential crises worldwide and providing information to top leaders.

“We could not perform our mission without them,” said Ronald Sanders, former chief of human capital at the Office of the Director of National Intelligence. “They serve as our reserves, providing flexibility and expertise we can’t acquire. Once they are on board, we treat them as if they’re part of the total force.”