Excerpted from "The Future of Management," by Gary Hamel with Bill Breen. Look for new excerpts weekly.

For our purposes, management innovation is anything that substantially alters the way in which the work of management is carried out, or significantly modifies customary organizational forms, and, by so doing, advances organizational goals. Put simply, management innovation changes the way managers do what they do, and does so in a way that enhances organizational performance.

So what is it that managers do?

Over the last hundred years, business scholars have pretty much agreed on what constitutes the work of management. In 1917, Henri Fayol, an early management theorist, described the work of management as planning, organizing, commanding, coordinating, and controlling—a definition that would provoke little argument from modern-day executives. My own synthesis of a century’s worth of management theory suggests that the practice of management entails:

• Setting and programming objective
• Motivating and aligning effort
• Coordinating and controlling activities
• Developing and assigning talent
• Accumulating and applying knowledge
• Amassing and allocating resources
• Building and nurturing relationships
• Balancing and meeting stakeholder demands

These tasks are central to the accomplishment of human purpose, be it mounting a mission to Mars, running a middle school, producing a Hollywood blockbuster, or organizing a church bake sale. Anything that dramatically changes how this work gets done can be labeled as management innovation.

Management innovation also encompasses value-creating changes to organizational structures and roles. Companies consist of business units, departments, work groups, communities of practice, and alliances with suppliers, partners, and lead customers. A new way of connecting these entities can constitute a management innovation. For example, InnoCentive, a spin-off from Eli Lilly and Company, has created a global market for scientific expertise that allows “seeker” companies to bid out tough technical challenges to a network of more than 70,000 scientists around the world. In the three years following its launch, InnoCentive channeled more than $1 million in “bounty” payments to its community of “solvers,” who often succeeded in cracking problems that had stumped internal R&D teams. While the goal of InnoCentive is scientific innovation, the processes and structures that support its global network of seekers and solvers is a first-rate example of management innovation, in that it involves new ways of aligning effort, coordinating activities, and applying knowledge—all components of managerial work.

While operational innovation focuses on a company’s business processes (procurement, manufacturing, marketing, order fulfillment, customer service, etc.), management innovation targets a company’s management processes—the recipes and routines that determine how the work of management gets carried out on a day-to-day basis. Typical processes include:

• Strategic planning
• Capital budgeting
• Project management
• Hiring and promotion
• Training and development
• Internal communications
• Knowledge management
• Periodic business reviews
• Employee assessment and compensation

These processes establish standard protocols for common management tasks such as evaluating an employee or reviewing a budget request. They propagate best practice by translating successful techniques into tools and methods that can be broadly applied. They also shape management values by reinforcing certain behaviors and not others. Put simply, management processes are the “gears” that turn management principles into everyday practice. In even a medium-sized organization, it’s impossible to change the what and how of managing without changing the processes that govern that work.

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MORE ON MANAGEMENT AND INNOVATION:
The Future of Management (Hardcover)
Staying Ahead of Your Competition (HBR Article Collection)
The Why, What, and How of Management Innovation (HBR Article)