The Value Creators Podcast Episode #42 – Yasmin Davidds on How Becoming A Better Human Makes You A Better Leader

Yasmin Davidds, president & CEO of Dr. Yasmin Davidds Leadership Institute and Multicultural Women’s Executive Leadership Institute advocates for a leadership approach called “graciously assertive,” which blends self-advocacy with empathy for others. 

Dr. Yasmin outlines eight pillars crucial for effective leadership, emphasizing practical methods like gratitude lists and self-awareness exercises to foster personal growth. Central to her philosophy is “graciously assertive” communication, combining assertiveness with grace to achieve collaborative outcomes. Yasmin discusses how this approach can transform workplace dynamics, emphasizing empathy and mutual understanding in both professional and personal relationships. She also addresses challenges faced by women, particularly women of color, advocating for gratitude and empathy to navigate biases effectively. Yasmin promotes moral leadership aligned with personal values, stressing genuine inclusion and the importance of mindsets like gratitude and growth for continuous personal and professional development.


Connect with Hunter Hastings on LinkedIn

Connect Yasmin Davidds on LinkedIn

Yasmin Davidds Website:

To download the book: Graciously Assertive

Show Notes:

0:00 | Intro
00:46 | Yasmin’s Point of View: Being a Better Human Being
02:37 | Graciously Assertive: Eight Pillars
04:13 | First Pillar: Self-Awareness
06:50 | Second Pillar: Social Awareness
08:23 | Third Pillar: Empathy
09:52 | Fourth Pillar: Self-Regulation 
11:45 | Fifth Pillar: Self-Compassion
12:17 | Zero Tolerance for Judgement
13:37 | Most Empowering: Pillar of Gratitude
16:37 | Eight Pillar: Healthy Boundaries 
18:20 | Assertive or Graciously Assertive Communication
23:45 | Empowering Women in Diverse Challenges
26:42 | Moral Leadership
30:50 | Find the Barriers and Remove Them
32:49 | Mindset
35:13 | Inclusion
38:13 | How does Yasmin teach?
40:19 | Wrap-Up

Knowledge Capsule

Leadership Approach Critique:

  • Traditional Models: Criticized for their hierarchical nature, where leadership is often top-down and authoritative.
  • Narcissistic Tendencies: Emphasis on assertiveness and self-promotion can sometimes lead to narcissistic behaviors, where leaders prioritize their own needs over others.

Yasmin Davidds’ Approach to Leadership:

  • Better Human Approach: Focuses on personal development and self-improvement as foundational to effective leadership.
  • Compassion and Understanding: Advocates for leaders to be compassionate, understanding that everyone has a unique story and perspective.

Key Pillars of Leadership:

  • Self-awareness:
    • Understanding Strengths and Weaknesses: Knowing one’s strengths helps leverage them, while awareness of weaknesses allows for improvement.
    • Emotional Impact: Recognizing how one’s emotions influence decisions and interactions with others, fosters better self-management.
  • Social awareness:
    • Energy and Behavior Impact: Acknowledging how one’s mood and actions affect those around them, crucial in maintaining a positive team dynamic.
    • Empathy and Adaptation: Empathizing with team members’ emotions and adjusting leadership style accordingly to foster a supportive environment.
  • Gracious assertiveness:
    • Kind Assertiveness: Balancing assertiveness with kindness and respect for others’ perspectives, ensuring clear communication without dominating.
    • Mutual Respect: Promoting an environment where everyone feels heard and valued, is essential for effective team collaboration.
  • Self-regulation:
    • Emotional Management: Controlling one’s emotions to prevent negative impacts on team morale or relationships.
    • Professional Conduct: Maintaining composure and professionalism, especially during stressful situations, to lead by example.
  • Self-compassion:
    • Kindness to Oneself: Understanding and accepting one’s flaws and mistakes without harsh self-criticism.
    • Enhanced Empathy: Having self-compassion enables leaders to be more understanding and supportive of others’ challenges and shortcomings.
  • Zero tolerance for judgment:
    • Non-judgmental Attitude: Avoiding snap judgments and prejudices towards oneself and others, fostering an inclusive and open-minded environment.
    • Promoting Diversity: Encouraging diverse perspectives and opinions within the team, valuing differences as strengths rather than weaknesses.
  • Gratitude:
    • Positive Mindset: Cultivating a mindset of gratitude promotes positivity and resilience in the face of challenges.
    • Enhanced Leadership Impact: Leaders who express gratitude inspire loyalty and motivation among team members, creating a supportive and productive work environment.
  • Healthy Boundaries

Without healthy boundaries, individuals are prone to burnout, impacting both personal well-being and organizational productivity.

Healthy boundaries prevent burnout by ensuring individuals allocate time for rest and personal activities.

Leaders who model healthy boundaries demonstrate the importance of work-life balance, enhancing team morale and productivity.

Graciously Assertive Communication

  • It involves assertiveness tempered with empathy and respect, aiming to foster constructive dialogue and achieve mutual understanding.
  • Begin conversations with active listening and genuine appreciation to create a receptive atmosphere.
  • Use “I” statements instead of accusatory “you” statements to express feelings or needs, reducing defensiveness and promoting openness.

Leadership Challenges for Women and Minorities

  • Challenges: Women, especially women of color, face biases and structural barriers in professional settings.
  • Biases such as sexism and unconscious bias hinder career progression and authenticity in the workplace.
  • Overcoming these challenges involves advocating for oneself assertively while fostering inclusivity and understanding among colleagues.

Moral Leadership

  • Leading with integrity and aligning actions with personal and organizational values.
  • Moral leaders set clear boundaries and principles, guiding decision-making and interactions within teams.
  • Upholding ethical standards builds trust and credibility, essential for sustainable business growth and positive impact.

Mindset for Success

  • Components: Includes gratitude, abundance, and growth mentalities to foster resilience and innovation.
  • A gratitude mindset encourages appreciation for opportunities and relationships, enhancing overall well-being.
  • Abundance mentality shifts focus from scarcity to possibilities, enabling risk-taking and entrepreneurial success.
  • A growth mindset views challenges as opportunities for learning and personal development, crucial for continuous improvement.

Inclusion and Diversity

  • Approach: Focuses on creating inclusive environments by understanding and addressing individual needs and perspectives.
  • Inclusion requires active participation and empathy, inviting diverse voices and perspectives into decision-making processes.
  • Combatting biases and promoting inclusivity involves continuous education and self-reflection to overcome personal and systemic barriers.

Components Of The New Management Paradigm.

The traditional methods and ways of thinking of strategic management are no longer viable.

They assume that exogenous causes and causal interrelationships can be shaped and utilized to produce objective factors of business performance. Superior management can result in superior performance through identifiable combinations of observable causal factors.

The modern science of complex evolving systems, represented by Austrian economics in social sciences, compels recognition that business outcomes are emergent rather than resulting from identifiable causal factors. Human action, by both customers and employees, occurs in complex interactions of dynamic interpersonal coordination, the results of which are unforseeable. It is the beliefs, perceptions, expectations, imagination and intentions of individuals that combine and interact unpredictably in business reality. Strategic business success is highly uncertain in this context and impossible to sustain.

A new strategic management paradigm is called for.  The components are:

The philosophy of subjective value. Human beings seek value, defined as an improvement in self-perceived well-being. They constantly seek a desired state to replace a current state that is deemed less than perfectly satisfactory. Businesses thrive when they are able to facilitate customers’ feelings and experiences of value. The performance of a firm, and any structure or methods it adopts, are 100% determined by the perceptions of its target customers. Any change in these perceptions will result in changes in firm performance. Dynamic business energy emanates from customers, not from strategy. 

Converting knowledge into value. It follows that customer knowledge and understanding are the vital, scarce resource of the business firm. There are no structural competitive advantages, but it can be the case that the combination of people in one firm share knowledge and understanding that is more functional for the task of conversion into value via innovation, service and relationship. The law of increasing functional information guides the market systems selection of the best value-facilitating firms.

Entrepreneurship (rather than management) is the business function for conversion of knowledge into new value. It is a non-linear, non-processual act of co-ordinated and creative imagination. It can be advanced and accelerated by identifying and continuously renewing insights into customers’ motivations, purposes and values, and composing and recomposing new value propositions for them to choose from. Entrepreneurial capacity consists of skill in designing business propositions and in stimulating customers’ choice of those propositions. During the act of designing the value proposition, the customer’s choice lies in the future, and so is unknown and unknowable. Entrepreneurial imagination is the cognitive connection of the present offerings and future choices. It does not result from traditional strategic management or planning.

Innovation is a necessary condition for business persistence. In the dynamic swirl of rapid change and inscrutable complexity, continuous innovation is required to stay relevant to customers and to stay coherent with the environment. This is continuous improvement in a value proposition to match continuously increasing knowledge on the customer’s part of what they can want and demand. There are opportunities beyond persistence – adaptive innovators can respond to the changing environment with new value propositions that exceed the expectations of customers, i.e. incorporate new knowledge before it’s widespread. And the truly evolutionary businesses can make leaps of innovation that introduce true novelty to the market. The market may select the novelty or reject it; successful new businesses and new products are those that qualify for selection. The market is always evaluating and always selecting.

Nothing in this process can be predicted or projected. Strategic planning is powerless. Discovery, not planning, is the dynamic of innovation in business.  Discovery requires the humility of relinquishing certainty and control, and the creativity of generating new ideas and combinations for testing and experimentation. There is joy in discovery, and we must learn to love feedback loops, the conduits from the customer and the marketplace that tell us how our experiments perform in evaluation. Humility and empathy are not the central focus of traditional strategic management. We hear much more about heroic business leadership and the intellectual superiority of planners and strategists. But discovery is not driven by intellectualism but by action – run lots of experiments, gather fast feedback, determine what works, and incorporate it into the next epxeriment, until a new value prososition emerges that is robust enough to commercialize.

Complexity is the overarching organizational metaphor. Complexity can’t be tamed or managed. Simple imagery fails to convey any meaning. For example, when there is discusion of market share, or growth rates, or 5-year total stock market returns, or even quarterly revenue, it’s meaningless in the context of complexity. Complexity is a swirl of ongoing interactions between people and their contexts, constrained by rules, norms, institutions, events and things, with emergent and unpreditable outcomes triggering new emergent responses which further accelerate change and make it even more chaotic. Businesses can’t snapshot the swirl of complexity, or choose just a few developments to respond to. They must act intuitively to find islands of order in the raging sea of chaos.

The new form of organization for complexity is autonomy. In the new paradigm, firms gradually learn how to auto-organize, eschewing structure and hierarchy and management authority in favor of self-management by employees and team members. Teams self-assemble around functions like marketing and branding or operations and delivery or finance, and role map the collaboration that will optimize the combination of specialist talents in pursuit of a shared purpose. Purpose is the binding force, rather than position in a hierarchy or on an org chart or the authoritarian directives of management. 

Subjective value, knowledge conversion, entrepreneurship, innovation, discovery, complexity and orgnizational autonomy – these are the components of the new management paradigm. 

The Value Creators Podcast Episode #41 – Projjal Ghatak On Harmonization Via Collaborative Team Development

Teams are the new focal point of organizational design and organizational function. Motivation – quantified as “energy” by Projjal Ghatak and Onloop – is the key to team performance. Technology is advancing to the point where motivation can be monitored using AI, and self-reported feedback and other nuanced approaches to understanding and improving motivation levels are delivering real progress. Purpose portfolios can align individual motivations with organizational goals, capturing the role of purpose in driving productivity and engagement.

Projjal mentioned companies experimenting with holocracy and distributed flat organizations, although scaling such structures was noted as challenging due to inherent human tendencies to seek direction and guidance. The conversation also explored frameworks like RAPID (Bain’s Responsible, Accountable, Perform, Informed, Decide model) and spans of control, highlighting strategies for optimizing organizational effectiveness and managerial efficiency.

Projjal emphasized the importance of respect and trust in leadership dynamics, noting that effective leaders inspire motivation and engagement through their actions and guidance. The role of AI in augmenting managerial capabilities and increasing spans of control was also discussed, highlighting the potential for technology to enhance organizational structures and improve managerial effectiveness.


The Post-Managerial Era (Blog Post) 

Connect with Hunter Hastings on LinkedIn 

Connect with Projjal Ghatak on LinkedIn

Knowledge Capsule:

Changing Business Organization

Evolution of Management Concepts:

  • Traditional management concepts from the industrial age are thoroughly outdated.
  • The ideas of “managing” and “being managed” have no place in the 21st century business world.
  • Modern businesses use software for global coordination and collaboration.

Role of Managers:

  • Businesses face challenges in maximizing the potential of human resources
  • There are significant changes in managerial roles due to technological advancements.
  • We can reject the traditional definitions of management.
  • Think instead about a collaboration and coordination role.
  • And make the distinction between managers, leaders, and coaches, each with specific roles.

Managerial Challenges:

  • One of the problems of the management concept is bad management – the wrong people with the wrong relationships with others.
  • Many businesses lack effective managers, especially among first-time managers.
  • This issue is consistent across different regions, industries, and business sizes.

Collaborative Team Development Software:

  • Using technology to simplify complex problems in leadership and management.
  • Inspiration from the fitness industry: breaking down tasks into manageable parts.
  • Focus on motivation (energy), clarity on goals, and feedback.
  • Technology structures management tasks, making them less dependent on individual skills.

Origins of Onloop:

  • Personal experiences with inadequate tools led to the creation of Onloop.
  • Differentiation between talent-focused technology and HR-focused technology.

Performance Management:

  • Traditional performance management processes are inefficient.
  • Introduction of microfeedback to replace traditional feedback methods.

Automation and AI:

  • Use of AI to automate performance reviews (which, in their original form, are the worst management tools!) and synthesize feedback.
  • Focus on reducing friction around regular feedback and enhancing productivity.

Engagement Focus:

  • Employee engagement levels are dangerously low according to Gallup and other surveys.
  • Engagement can be enhanced through CDT product usage, increasing both motivation and  effectiveness.
  • Regular usage reviews to understand product performance and areas for improvement.

People Management vs. HR Management:

  • People management focuses on productivity and team performance.
  • HR management is more about compliance and administrative functions.

Hybrid and Distributed Teams

  • Hybrid teams traditionally mean a mix of remote and in-office workers.
  • Modern context includes geographically and functionally distributed teams.
  • Diverse teams require intentional management practices.
  • Structured cadences and rhythms are necessary for effective collaboration.

Challenges in Hybrid Teams

  • Informal feedback loops are disrupted in remote settings.
  • Leaders need to adapt to structured communication tools like Zoom and Slack.
  • Leaders accustomed to in-person interactions struggle with remote management.
  • There’s a need for intentional rituals to maintain clarity and motivation.

Rituals and Cadences:

  • Regular all-hands meetings to build relationships and rapport.
  • Structured one-on-one conversations using frameworks like CDD (energy, goals, feedback, skills).

Calendaring Everything:

  • Scheduling all important activities to ensure they happen.
  • Emphasis on intentionality in scheduling to maintain productivity and team cohesion.

Collaborative Team Development:

  • Shift from traditional performance management to continuous feedback and goal setting.
  • Using technology to automate and simplify performance reviews.

Reducing Bias:

  • Replacing manual reviews with automated summaries to minimize bias.
  • Focus on observations and work outcomes rather than subjective ratings.

Bias in Traditional Systems:

  • Eloquence bias and gender disparity in leadership roles.
  • Extroverted, assertive individuals are often rewarded over more reserved team members.

Equal Outcomes through Technology:

  • Using machine learning to ensure fair assessments and reduce bias.
  • Focusing on objective performance metrics to support diversity and inclusion.

Self-Reported Metrics:

  • Currently, motivation is self-reported as a “battery level” (full, empty, or in between).
  • This data is visible only to the manager to maintain psychological safety.

Potential for AI:

  • AI is not yet capable of accurately detecting motivation through behavior or dialogue.
  • Future potential for AI to infer motivation from observations and interactions.

Integration of Well-being and Performance

  • Well-being (referred to as energy levels or motivation) is crucial for productivity.
  • Addressing anxiety and mental health as part of performance management.
  • Reframing “wellness” as “energy levels” to increase engagement and acceptance among leaders.
  • Regular energy checks are popular and help gauge team motivation.

Defining Purpose Portfolios:

  • Employees should have clear purpose portfolios that align personal and professional goals.
  • Activities should support these purpose pillars, enhancing motivation and fulfillment.

Future of Work with AI:

  • AI will push humans to focus on uniquely human attributes, such as purpose and service orientation.
  • Emphasizing service to others as a core component of motivation and leadership.

Impact of AI and VR:

  • AI and immersive virtual reality will significantly change the nature of work.
  • Countries like the Philippines could see economic growth by leveraging these technologies.

Rethinking Workforce Strategy:

  • Developed countries need to adapt to a future where AI and VR redefine competitive and cost-effective labor.

Challenges in Current Structures:

  • There is a desire to eliminate traditional hierarchies and silos within organizations.
  • Future discussions to explore how firms can adapt and restructure to be more efficient and inclusive in a technologically advanced landscape.

Hierarchical Structures and Human Nature:

  • Humans are wired to follow direction, as seen in parental guidance during childhood.
  • This inclination often translates into a preference for hierarchical organizational structures.

Challenges with Holacracies:

  • While holacratic structures like Hire exist, they face scalability issues.
  • Humans’ inherent need for direction makes fully flat, networked structures difficult to implement effectively.

Frameworks for Organizational Management:

  • Bain & Company’s RAPID framework (Responsible, Accountable, Perform, Informed, Decision-maker) offers a structured approach to organizational management.
  • Optimal spans of control (4-8 direct reports per manager) can enhance managerial efficiency.

AI’s Role in Management:

  • Advancements in AI enable managers to handle larger spans of control by delegating routine tasks to AI systems.
  • This allows managers to focus more on strategic decision-making and less on routine operational tasks.

The Value Creators Podcast Episode #40 – Kimberlee Josephson: A Better Understanding of the Role of Business in Society

Kimberlee Josephson is an associate professor of business at Lebanon Valley College, and an insightful and energetic promoter of entrepreneurship and free markets at The American Institute For Economic Research. 


Show Notes:

0:00 | Intro
2:02 | Kimberlee Josephson’s Background
3:53 | Big Picture of Capitalism
8:16 | What was the Problem?
11:34 | How Kimberlee Teaches Power Structure and Other Programs
17:19 | Companies Prioritizing Morals Over Profi.
19:55 | Maximizing Shareholder Value: Research Perspective
23:04 | Antitrust: Government’s Role in Business Scrutiny
28:15 | Monopoly as a Business Goal: Darker Motives
33:15 | Critics of Capitalism: Distorted View of Competition
37:21 | Focus on Positive Business Dynamics, Not the Destruction Part
39:44 | Value Creators Online Course
40:57 | Business Education 
44:23 | Redefining Entrepreneurship 
46:44 | Academia Being Non-Dynamic: Where to Get Business Education? 
51:38 | Wrap-Up

Knowledge Capsule:

Critics of capitalism and of business are misdirecting us with their concerns about business morality and resource allocation:

  • It’s a mistake to put companies in the role of becoming moral arbiters and shifting focus from profit-oriented to purpose-oriented strategies.
  • Kimberlee raised caution against organizations diverting resources towards social causes, potentially at the expense of core competencies and shareholder interests.

CSR and the Stakeholder Mindset are detrimental to the true role of business:

  • Kimberlee discusses her skepticism about corporate social responsibility (CSR) and the stakeholder mindset.
  • She expresses concerns about the effectiveness of CSR and its potential for harm, such as dependency-based relationships and rent-seeking behavior.
  • CSR became even worse when it evolved to Environmental, Social, and Governance (ESG) initiatives – a more specific set of interventions in the conduct of business.
  • Measuring and implementing imposed ESG standards are problematic, and there are great concerns about regulatory power.

The true role of Business in Society:

  • Kimberlee explores the multifaceted role of business in society, including addressing negative externalities and creating positive externalities.
  • Reference is made to Archie Carroll’s CSR pyramid, emphasizing economic, legal, ethical, and philanthropic responsibilities of businesses.
  • Business increases well-being for customers, and therefore for society.

Criticism of Government Intervention and Antitrust Measures:

  • Kimberlee expresses frustration with government intervention in business, particularly regarding antitrust measures and criticisms of large-scale companies.
  • Antitrust regulations hinder businesses’ ability to compete and innovate freely.

Differentiation is strategic, high market share is not a problem: 

  • Through excellence in differentiation, it’s possible to create a market space with little to no competition (Blue Ocean strategy).
  • Regulators express concerns about such market activity, as evidenced by the concerns raised by Lina Khan about excessive market share.
  • Large firms achieve dominance through profitability, attractiveness, and scalability, which reflects consumer choices. High market share simply means more customers are happy.

Government Intervention in Mergers and Acquisitions: 

  • Anti-trust legislation and actions are examples of government interference in business transactions, in this particular case,  mergers and acquisitions.
  • Kimberlee is an advocate for the separation of politics and economics: The marketplace will sort out whether mergers and acquisitions are good for customers.
  • It can be inefficient to have multiple providers. Kimberless discusses Milton Friedman’s perspective on the inefficiency of having multiple providers for essential services like telephone poles.

Monopoly Power and Innovation: 

  • Monopolies seldom last long in the market. Kimberlee reflects on past concerns about monopolies such as Netflix and the rapid emergence of numerous competitors and customer options..
  • Competition drives businesses to innovate and improve efficiency; Kimberlee cited case studies such as Dyson’s disruptive innovations in the vacuum cleaner industry.

We can change attitudes through business education at every point in the education pipeline:

  • From High School to community college to university undergraduate and graduate streams to executive and entrepreneurial education, it’s the task of business education to re-establish principle-based understanding of the role of business.
  • Kimberlee Josephson is an active leader in this space.
  • Value Creators is trying to help:

The Dawn Of The Post-Managerial Era.

In Aberrant Capitalism, Steve Denning and I chart the ascent, dominance and now decline of managerialism, the approach to running business corporations through bureaucratic systems of management control. Happily, we see the end of the managerial age and the dawn of a new post-managerial era.

Aberrant Capitalism begins with a quote from economist Ludwig von Mises:

Those who confuse entrepreneurship and management close their eyes to the economic problem. The capitalist system is not a managerial system; it is an entrepreneurial system. 

Ludwig von Mises (Human Action 1949)

Business has been confused about this problem for over 100 years. In the golden age of entrepreneurial capitalism, which we can locate in the second half of the nineteenth century, at least in the US, the great corporations were led by entrepreneurs, not managers. The unicorns of their time, these fast-growing corporations harnessed new technologies on behalf of customers to elevate the quality of life. The entrepreneurial leaders of the time saw the market-generating potential of steam engines, railroads, electricity distribution grids, oil refining, long-distance communications, mass manufacturing, packaged food, and advertising. They turned these inventions into commercial innovations and built an audience of happy customers enjoying new experiences ranging from affordable illumination to trans-continental travel. The range of goods and services available to customers expanded, quality went up, and prices went down. 

This was a pre-managerial age. The individual owners and founding partners of the great corporations were visionaries who imagined a great and happy future of high achievement and fulfilling lives for Americans. John D. Rockefeller of Standard Oil, for example, consciously aimed at producing and distributing “the best illuminator in the world at the lowest price” because “we are refining oil for the poor man, and he must have it cheap and good[1]”. He viewed the kerosene he manufactured as a civilizer, “promoting among the poorest classes …a host of evening occupations, industrial, educational and recreative …(carrying) more cheap comfort into more poor homes than almost any discovery of modern times” (The Myth of the Robber Barons, Burt Folsom)

This is the entrepreneurial mindset: placing the highest priority on customer needs and devoting the entire supply chain to their purpose. Standard Oil required staffing and organization, of course. Rockefeller paid higher than market wages and gave long vacations so that he could attract the right people and then delegate responsibility to them. He knew that good work and good ideas were priceless.

In the twentieth century, the entrepreneurs exited their businesses due to old age or death or via a sale. Professional managers took over, ushering in the managerial age. They changed the function of management from the mass production and mass distribution that made civilizing innovations and the experience of well-being available to all. They focused instead on control, which is a benefit for managers, not for customers. The tools of control included:

Central planning: managers believed that business plans and resource allocation decisions should be made by a planning and budgeting committee or group following the direction of the top officers of the company. There were some feedback loops, but they were slow and data science was not far advanced and so the feedback was low in information and high in noise. Nevertheless, central planning advanced, even though CEO’s like Reginald Jones of GE admitted that he “could not achieve the necessary in-depth understanding” of his own planning department’s plans. (Aberrant Capitalism, p37)

Hierarchy: The transmission mechanism for the centrally-developed plans was hierarchy.  The top officers told the VPs reporting to them, who communicated to their directors and managers, and front-line employees. Dissent (which we might also call creativity or what John D. Rockefeller called good ideas) was discouraged. Hierarchy was the reason for slow, noisy feedback.

Bureaucracy: To administer both the implementation of plans and the management of the hierarchical organization, management introduced bureaucracy, which had, hitherto, been a method of government rather than business. The purpose of bureaucracy was not customer service or satisfaction, or even an observable contribution to corporate profits, but compliance with rules and regulations. There are no rewards in bureaucracy for initiative or innovation. The goal is not to adapt to changes in the marketplace, but to try to constrain the marketplace to follow the bureaucracy’s rules. 

Financialization: Over the course of the twentieth century, managers became more reliant upon the financial sector for debt and credit, and delegated some of their control powers as part of the trade. The short-termism of quarterly earnings targets, the allocation of funds to share buybacks and dividends rather than to R&D investments, and the adoption of the mantra of shareholder maximization – which stands in sharp contrast to the customer-first ethic of entrepreneurship – are all consequences of ceding primacy to the financial sector. 

Management Slack: Nobel prize-winning economist Oliver Williamson used this term to describe the discretion acquired by management organizations to use resources for their own benefit rather than for the customer or for company profits. The range of slack is wide, from oversized offices and managerial perks, to lavish salaries and pension, to the use of corporate jets. Williamson suggested that managers would deliberately add costs to hire unnecessary staff because the increased size of a department would result in more prestige and power for the department head. Management slack became a form of insider self-dealing: more for the managers and less for customers, investors and employees.

The late twentieth century demise of big, bureaucratic corporations like GE and IBM can be attributed to internal developments along these lines: the accumulation of greater weight of bureaucratic, hierarchical management eventually over-burdens the creative engineers, operators and salespeople. They can no longer function as well as they need to for the benefit of customers.

What will change in the 21st century

The end of the managerial era is a consequence of the new business models that are made possible by digital enablement. Customers are now directly connected to the firm – think of amazon or Airbnb as examples – in such a way that their wants, desires and preferences are instantly and effectively implemented. The customer is the boss, not in the sense of sitting atop an authority hierarchy, but in the sense of controlling the fate and operations of the firm. Economists have always recognized this role for customers in theory: here’s a passage from economist Ludwig von Mises in 1949:

The real bosses, in the capitalist system of the market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or that is cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction.

This is a passage of incredible vision. It has taken 75 years for business practice to catch up to Mises’ theory of the market system. The mechanisms for the catch-up are digital enablement of the direct connection to the customer, A.I. processing of the resulting data flow, and the interconnection of people and functions in the firm who can respond to the insights from the data flow with hyper-personalized service and precise targeted innovation.

In this digitally enabled world, there are three new dimensions of the economist’s “boss customer”:

The customer can command and receive a personalized experience

The old management method was to try to predict what customers might want in the future, by asking them questions about their dissatisfaction with today. But customers are not in a position to imagine and design the future; they don’t have the expertise or the information. 

The new method is to deduce the customer’s preferred personalized experience from their present-day behavior: the searches they conduct, the purchases they make, the websites they visit, their offline behavior as they work, shop and travel. All these activities generate behavioral data, and hyper-automation can instantly energize a supply chain to deliver on the needs highlighted by the resultant data patterns. It is digitized customer behavior data that provides the energy for the system, not their expressed attitudes or opinions.

The customer can add many layers of expectation to their desired experience.

Through their behavior, customers can express not only what they want but many other dimensions of how they want it: where and when and how fast, in what kind of packaging, using what kind of delivery method, accompanied with what level of messaging, with what kind of service wrapper (e.g. insurance), with what kind of return policy and what level of ease-of-return process. These and many more expectations are to be met, or the customer might look to alternatives on all those dimensions. The customer is the selection engine for best service and best experience, and operates with the confidence that alternatives are available.

The customer is the creator of value in the new value system.

The hyper-personalized experience plus the continuous layering and raising of expectations constitute value for the customer. It’s an ever-changing value benchmark because the customer is able to change it. They feel that they can always raise the bar. 

So now, when we talk about value creation, we must reverse the mental flow model that that term usually suggests. Value creation, traditionally, has been defined as firms creating value for customers. Today and tomorrow, customers will create value in their personalized experiences, based on their own requirements and expectations. 

The role of the digitally- enabled firm is facilitation, making the value experience easier, more convenient and closer to expectations. The concept of ’the digital friend”, a digitally enabled brand that knows the customer well and demonstrates empathy via a hyper-personalized experience, will be the model for value facilitation.

Central facilitation replaces central control.

Traditional management is a control concept. In this concept, resource allocation is controlled through the planning process, and then hierarchical organization structures and the command authority of title and position are deployed to ensure that subordinate employees follow orders to deploy the resources through implementation. Value creation resides in the plan, and the role of implementers is simply to ensure that value is not eroded through imperfect action.

This control-through-command won’t survive. The customer now commands. The structure of the firm must be flat and networked so that the customer’s commands can flow to where they can influence internal functions. Those functional centers respond to the customer, not to an authority structure. 

The post-managerial era has arrived, only 75 years after economists predicted it.