Management Innovation is at the Top of the Innovation Stack



“Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.” — Howard Aiken

When it comes to innovation, Management Innovation is at the top of the innovation stack.

Management Innovation creates new ways of mobilizing talent, allocating resources, and building strategies.

Management Innovation is how wars have been won and how businesses have created brilliant breakthroughs and tremendous turnarounds.

For anybody who has ever felt that ‘the system’ is stifling innovation or that the bottleneck is at the top of the bottle, Management Innovation is the key to unlocking the shackles that bind us to legacy management practices and beliefs.

In the book The Future of Management, Gary Hamel walks through the Innovation Stack and how Management Innovation is at the top of the pyramid.

4 Big Types of Innovation

According to Hamel, there are 4 big types of innovation that make up the innovation pyramid:

  1. Operational Innovation
  2. Product / Service Innovation
  3. Strategic Innovation
  4. Management Innovation

Management Innovation is at the Top

Management Innovation is at the top of the innovation pyramid for good reason.  It both amplifies value creation and it creates a competitive advantage that is tough to duplicate.

Via The Future of Management:

“Innovation comes in many flavors; operational innovation, product innovation, strategy innovation, and, of course, management innovation.  Each genre makes its own contribution to success, but if we were to array these various forms of innovation in a hierarchy, where higher tiers denote higher levels of value creation and competitive defensibility, management innovation would come out on top. “

Operational Innovation is at the Bottom

Operational Innovation is at the bottom of the innovation stack.  Operations are often outsourced and unique advantages are difficult to defend, because they are often commoditized.

Via The Future of Management:

“At the base of the pyramid is operational innovation.  In a world of hyper-competition, operational excellence is essential, but I the absence of some Toyota-like management innovation or Ikea-style business model breakthrough, operational innovation seldom delivers a decisive, long-term advantage.  This is true for several reasons. 

First, operational preeminence often depends heavily on the quality of a company’s IT infrastructure.  Unfortunately, advances in hardware and software tend to diffuse rapidly , making IT-based advantages notoriously difficult to defend. 

Secondly, many companies today outsource a wide range of business activities to third parties—vendors who often serve several companies within a single industry, and who typically lack the incentives to help a single customer build a standout advantage.  While outsourcing and offshoring can help a company stay even with the competition, they seldom yield a significant proprietary advantage. 

Finally, there is a growing swarm of consultants who work long days transferring best practices from exceptional companies to mediocre ones.  This, too, tends to level out operational advantages.”

Product Innovation is Above the Bottom

I think it’s a surprise to people that Product Innovation is near the bottom.  The reality is that it’s pretty easy to copy product innovations, unless you put protective measures in place around intellectual property.

Via The Future of Management:

“Next up the food chain is product innovation.  There’s no doubt that an iconic product can lift a company from obscurity to cult status in short order (think, for example, of Dyson’s bag-less vacuum cleaners). 

Yet in the absence of enforceable patent protection, most products are quickly knocked off. 

In addition, an ever-accelerating pace of technological progress often gives upstarts the opportunity to leapfrog, yesterday’s pioneers. 

As a result, breakthrough products seldom grant a company long-lasting industry leadership.  For example it only took a few years for Samsung to improve upon Nokia’s super-slick mobile phone designs, for other golf club makers to match the playability advantages of Callaway’s Big Bertha irons, or for Hoovers to come up with its own ‘Cyclonic’ vacuum cleaner.”

Strategy Innovation is Near the Top

Strategy Innovation is near the top of the innovation pyramid.   Bold business models and brilliant business strategy is tougher to copy and emulate, even when you see it in action.  After all, smart strategy is based on your unique strengths, weaknesses, and opportunities in the market place.

When done well, your strategy is uniquely you.

Via The Future of Management:

“Further up the stack is strategy innovation—bold new business models that put incumbents on the defensive.  Standout examples include Ryanair, Europe’s leading low-cost airline, Apple’s iTunes music store, and Zara’s chic but cheap couture. 

A killer business model can generate billions of dollars in market value for the innovator—but on average, a distinctive business model is more easily decoded and counteracted than a heretical management system.

Wal-Mart’s supposedly  invincible lead in discount retailing hasn’t prevented other retailers, like Costco and Target, from flourishing.  America’s crop of low-cost airlines, including Frontier, JetBlue, AirTran, and America West (recently merged with US Airways), have purloined entire chapters from Southwest Airlines’ once-unique playbook.  And although India’s outsourcing pioneers—companies such as Infosys and Wipro—have become industry giants, they must still scramble every day to defend their lead from a horde of envious and determined wannabes who are equally eager to explore India’s wage advantage.”

Management Innovation Has a Unique Capacity to Create Difficult-To-Duplicate Advantages

Management Innovation is the most difficult to copy and it provides the most value creation.

Via The Future of Management:

“The point is, not all types of innovation are created equal.  When focused on big, chunky problems, management innovation possesses a unique capacity to create difficult-to-duplicate advantages. 


Because some heresies are more heretical than others.  You, for example, would probably find it easier to adjust your fashion preferences than to transpose your religious beliefs.  Similarly, most executives find it easier to acknowledge the merits of a disruptive business model than to abandon the core tenets of their bedrock management beliefs.”

So if you’re wondering where you can make the most impact when it comes to innovation, it really comes down to Management Innovation.

That said, remember that a pyramid is as strong as its foundation.

If you want to be more effective at innovation, then draw from all levels of the Innovation Stack.

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  1. Hi J.D.,

    Would it be possible to have some quick examples of management innovation? Perhaps a few high-level extracts from the book.

    Thank you,


    • Hey Osiris,

      According to Hamel, traditional management principles have been built around a small set of core principles: standardization, specialization, hierarchy, alignment, planning, and control, and the use of extrinsic rewards to shape human behavior.

      With that in mind, whenever we see management ideas that contrast or live outside of those traditional ideas, we see management innovation.

      I think we see a lot of management innovation when we see things like self-organizing teams, innovation time baked into the job, intrinsic rewards, etc.

      Agile methodologies have been disrupting traditional management principles for quite some time.

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