Following is an excerpt from my new book, Minds at Work: Managing for Success in the Knowledge Economy (Chapter One). 

As the economic paradigms change, a corporate Darwinism takes over and the companies that fail to change and evolve disappear.

In 2012, Richard Foster’s research at Yale University indicated that the average life span of a company listed in the S&P 500 index of leading U.S. companies fell by more than 50 years in the last century, from 67 years in the 1920s to just 15 years. He estimated that by 2020, more than three-quarters of the S&P 500 will be companies that we have not heard of yet. More recently, in 2016, Innosight, a growth strategy consulting firm, forecasted that half of S&P 500 companies will be replaced over the next 10 years. The new environment is increasingly aggressive, incessantly competitive, and constantly driven by surprise innovation and technological changes, all happening at an unprecedented pace. Yet we are still trying to use 20th-century management practices and principles to coordinate and manage people in the 21st century. We need to change the basic way we manage people so that managers can create the best environment for everyone to develop the competencies necessary to be successful in this new environment.

We have no choice. We need to stop managing hands.

None of this, we suspect, is news. What may be new is that you are, as a manager, in charge of this change. Your primary responsibility is to lead people into a 21st-century knowledge economy that supports and sustains learning over everything else. Learning is the critical differentiator in the knowledge economy. How you manage that learning is the new competitive advantage.

We describe the 21st-century corporation as an organization that is global and virtual. People all over the world will form the intersecting nodes for a constantly humming web of communication. They will be able to continuously and seamlessly communicate and collaborate. From the individual to the group, their actions will be quick, decisive, and informed, and the results relevant, smart, and proactive.

To create this corporation, how we share information must change. As Ray Gilmartin, CEO of Merck, states, the 21st-century corporation is one in which “a hierarchy of ideas replaces the hierarchy of position.” The previous command-and-control structure—where knowledge was power, but only a few could access it and make decisions—will be replaced with the new structure, where sharing knowledge is the real power and decisions are made by everyone focused on the job. There is no alternative future.

Examples abound of companies that were once household names that became extinct because they did not successfully shift from a static managing hands model to a more agile and dynamic managing minds approach: Compaq, E.F. Hutton, PaineWebber, Merry-Go-Round, MCI WorldCom, Eastern Air Lines, Enron, Woolworth, Pan Am, Kodak, Standard Oil, The Pullman Company, Arthur Andersen, General Foods, TWA. Of the many factors that contributed to their demise, their slowness or inability to change the way they managed people played a major role.

If you have your doubts, look at the companies that are managing minds who filled the empty spot in the marketplace. Investment firm E.F. Hutton—whose commercial catchprase was, “When E.F. Hutton talks, people listen”—was replaced by several technology-based brokerage houses that understood that investors wanted to disintermediate from brokers and manage their own stock portfolios. The older companies were so invested in a hands-on approach to buying and selling stocks that they missed the big new idea. Individuals no longer wanted to listen. Instead, they wanted to use a faster, cheaper, and more do-it-yourself technology that provided information to help them purchase and sell stocks without brokers.

Kodak’s moment happened when senior management refused to look at digital photography as a disruptive technology. They failed to heed their own engineers, who told them that instant film was an idea whose time had come and gone. Decisions in this managing hands company were top-down and final. Kodak was so invested in manufacturing film that they ignored customers who were rapidly switching to filmless cameras. The lesson is clear: Corporations must learn to listen to their customers and employees or face the consequences.

“Change or die” is not just a compelling hook to capture the imagination. It is the reality that corporations face whether they want to admit it or not. Fortunately, examples of success are everywhere. The new style of managing minds is the antidote to the problems created by trying to force-fit the 20th-century analog model into the 21st-century digital reality.

Hands are replaceable, literally: Human hands are being replaced by robotic hands every day. And managing robots is no longer a job that requires hands-on managers. This trend toward automation will not stop while technology keeps getting better and more sophisticated. One study from Oxford University found that “advanced robots are gaining enhanced senses and dexterity, allowing them to perform a broader scope of manual tasks. This is likely to change the nature of work across industries and occupations.”4 Astonishingly, robot hands can now thread a needle.

If you think threading a needle is not that big a deal, here is another example. In a kitchen in Silicon Valley, the team at Zume Pizza is hard at work. Pepe and Giorgio squirt on the sauce, and Marta spreads it in concentric circles, just like they do in Italy. Then Bruno puts the pizza in the oven to bake to perfection. And they do not even stop for a moment to catch their breaths. That’s because Pepe, Giorgio, Marta, and Bruno are robots. And while human employees still apply the toppings according to the customer’s wishes, it’s only a matter of time before they cede that role, too. Made-to-order, ready-to-go, fully automated pizza in as little as seven minutes: As the owners are proud of saying, it’s “artisanal robotic pizza.”

You need only to read any recent news report to see this story repeated hundreds of times:

  • Foxconn has replaced 60,000 factory workers with robots.
  • Wendy’s is replacing its lowest-paid workers with robots.
  • Tesla Gigafactory is using robots to build machines at its battery factory.

We once used machines to build things, and we managed hands. Now we build machines to build machines. When there are no hands left, what still needs to be managed?

Minds. It’s time we begin to consciously manage minds—the minds of the people who design, program, install, service, and upgrade those robotic hands, for example. Their work is the product of their thinking, creativity, and problem solving.