The view of manual employees as mindless machines dates back to the Industrial Revolution, when most workers were poorly educated, and was entrenched by Frederick Taylor, whose bureaucratic model institutionalized a caste system of thinkers and doers that still persists. Which is unfortunate, because that model allows a vast reservoir of human ingenuity to go untapped. As a result, firm performance suffers. But there is a path out of this trap, as the French tire manufacturer Michelin has found. Since 2012, under the banner of "responsabilisation" (French for empowerment), the company has dramatically increased the authority and accountability of workers on the front lines. The firm kick-started this change through a bottom-up process involving targeted experiments in a handful of plants and slowly scaled up successful approaches. The outcome: A workforce that's deeply knowledgeable and relentlessly inventive, and that had delivered half a billion dollars in manufacturing improvements by 2020.

While most business leaders recognize that bureaucracy squashes initiative, risk taking, and creativity, it continues to thrive. In a complex global environment, it's seen as a necessary coping mechanism. Many look to start-ups for an answer. But the most promising solution may have emerged in an unlikely place: the world's largest appliance maker, Haier. Under a renegade CEO, it has been divided into 4,000 self-managing microenterprises. About 250 are market facing ("users"), and the rest ("nodes") supply them with components and services like IT and HR support. Users can hire and fire nodes--or contract with outside providers--as they see fit, and nodes' revenues are tied to their users' success. Ultimately, everyone is accountable to the company's customers. Everyone is also encouraged to be an entrepreneur. All targets are ambitious, and rewards are tiered, performance based, and potentially hefty. So far that formula seems to be working beautifully, producing 18% yearly revenue growth for a decade and $2 billion in market value from new ventures.