Leading in the digital age

What does it take to lead in digital business

I closed out in last week’s blog that we are in the next industrial revolution, the digital age.  Technology is disrupting all things in business and society and that the need for a ‘different type of leader’ will be key to success.

Leadership has always been about people who had reached the top of their organisations and were “in charge” through the good old fashioned promotion ladder approach.

Business leaders must recognise that they need leaders at all levels of their organisation.  No matter the position, or responsibility, everyone has to be accountable for creating value for the customer.  Experts in leadership have been adding new leadership characteristics such as authenticity, emotional intelligence as well as the abilities to establish relationships and build trust as essential for today’s leaders.

A study by Westerman, Bonnet and McAffee looked at what 184 organisations from multiple industries are doing in response to the opportunities offered by the digitalage.  They analysed the organisations in 2 dimensions:  1. how much time and money they are spending in implementing new digital capability, 2. If they were also building new leadership capability required for the Digital Age.  Using these two dimensions, they grouped theorganisations into 4 groups as represented below.

“Source: Capgemini consulting adapted from the book “Leading Digital: Turning Technology into Business Transformation”, Harvard Business Review Press, 2014″

Beginners: Have not yet invested in the leadership capability or the digital tools to effectively use Digital Age tools.

Fashionistas: Have invested in digital tools, but have not invested in developing the new leadership capabilities needed in the Digital Age.   

Conservatives: Are developing new leadership capabilities, but are not sure which digital tools they should adopt, and are not able and willing to spend the time or money investing in what is needed. 

Digital Masters: Are developing new leadership capabilities, and then using them to select and implement the digital capabilities needed for success. 

The difference in the financial performance of these 4 groups showed strong evidence of the importance of investing in developing Digital Age Leadership capabilities in order to select the most effective digital tools for your company needs.

Many organisations have already introduced  good leadership programmes and these should not be replaced, but rather businesses should seek to enhance them by introducing 5 new capabilities. 

To introduce the 5 Leadership Capabilities and illustrate why they are essential, lets quickly review 4 primary types of organisations that have evolved since the start of ‘modern business’, up to the present.

The Functional Hierarchy was formed to optimise value during the industrial age to bring the value of scale.

The Matrix organisation was formed to better meet the needs of customers, providing more variety and flexibility in product offerings by leveraging the tools and capabilities of the information age.

The Alliance organisation was formed to respond to the increasing demands of doing business globally in a world where communication and information technology both demanded and enabled faster response to customer’s needs.

The Value Network organisation was formed to leverage the opportunities of the digital age to optimise stakeholder value by placing the customer in the centre of decisions and actions to act on the customer insights gained from customer intimacy.

No matter what your job, or what industry or vertical of business you work, you are no doubt feeling the effects of the Digital Age.  Those effects will only increase and accelerate.

Let’s now drill into the leadership capabilities needed to win in the digital age.

Capability 1: Leading Beyond the Edge: The digital age leader must have the abilities to lead beyond the edge of their formal authority. They now have to lead cross-functionally but still within the edge of their organisation.

Capability 2:  Building Trust, rather than relying on formal authority, as the basis for leading:  Leaders can no longer rely on formal authority as their source of authority to lead members of their teams studies of highly effective cross-functional teams revealed that the ability to build and maintain deep trust relationships was more effective as a foundation skill for leadership.

Capability 3:  Forming and Leading Virtual Teams:  Virtual teams are teams or groups that slice across departments, organisations, skills and can be geographically dispersed.  Members can occasionally meet in person, but most often coordinate their work through information and technologies in order to achieve a common goal.

Capability 4:  Collaborating and Co-Creating:  Collaboration is more than just working together or cooperating with others.  When people collaborate and co-create they must trust one another and share expertise willingly to achieve a common goal.

Capability 5: Finally learning dynamically: if everyone has the digital age tools and processes available to them how does any one organisation win? The ability to constantly learn and adapt from every customer or business interaction, gaining insights and then acting on them, being the first and the best at creating customer value.

‘The purpose of the modern business is to optimise and create value for all its stakeholders’

  • Customers
  • Employees
  • Shareholders
  • Partners
  • The societies within which they operate

As we travel further into the digital age these leadership capabilities we have discussed will be ever more critical.  Evolving to effectively create stakeholder value whilst facing ever changing customer needs and exponential advances in technology.

I’d like to close with a couple of stats and a question.  It’s a question I believe all business and people who truly want to succeed in this dynamic world should be asking themselves.

If recent studies show that ‘Digital Masters’ such as Nike, Amazon and Apple – who have highly developed leadership capability and digital capability – outperform the average profitability of other members in their industries by a whopping 26%.

Those organisations that have highly developed digital capability, but don’t have highly developed leadership capability underperform their industry peers average profit by a surprising 11%.

Isn’t there now a clear and compelling business case for developing digital age leadership capabilities in your businesses right now?

This blog was powered by two double espresso and Crosstown donuts……