Digital competence has become an essential attribute in this economy, but few organizations outside tech seem able to build such talent pipelines. This is due, in part, to the fact that some of the disciplines are so new, no one over the age of 30 has much experience with them.
But even within tech, there is growing awareness that enduring values like trust are critically important for optimizing the alignment of corporate strategy with employee and customer engagement because in a rapidly evolving world, they represent among the only certainties. JL
Douglas Ready and colleagues report in MIT Sloan Management Review:
Only 9% of survey respondents strongly agree their companies have leaders with the skills needed in digital workplaces. While 82% say their companies need digitally savvy leaders, only 40% believe their organizations are building leadership pipelines. There is a measurable disconnect between awareness, ability, and urgency. Digitalization is creating unprecedented demands on leaders and will increasingly compel companies to change the way they operate. “When we think about the digital economy, we think everything has to be revolutionary. But technology has become such a powerful force, trust and integrity become even more important."
The majority of executives we surveyed are hampered by cultural inertia, specifically a reluctance to rigorously rethink or challenge their past leadership practices. The principles of behavior, culture, and organizational design that once defined excellence have become less relevant and less valuable. Self-deceptive inconsistencies and contradictions dominate the self-assessments of many leaders today.
We have identified three fundamental reasons leaders aren’t as ready to lead in the digital economy as they think: A deficiency in digital savviness coupled with outdated mindsets.A series of blind spots that prevent them from seeing a clear path forward.Multiple embedded tensions that undermine strategic execution.
1. Deficient Skill Sets, Outdated Mindsets
Fully 71% of our respondents agree that they are personally prepared to lead in the digital economy. Yet this same group scores significantly lower when asked whether they possess specific digital skills, such as using analytics to influence their decision-making or advocating for the use of machine learning in their organizations’ operations.
Even more disconcerting, whereas 82% of respondents say their companies need digitally savvy leaders, only 40% believe that their organizations are building robust leadership pipelines. There is a measurable disconnect between awareness, ability, and urgency.It is clear, however, that digitalization is creating unprecedented demands on leaders and will increasingly compel companies to change the way they operate from the ground up. “Data will no longer be the job of the CIO or an analytics division,” states Rajiv Srivatsa, cofounder and former chief technology and product officer of the India-based omnichannel furniture retailer Urban Ladder. “It will be the job of every single person in the company, whether they are in marketing, sales, customer service, or HR.”
Virtually every interviewee observed that leaders can’t be successful unless and until they achieve a certain level of digital savviness. But many leaders simply haven’t reached it. Indeed, the sharpest evidence that leaders are unprepared is that only 9% of all survey respondents strongly agree that their companies have leaders with the skills needed to thrive in digital workplaces. Just 12% strongly agree that their leaders have the appropriate mindset for leading in this new world of work.These responses suggest a lack of confidence in leaders’ competence.
2. Blind Spots That Cloud Perspective
To compound matters, many of today’s leaders are not as self-aware as they need to be: Blind spots disrupt their ability to prepare for the intense and unfamiliar competition brought on by digitalization. Our findings revealed four types of blind spots: strategic, cultural, human capital, and personal.
Strategic blind spots exist when leaders fail to grasp the revolutionary changes upending the business models in their industries. “Software is eating every industry,” notes Brian Halligan, cofounder and CEO of the marketing software provider HubSpot. “I mean, you name the industry, it’s going to eat it. And every company is a software company today. You’re a company that makes tables or chairs — you’re in the software business. You’re a tech-enabled services business. If you don’t get that, your company is in trouble.”
Cultural blind spots exist when organizational behaviors are so embedded that improvements become affronts to cherished norms. Michael Schrage, research fellow at the MIT Initiative on the Digital Economy, observes that traditional norms around how top executives should communicate with their people are shifting more quickly than many leaders recognize. Schrage recounts his exchange with the CEO of a large German company several years back whose speechwriter was blogging on his behalf: “I told him if he really wanted to establish a digital imprint on his organization and change the culture, he’d better be advised to comment on other people’s blogs, posts, and wikis. You link. You participate in FAQs. You respond. Have digital conversations — show that you are living in the business, not just above it.”
Human-capital blind spots exist when a company’s talent policies and practices reinforce outdated hiring and promotion practices. “When my last company first launched, we thought we knew how to attract millennials and Gen Z’s,” says Brian Kardon, chief marketing officer at InVision, a digital product design platform. “It took me a while to understand that I was more old-world than I had thought. I knew the desk phone was dead, but it turns out the desk itself is dead! Our people expect the same tools and environment they either have at home or had at college. If they do their work from a sofa or beanbag at home, they want to work like that here. We get that now, and frankly it works for all of us.” “Let’s look at how people really get promoted, and who gets promoted,” states Patty McCord, former chief talent officer at Netflix. “Let’s look at who we really invest in. Are we hiring and promoting the same kinds of people who helped get us into trouble in the first place? There has to be a new path to leadership in most organizations. And that path should be available to everybody.”
Personal blind spots exist when leaders deliberately or by default surround themselves with colleagues who reinforce and enable old-world thinking. Nisa Leung, managing partner of Qiming Venture Partners, a Chinese venture capital company with $4.3 billion in assets, looks for entrepreneurs who have not only good ideas and discipline, but also “the humility to know what they don’t know. They recruit, very quickly, team members with different perspectives.”
Perspective is important, but so are new skills. “All leaders need to be more technologically savvy,” states Arthur Yeung, senior management adviser to Tencent Group and visiting professor of management at China Europe International Business School. “I come from HR, and I have been a deep specialist in that area. But today at Tencent, most of the important conversations center around technology. If I am going to be a trusted adviser to the top management team, I need to be in technology conversations. I need to go back and learn my ABCs: AI, big data, and cloud.”
Many interviewed leaders expressed concern that they might lose the trust of their employees due to a group of tensions and trade-offs that emerge directly from the new world of work.We repeatedly heard, for instance, that speed is the new currency in the digital economy, but several interviewed leaders cautioned that speed brings trade-offs. Some pointed out that big strategic mistakes and cultural miscues could occur if leaders are not thoughtful and deliberate at crucial moments in a company’s development. Others said that accelerating the pace of operations can make it difficult to maintain the meaningful relationships that are essential to sustaining a fast pace over time. As Chin Yin Ong, head of people at Grab, a Singapore-based technology company, observes: “Speed is the main currency of digital business models, but with everything moving in hyper-speed, people may feel they have lost touch with building personal relationships. We need to balance the pace of business and cultivating networks to achieve the best outcomes.”
These are just a few of the tensions that create challenges and leave leaders with many dilemmas. Where do they make their investments — is it purpose or profits, speed or deliberateness, digitalization or personalization? Failure to confront these dilemmas can keep organizations stuck in a debilitating sense of inertia, which can deteriorate into cynicism and a deepening sense of mistrust.
Great leaders today are addressing these tensions head-on with a simple remedy: They ask for help. They trust that their teams will be motivated when asked to contribute their ideas on how to reconcile these and other tensions that confront their organizations. They have the humility to express transparently and authentically that together, as a community of leaders, they will put these issues into the proper perspective.
Great leaders use a new playbook. They artfully introduce new leadership approaches that particularly appeal to a new generation of employees while honoring the time-tested behaviors and attributes that serve to inspire trust, build a sense of community, and motivate employees to improve performance.
But how can more companies get there? What new, emerging leadership behaviors need to be adopted in order for companies to thrive in the digital economy? How do these behaviors mesh with those attributes that simply work, no matter the times, circumstances, or cultural considerations?
From the survey results and executive interviews, we discerned that the value of several specific leadership behaviors was eroding. We found a clear consensus that the value of some leadership behaviors, such as having integrity and ethics, was enduring. Other behaviors had gained new emphasis and new value; their value was emerging. Interviewees cited the need to build core competencies in emerging behaviors, such as expressing empathy, and avoid investing in eroding behaviors, such as micromanaging. Collectively, our findings suggest that the most advanced leadership teams are committed to identifying these 3E’s (eroding, enduring, and emerging leadership behaviors) in their organizations. (See Figure 3 for a partial list.) These leaders then look to strengthen emerging and enduring leadership attributes and shed behaviors that are eroding in value.
Debjani Ghosh, president of the India-based software and services companies trade association NASSCOM, notes: “The idea of top-down leadership is a thing of the past, or should be anyway. It’s not what people are looking for. Leadership needs to be democratized. Decision-making has to be more distributed so that every person feels it is his or her responsibility to lead, because that is what will lead to speed, which is so important for business success today.”Hariolf Wenzler, former head of marketing for EMEA at the law firm Baker McKenzie, adds another example of an eroding leadership practice. “In a law firm, becoming partner used to be the only goal for people from a career perspective,” he says. “But now, it’s important to inspire people. Our lawyers are creative people with multiple goals in their lives; dangling partnership in front of people isn’t everything.”
Some time-tested leadership attributes and behaviors — ethics, trust, and integrity among them — are still viewed as critical in the new leadership playbook. Let’s take one enduring behavior as an example. Our survey results showed that the most important behavior in leading teams is, by a wide margin, trust. Tencent’s Yeung put it this way: “When we think about the digital economy, we sometimes think that everything has to be new or revolutionary. But in the digital world, things like trust and integrity become even more important. Technology has become such a powerful force and can improve our world so much, but without trust and integrity it can also do lots of damage to society, so we must be responsible with this power. That’s why Tencent’s new mission statement is ‘Technology for good.’”
Just as some leadership behaviors are diminishing in importance, other behaviors are becoming more critical to success. As noted earlier, 82% of survey respondents and virtually all of those interviewed indicated that digital savviness is a nonnegotiable leadership skill required for the future. This is a perfect example of an emerging attribute, because digital savviness would not have appeared in many companies’ leadership frameworks as recently as five years ago. “We obviously need people with strong analytical skills,” says Anne Benedict, chief human resources officer at the software company Infor. “But we want those people to be able to interpret massive amounts of data. We realize we need to solve large problems together as a team. We also want people who are great at forming and implementing all kinds of networks and relationships to help us solve our customers’ needs.”
Virtually all interviewees touted the growing importance of collaboration skills to achieve operational excellence. Lori Beer, global CIO of JPMorgan Chase, had this to say about valuing collaboration and mastering relationships: “We need to collaborate effectively not only with colleagues inside the bank, but with our customers and other partners in our ecosystem. That’s an important way we’re able to deliver solutions and end-to-end customer experiences.”
What’s more, during our focus-group sessions with next-gen leaders, trust once again was highly valued. People want to trust their leaders and have their leaders trust them. Trust enables individuals and teams to be more willing to take chances or go the extra mile for their organizations. As William Weldon, retired chairman of the board and CEO of Johnson & Johnson, notes: “At the end of the day, the only thing we have going for us is being honest, being trusted, and being trusting. If we break that bond, it is almost impossible to earn it back.”
Great leaders in today’s economy understand the power of providing a clear purpose, communicating authentically and with inspiration, building relationships within and among teams, being empathetic with an increasingly diverse workforce, and possessing an investment mentality with both people and the planet. These trailblazing leaders value inventiveness, curiosity, trust, digitally savvy and analytically minded talent, and more. The challenge, then, for prospective trailblazers is to cultivate emerging behaviors, combine them with the enduring ones, and proactively shed behaviors eroding in value. Doing so is integral to crafting a leadership framework that is right for the times.
We have found that executive teams can learn a great deal about themselves and how they would like to develop as leaders by identifying which behaviors are eroding, enduring, and emerging in their organizations. In executive education classes taught by one of the authors, this process leads directly to a productive discussion about which leadership behaviors are aspirational, which behaviors are areas of competence but eroding in value, and which behaviors are enduring in value (and may or may not be areas of competence). This straightforward process — which we call the 3E’s Diagnostic — is a useful team-building exercise and exposes areas for leadership growth, investment, and disinvestment. Leadership teams vary in which skills they value most and most want to value.
Emerging and enduring leadership behaviors constitute a highly aspirational leadership playbook. Few — if any — leaders are competent across the full set of these attributes.
The primary leadership challenge in the digital economy, however, isn’t simply to adopt a group of behaviors or to achieve a set of competencies. The deeper challenge is to develop a new mindset that anchors, informs, and advances these behaviors. Mindsets are mental operating systems that guide behaviors. Behavior is a function of mindset. Leaders need to change their attitudes and beliefs — their mindsets — about what leadership looks and feels like, if they want to produce behavior change that lasts over time. “Organizations need to completely rethink what they are about and what it means to lead,” McCord says. “It’s not about one person or even those only at the top. In today’s world, everyone has to be a leader — we have to think of ourselves as members of a leadership community. It’s not just something we talk about. It’s who we are.”
We identified four specific mindsets that represent the hallmarks of great leadership in the digital economy. These mindsets reflect the principles, values, and norms of trailblazing leaders. Leaders we interviewed expressed these mindsets in clear, declarative, and descriptive statements of who they are, what they stand for, what they value, and how they will behave.
Trailblazing leadership teams from companies like HubSpot, LinkedIn, and Netflix express these mindsets when discussing their intent to form powerful communities of engaged leaders who are customer obsessed, incurably curious, committed to purpose and planet, and masters of connectivity, networks, and relationships.Developing and embracing these mindsets requires a complete reimagining of what it means to lead in the digital economy. These mindsets make it possible for communities to be bound together by a shared purpose. We emphasize leadership mindsets not to minimize skills or behaviors, but because we found clear evidence that pathological legacy leadership mindsets undermine leaders’ preparedness and effectiveness. Talking about being innovative or resilient, for example, doesn’t get the job done. Taking action does.
I would insist that anybody who wasn’t numeric on my team develop those skills,” says Ilene Gordon, retired chairman, president, and CEO of global ingredients solutions company Ingredion. “We come together to solve big problems for our customers. If you don’t have the analytical capability to identify the most important problems, then we’ll be of less value to them. With that in mind, I also want to make sure that our people have the perspective to see beyond the numbers — to understand what the numbers mean.”
The producer mindset combines a focus on customers with a focus on analytics, digital savviness, execution, and outcomes. Producers use analytics to accelerate innovation to address shifts in customer preferences and improve customer and user experiences.
“When I was in business school at Sloan, the mantra was that your product needed to be 10 times better than the competition,” says HubSpot’s Halligan. “That made sense then, but today the new mantra is that your customers’ experience needs to be 10 times better. Companies need to be clear on just what it is that makes them special and execute along those dimensions. That means working in teams to get the big things done — not just for the team’s objectives, but for the enterprise’s objective to create a world-class customer experience.”
Fashion’s traditional retail model, for instance, stood unchanged for many years, but disruptions to the industry have put a new premium on speed and customer experience. Roger Young, chief human resources officer of Li & Fung, recalls the old model, in which designers showed their work on the runways of Paris and New York, setting in motion a long supply-chain process that resulted in retailers selling similar, less expensive designs to the consumer market many months later. But now, when a celebrity like Taylor Swift wears something out one night, we can count on photographs of her appearing all over social media. Her young fans want to look like their fashion role model, Young says, and “they want that on the shelves immediately.”
Today, a much different process is set in motion: Designers create a digital, rather than physical, sample inspired by the latest trends that is put through the supply chain within a matter of weeks. As Young observes, “The democratization of information and the advent of social media have brought a real focus around continued innovation to be able to give consumers what they want — and fast.”
Leaders with an investor mindset pursue a higher purpose beyond shareholder returns.2 They are dedicated to growth, but in a sustainable fashion. They care about the communities in which they operate and are intent on improving quality of life. They care about the welfare of their employees and invest in safe working conditions. Their investment mentality leads them to deepen their commitments to, and understanding of, their customers; they don’t just look at customers as streams of revenue. They pay close attention to not only what products they are selling or services they are offering, but also why they exist as enterprises. They are in the game for the long run, so they are deliberate about the big bets, even though they move with speed and agility on a daily basis. When it matters to the planet, communities, and the welfare of employees and customers, they take their time to get things right. Cherie Nursalim, vice chairman of GITI Group, a diversified business conglomerate in Asia, offers this description of the investor mindset: “Whether we call it mission-driven, purpose-driven, or even a sense of shared values, to me it’s about believing in ourselves as a business that can partake in and cocreate an ecosystem for solving social, ecological, or spiritual divides. At Kura Kura Bali, an eco-development project we are leading, we encourage our team to apply systems thinking and Theory U [change management principles] to cultivate an open mind, open heart, and open will — and it is inspirational for all of us, but especially for our younger people.”
Former PepsiCo chairman and CEO Steve Reinemund makes a similar point: “The truly great leaders have motivating, purpose-driven visions,” he observes. And Cranfield University School of Management professor emeritus David Grayson adds that it’s critical for leaders to help their organizations define their broad purpose — “something that is an authentic and inspiring explanation of how the business creates value both for itself and for society simultaneously over the long term.”
To Susan Sobbott, former president of American Express Global Commercial Services, having an investor mentality means focusing on the human impact:
When I shared our financial goals with the team, I struggled. Financial goals were pretty much all that mattered. But for me, they felt empty, because I wanted to align purpose, principles, and profits. Yet I found myself talking about achieving a 15% growth rate in revenues or 10% growth in profits or a 20% reduction in costs. I wasn’t motivated by just a set of numbers, and I found it hard to believe the team would be. So, I began framing the financial goals as the outcome. I redirected our attention to how we could change the lives of a million customers through our work as a team to help our customers thrive. All of a sudden, I, myself, was sparked, which was contagious. The team lit up with pride, having a sense of determination through a clear intention. Motivation and creativity grew, which made hitting the numbers easier. Investing in a wide range of talent, not just high performers, was also a consistent theme throughout the interviews. Marjorie Yang, chairman of textile and apparel manufacturer Esquel Group in Hong Kong, shares this perspective. “Many of our employees don’t have a formal education,” she says. “Without further training or education, their career potential will be very limited. But we are investing in them, especially in helping them become more digitally savvy. We take every person in the company who wants to be involved through coding education, and we’ve invented a fun way that they can develop apps they can share with their kids to show them they are digital hotshots! It is very motivational for our employees to know we are invested in their futures.”
In an increasingly connected world, mastery of relationships, partnerships, and networks is a new currency that drives organizational effectiveness. “If leaders do not master collaborative relationships, both inside and outside the company, it can limit production of the outcomes needed to win our customers’ business,” states JPMorgan Chase’s Beer. Leadership teams with a connector mindset get this. It’s how they operate. This shift — regularly bringing together diverse stakeholders to achieve a shared purpose, often on a short time frame — has tremendous implications for leadership. With more diverse interests, spread across individuals, functions, companies, geography, and industries, the challenge of aligning interests becomes more complex and more urgent. “It is so important to have a diversity of voices at the table,” states John Tyson, chairman of the board of Tyson Foods. “We try to bring a diversity of skill sets, but more important, a diversity of perspectives. That helps us better solve customers’ problems, which in the end is why we are here.”
In the digital world, having a connector mindset takes on a whole new level of importance, says MIT’s Schrage:
Let’s say you are in a business that is rapidly migrating from an emphasis on products to platforms. You are likely doing so in an ecosystem environment — a complex array of partnerships with users, customers, and suppliers. You might even partner periodically with competitors when mutual benefit overshadows the core rivalry. Network effects are key — facilitating a process in which users are creating value for other users. This approach flies in the face of the more traditional view of creating strategic advantage, which overwhelmingly focuses attention on optimizing organizational capabilities to win, rather than optimizing the efficacy of interactions among users to create more valuable communities.
“Leaders have to be extremely open to change and extremely flexible in different situations,” says Erik Gatenholm, cofounder and CEO of Cellink, a public bioprinting company that enables researchers to 3D-print organs and tissues through its offering of disruptive printers and ink. “It’s a matter of survival of the fittest. Your organization is going to go through a lot of different change cycles, and if you’re not open to that, then you are going to be a dinosaur within a year.”
Explorers are curious and creative, and they operate well in ambiguous situations. They engage in continuous experimentation and learn by listening to many, and varied, voices. Organizations whose leaders have an explorer mindset often have cultural norms that tolerate, and indeed encourage, failure, reverse mentoring, and a deep curiosity about how the forces of digitalization are reshaping the competitive environment. David Schmittlein, the John C. Head III Dean and professor of marketing at the MIT Sloan School of Management, says, “Great leadership teams in the new economy have a deep and restless curiosity. They are curious not only about driving customer and user community value, but about clarifying and pursuing their organizations’ social value as well. They ask themselves, ‘What do we offer that the world actually needs?’ This is all about crafting and articulating your leadership narrative as a team — that we will be a community of colleagues that pursues continuous invention, and that we will be intentional about it through our actions.”
Explorers are intent upon building amazing communities. They do so in a variety of ways and over an extended period of time. One of the most effective tools they have in doing so, per Schmittlein’s point, is shaping and articulating powerful narratives of what’s possible. They share stories about what great leadership looks and feels like when individuals come together as teams, and teams come together as communities, with a unifying sense of purpose and collective ambition.
As the gig economy takes shape, the role of leaders will shift from managing talent to inspiring and engaging people as members of a community of leaders. Leaders need to be prepared for this difficult shift, which is replete with blind spots and cultural tensions. Identifying and addressing these challenges are substantial undertakings and can be achieved only by reimagining what it takes to be a leader.
Leading in today’s world is about creating conditions for success so that everyone can contribute their best efforts to a common cause. This goal of building a community of leaders relies on four components: enhancing customer value, serving a higher purpose, strengthening connectivity, and fostering creativity and continuous innovation.
Creating the conditions for success starts with setting the tone and developing the mindsets that constitute the foundation of the new leadership playbook. Successful leaders are the ones who don’t just see what the future might bring; they create it. They are the ones who don’t just talk about the power of purpose; they live it. They are the ones who don’t just embrace inclusion and diversity; they measure and reward it. They are the ones who have learned how to lead teams and companies with the courage, freedom, and joy that comes from knowing that they are building new and amazing communities of leaders. They are the ones who have unleashed the energy in their organizations by creating communities of leaders who are producers, investors, connectors, and explorers.
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