4 Implications for Leadership
Individually and collectively, seven Principles that explain what digital technologies actually do are profoundly changing the context for leadership. The Global Survey showed that respondents worldwide typically believed their own leaders were not responding adequately to these changes. This chapter describes the new context.
The Seven Principles (see also chapter 10)
- Digital technologies reduce, or eliminate, the value of an elite group’s skills or knowledge and enable—and may even require—the automation of its work.
- Digital technologies augment the capabilities of less-skilled people, enabling them to undertake tasks they couldn’t earlier.
- Digital technologies enable—and may even require—work to be distributed over time and geography.
- Digital technologies enable—and even require—work to be increasingly thought-driven instead of being muscle-powered.
- Digital technologies create needs that aren’t predictable and/or add disproportionately great value.
- Digital technologies expose organizations to radical transparency, which may—or may not—benefit them individually, or their networks or society at large.
- Digital technologies interact with and affect an organization’s external environment.
The Pressure for Culture and Gender Equality Is Rising
Leadership education offered by business schools, leadership solutions promoted by consultants, and leadership policies implemented by most companies have long made three key, linked assumptions. The first two are these:
Most people working together are governed by the common organizational culture, policies, processes, and structures of a single company. Since each company is relatively self-contained, executives can assume a well-understood, shared framework for their leadership initiatives. As long as others (e.g., suppliers) adhere to legal contracts, how their people are led doesn’t matter.
Most employees share a handful of cultural, lingual, religious, racial, and political heritages. Home-base and similar countries provide companies, even large multinationals, with most of their employees and customers. Therefore, most employees fit into a few categories, and leaders guide people who mostly look like them, talk like them, pray to the same gods, eat the same food, and so on. Business units located elsewhere rely on equally homogeneous local employees. Their leaders graft essential elements of the local culture onto the home-base corporate culture.
These two assumptions largely held true throughout the twentieth century in the world’s largest economy. So they influenced American scholars who have long dominated business education. They spread elsewhere as Americans helped set up business schools in Europe and Asia and exported teaching material worldwide. America also awarded more business doctorates than any other country and published most of the top business journals. Thus, its experiences became “received wisdom” everywhere, even when they didn’t quite capture the local context.
Digital technologies make these assumptions unrealistic. By distributing work (Principle 3), they make people half a world away critical to success. They may be from very different cultures and work for organizations with different policies. Radical transparency (Principle 6) may instantly taint a brand name globally by bringing to light problematic conditions in a company’s partner.
Of the executives who responded to the Global Survey, roughly 40% each (totaling 80%) “Strongly Agreed” or “Agreed” with the proposition that their work was distributed across space and time (see figure 4.1). At the same time, they gave relatively tepid support for how their own executives performed in the light of this reality. “Strongly Agree” responses dropped roughly by half (22%) and the “Somewhat Agree” ones rose commensurately in their assessments of their executives’ effectiveness at leading across corporate boundaries. Only 27% “Strongly Agreed” and 32% “Agreed” that their executives led effectively across national boundaries. The roughly 20% combined drops in response to both questions reveal a major weakness.
Globally, when work is distributed, executives don’t lead well across national differences and organizational boundaries.
Roughly twenty years after the emergence of the digital epoch, the average ratings in the Global Survey for leading across national differences and corporate boundaries were dismal around the world (see figure 4.2). Data from regions with more than 50 respondents show that none even got close to “Strongly Agree” on these two questions. India’s relatively stronger rating for leading across corporate differences is probably due to the outsourced knowledge work done there. Continental Europeans rated their companies most harshly. Their worse than “Somewhat agree” scores could indicate either a regional weakness or, what is more likely, a greater degree of self-awareness. If the latter, the responses from other areas are optimistic. In any case, globally, leaders have much to improve.
Worldwide, executives aren’t leading effectively across national differences and organizational boundaries (for regions with n > 50).
Research shows that individuals from around the world favor leadership styles that are consistent with their cultures.1 Even today, CEOs are mostly native-born—or occasionally, naturalized—citizens or from similar and/or neighboring countries.2 Western leaders in Pacific Asia believe their local executives are less prepared to succeed them than executives from elsewhere. So those Pacific Asian executives are more receptive to calls from executive search firms.3 They are also more skeptical of their headquarters than are Asian executives in Asian companies. However, this isn’t just a Western problem.
Japanese companies rely heavily on expats (Japanese executives sent abroad),4 having failed to integrate foreigners (foreign executives working overseas in Japanese companies) into leadership positions.5 Top Japanese executives know that this failure is hurting their businesses. One interviewee, the senior-most HR executive in South East Asia, had prepared an eighty-page analysis for his corporate officers. He lamented that highly prized fluently trilingual (in Japanese, English, and Mandarin) or bilingual (in Japanese and English) foreigners regularly refused job offers, expecting their nationalities to stymie their progress.
The third assumption implicitly made about leadership is this: A company’s leadership standards embody the worldview of its dominant executives. Most executives in leadership positions come from the home-base (or similar) country. Executives from underrepresented backgrounds, or other nations, adapt and conform, or they forfeit the right to lead. The dominant group is overwhelmingly male.
This assumption, unlike the prior two, isn’t solely attributable to America; bias and patriarchy are present all around the world. In most places, women have had to put up with behavior ranging from unconscious slights to full-on abuse.
Creditably, American and European countries collect and discuss data on this issue. These show they have a long way to go. Among US S&P 500 companies, “fewer large companies are run by women than by men named John.”6 In 2018, only 4.9% of CEOs leading European and American companies were women.7 As a result, many hiring decisions end up enforcing the status quo and perpetuating the misguided notion that the traits associated with being male define “good leaders.”
Digital technologies are forcing—and facilitating—a rethinking of this assumption, too. Meaningful work is increasingly thought driven and happens inside people’s heads, not muscle powered and happening outside people’s bodies (Principle 4). Throughout history, men have held power in workplaces globally because they were, on average, physically stronger. This advantage is increasingly irrelevant. Moreover, radical transparency (Principle 6) can expose discriminatory behavior worldwide, putting at risk the ability to attract talented people. As a result, young people, women, minorities, and foreigners are in positions to challenge these anachronistic ideas or withhold intellectual contributions by simply walking away.
Chapter 5 discusses these issues, gives examples of companies that are redefining leadership to make it inclusive, and suggests what individuals must do.
VUCA Conditions Will Require Broad Skills Away from Centers of Power
Prior long-arm-of-impact technologies allowed organizations to respond to their environment. A long-established idea in business is that an organization’s environment must determine how it functions. In organizational design, stable markets and long–life cycle products allow choices of strategies, structures, and systems that would be deadly in fast-paced environments. In leadership, a similar logic also holds:8 A democratic leadership style may be ineffective in an environment that requires showing people the way. The causal directionality in both situations is one way—the inside must respond to the outside.
Digital technologies are far more powerful. They allow organizations to react to their internal environments by de-skilling (Principle 1) and upskilling (Principle 2) work, distributing work over time and across space (Principle 3), serving unpredicted and/or high-value emergent needs (Principle 5). They also allow organizations to affect their external environments by interacting with them on an ongoing basis (Principle 7) and by acquiring or releasing hard-to-control information (Principle 6). The outcomes of these interactions can traverse the world in milliseconds, not weeks or months or years. So they can upend environments everywhere.
In the digital epoch, organizational design and, more importantly, leadership, must be cognizant of the implications of this superfast bidirectionality. Most of all, it substantially raises the stakes for most decisions leaders make. Our collective focus on greed as the sole cause of the 2009 fiscal crisis kept us from learning this key lesson from the first, truly global, leadership failure in the digital epoch.
The Global Survey captured how the world has changed: 589 executive respondents answered five matched questions about all companies in general and their company in particular. They had to compare their current conditions with those their companies had experienced a decade ago. Regardless of where in the world they were based, the size of their companies, or the range of their operations (national, regional, global), their responses established that the business environment had become more VUCA (see figure 4.3). Fifty percent or more “Strongly Agreed” or “Agreed” that it was harder to avoid doing business in unstable countries, political issues needed more attention, speed of decision-making had risen, there were more issues to consider, and the overall business climate was less predictable. The single biggest change for respondents, with 78% support for their own companies, was in the number of issues they had to consider.
Compared to ten years ago, the business environment has become more VUCA.
Away from corporate offices, on battlefields, the US Army learned a key lesson most companies still have not: VUCA environments challenge traditional leadership capabilities. In a 2010 Harvard Business Review article, David Weinberger described a conversation with two midcareer officers:
[The] officers were eager to counteract … common stereotype of the paradigmatic military leader as General George S. Patton standing in front of a giant American flag. Patton was a leader when the U.S. won wars by bringing massive resources to bear on concentrated points. Iraq and Afghanistan have changed that … it’s not enough to be able to do the job of the person above you. You have to be able to do 18,000 different jobs. You have to be able to manage water systems, run a town hall meeting, issue micro-grants, be politically savvy—and that’s if you’re a 25-year-old [sergeant].9
As other officers learned the same lessons, US armed forces’ leadership training assimilated them. In 2011, General Martin Dempsey, the former chairman of the Joint Chiefs of Staff, that is, the senior-most officer across all branches, described the transformation discussions in progress. These would affect officers who were nowhere near battlefields in order to train them to be on one. In an interview, he said:
I personally believe that what made me adaptive was being pulled out of my comfort zone. … Put someone in a completely new environment, and they will have to adapt. … Should we allow officers to take a sabbatical from the Army? They might go to work in industry, go into academia. … We are doing a lot of study on defining what constitutes a broadening experience … I am talking about it as one instrument of leader development. … If we had a menu of broadening opportunities and gave them some ability to collaborate on it, we’d be in a better position.10
In the opening chapter of his 2015 book, four-star US General Stanley McChrystal wrote about his time with the Joint Special Operations Task Force:
The Task Force hadn’t chosen to change; we were driven by necessity. Although lavishly resourced and exquisitely trained, we found ourselves losing to an enemy that, by traditional calculus, we should have dominated. … more than our foe, we were actually struggling to cope with an environment that was fundamentally different from anything we’d planned or trained for. The speed and interdependence of events had produced new dynamics that threatened to overwhelm the time-honored processes and culture we’d built.
… we realized we were not in reach of the perfect solution—none existed. … For a soldier trained at West Point as an engineer, the idea that a problem has different solution on different days was fundamentally disturbing.11
Search online and you will find that other top-notch armies have also discovered that VUCA conditions demand the ability to do many things, solve many different problems, each time in a new way. In more situations than not, officers with breadth are more suited to dealing with VUCA conditions than those who only do a few things very well.
Chapter 6 addresses how these lessons apply in business settings.
A Multipolar World Will Demand Increasing Collaboration
Digital technologies allow mission-critical tasks to be done in locations around the world (Principle 3). So the power to make consequential decisions is rarely concentrated in one individual or organization. More than ever before, if they contribute intellect (Principles 4 and 5), decision makers have the ability to push back if they disagree. Particularly in combination with the prior two discussions of diversity and VUCA conditions, these suggest a need for effective collaboration.
Despite all the commitments to win-win in every possible instance, the Global Survey showed that business leaders don’t collaborate well. Executives responded to two matched questions. One asked whether distributed work required leaders to be more collaborative. Another asked whether leaders in their own companies were collaborative with distributed personnel. The results for geographic regions with at least 50 respondents (see figure 4.4) show a gap, sometimes a very substantial one, around the world.
The collaboration gap: Executives fall short of expectation worldwide (for regions with n > 50).
Continental Europeans again were either more self-aware or more self-critical. Even in regions with nonexistent (e.g., China) or small (e.g., India) differences, the intensity of support fell. Among Chinese executives, “Strongly Agree” dropped 11% and “Agree” rose the same amount, while among Indian executives, a 7% fall in “Strongly Agree” got distributed to “Agree” (2%) and “Somewhat Agree” (4%).
In the digital epoch, collaboration poses unique challenges. Jean-François Baril was chief procurement officer during Nokia’s heyday. He had grown and overseen its partnership-driven procurement network, bringing together intellectual property created and owned by multiple global companies and embedding them in Nokia cell phones. I’ve formally interviewed him several times and informally discussed leadership with him many times more. Once, he told me at the start of a scheduled two-hour interview that he had to shorten it by fifteen minutes. He had an emergency board meeting right after ours:
I have to report on a major problem at our partner. Battery production is tricky; fires do occur. The main factory supplying us had a fire. I talked to the top guy there and we decided to stay out of this while our people jointly figured out what to do. If we got involved, people would have focused on us, not on what they needed to do.
I expressed amazement that he hadn’t rescheduled our meeting. After all, the fire threatened the supplier’s ability to meet its shipment obligations. I wondered aloud how the top executives on each side could not be personally managing the crisis. He waved away my concerns:
There’s nothing for me to do right now. Their people and ours will find a solution. I’ll tell the board that when we have a solution, they will know. This is what collaboration means. Selecting your partners carefully and trusting them when things go wrong.
The collaboration between the two teams could have failed for several reasons. First, the people involved worked far apart and, unlike colocated people, didn’t know each other well. Digital technologies mediated much of their interactions. It’s harder to build trust and collaboration at a distance than when people are colocated.12 Second, because of cultural and ethnic differences, they communicated and made decisions very differently. Nordic Europeans can be very direct, while some other cultures are often guarded. These conditions can sometimes challenge trust and collaboration.13
Third, both sides had to involve people with critical capabilities and knowledge who hadn’t worked together in less demanding, business-as-usual conditions. Building such “risky trust”14 is difficult. Those who regularly rely on it usually work face-to-face, as in hospital operating theaters, where institutional guardrails exist. Distance makes this more challenging.
Fourth, the possibility of huge losses and lawsuits at stake at the corporate level and heightened stress at the team level could have triggered interpersonal conflict. That makes it harder to talk about, much less resolve, work-related conflict.15 Finally, solving the problem required significant creativity under conditions where few good options existed.
The teams at Nokia and its partner performed exceptionally well. Outsiders didn’t notice the crisis, which had jeopardized millions of cell-phone sales globally.
Chapter 7 addresses what it takes to go beyond the banality of win-win.
Creativity and Synthesis Will Be More Important Than Productivity and Analysis
In the twentieth century, it was easy to separate creation (primarily R & D- and marketing-related activities) from exploitation (all else). In contrast, digital technologies are increasing the importance of cerebral work (Principle 4). “Good work” is taking the form of ideas, concepts, and symbols to be manipulated on computer screens—across all areas of organizations. New ideas, events, projects, customers, and markets must regularly be created (Principle 5)—across all areas of organizations. Moreover, all of this is happening in the context of distributed work (Principle 3).
As a result, the distinction between creation and exploitation is increasingly hard to maintain. My research on using knowledge to compete had led me to conclude that “every act of management must be an act of learning.”16 More recently, Amy Edmondson has written about “execution as learning.”17 Leading for creativity is no longer just a nice-to-have virtue in R & D departments but is essential almost everywhere.
Around the world, we are largely unprepared for this challenge. Primary education in most places relies on rote learning. College education often relies only on solitary capstone courses; in effect, it assumes that students will figure out for themselves how to create whole cloth out of individual spools of thread. Business processes and organization structures still embody the percepts of scientific management and the quality movement and use temporary, superimposed artifacts to synthesize.
Executives who responded to the Global Survey revealed two particularly telling gaps. The first showed up in their responses to two matched questions about whether digital technologies sharply increase the thought content of work in general and whether they had to think more than in the past. The gap for “Strongly Agree” and “Agree,” averaged across all respondents, was 10% (see figure 4.5). While the responses were high and well-matched for the United States and Canada, India, and China, they weren’t in Continental Europe (21%) and the UK and Ireland (15%).
The thinking gap: In general, thought content of work has risen, but executives themselves don’t have to think more (for regions with n > 50).
One plausible explanation, of course, is that Continental Europeans are truly pessimistic. This time, however, they have company. Another plausible explanation is that work has been redesigned in some parts of the world; areas that haven’t done so have to catch up. The most likely explanation, however, is the simplest explanation: People tend to be optimistic and believe that difficulties others will endure will bypass them. So they assume they don’t have to change.
The Global Survey also showed that respondents recognize the need to foster creativity and promote learning. They also believe their organizations are failing (see figure 4.6). Here, no region of the world can claim success. On the basis of combined “Strongly Agree” and “Agree” responses, around the world, they rated the need for fostering creativity and promoting learning higher than they rated their own executives’ ability to do so. The average shortfall was 17%; the gap was 13% in the United States and Canada and a whopping 53% in Continental Europe. Areas that seemingly did well did so on the strength of their “Agree” responses. These exceeded their “Strongly Agree” responses: India (6%), China (14%), and the UK and Ireland (11%).
The creativity gap: Though there is a need to foster creativity and promote learning, executives don’t think their own leaders do so well (for regions with n > 50).
Chapter 8 addresses how leaders can make creativity a primary focal point of leadership.
The Focus of Technology Initiatives Will Need Rebalancing
The Global Survey asked respondents two matching questions on digital technology implementation: Who should drive it and who was driving it in their companies? It offered seven possible responses ranging from “Technology focused” to “People focused” with “Business focused” at the midpoint. Fifty-six percent of the respondents collectively picked the three technology-skewed choices for the “should” question, and 58% collectively picked them to characterize their corporate realties (see figure 4.7). “Business focused” attracted only 24% and 22%, respectively, while 19% and 20%, respectively, picked the three people-skewed options.
Executives worldwide aren’t taking people’s needs into account while implementing digital technology projects.
We have ample evidence from our knowledge of design and creativity that technology and/or business focus, without attention to people’s needs, produces suboptimal outcomes (see chapter 8). So these results are an early warning signal. Another problem is more acute. Earlier, the chapter 2 argument against the abuse of the term “disruption” said, “Words matter. They shape our thoughts, just as much as our thoughts shape them.” Similarly, unbalanced pursuits of the next new shiny bauble can easily lead to unwanted or socially harmful or even dangerous outcomes.
These issues, and what leaders need to do to avoid getting entrapped, are discussed in chapters 9 and 10.
People Are Gaining Power over Key Decisions Sooner
The final implication, applicable across all subsequent chapters, is attributable to the distribution of work (Principle 3), aided by upskilling (Principle 2). People are gaining the authority to make consequential decisions far sooner than they used to in the predigital world. So they don’t have the lengths of time to prepare that they previously did. “Time to expertise” is being severely compressed in the early twenty-first century.
Between 2005 and 2010, Michael Watkins and I informally recorded data from midtier executives around the world who attended the leadership programs we taught. One question asked the number of months each had been in the most recent position held. The response never fell below twenty-four months, and unless the executive was a scientist or technologist, never exceeded thirty-six months. So in two to three years, the average executive had to transition into a job, master its idiosyncrasies, deliver noticeable value, find another job, and move on.
The Global Survey formally pursued a related issue. It asked for the number of years of experience the respondents’ companies required now, and had required ten years ago, before giving people cross-organizational or cross-border responsibilities. Six hundred executives answered both questions (see figure 4.8), making their responses eligible for analysis. Though 199 companies—a third of the respondents—didn’t change their policies, overall, companies requiring over ten years of experience dropped about 8%, while those requiring one to five years rose almost 6%. China bucked this trend; almost 64% of its companies required the same or more experience.
Years of experience needed for cross-border or cross-organizational responsibilities (data are for 600 survey respondents).
The data for multinationals is even more compelling: 288 out of 430 companies (67%) actually changed their requirements. Among them “1–5 years” rose 12.5%, while “over 10 years” and “6–10 years” dropped 10.8% and 1.7%, respectively. Consequently, across all 430 multinationals, people with a lot less experience were making these consequential decisions.
These findings establish that in the digital epoch, people are affecting the lives of many others in their organizations and outside them relatively early in their careers. Organizations need to pay attention to individuals’ leadership abilities far sooner than they used to. Leadership is no longer just the responsibility of those who have reached the highest echelons.
Jaikumar’s entire research can be reduced to one simple idea that the prior two chapters and this one have captured: Ideas, processes, systems, values, and organizations that work beautifully in one epoch fail to be sufficient in the next. The same is true for leadership.
You can’t afford to ignore this lesson. “Do-overs” may be hard to come by. The rest of the book will address what you must do.
Notes
1. Gustavo Tavares, Filipe Sobral, Rafael Goldszmidt, and Felipe Araújo, “Opening the Implicit Leadership Theories’ Black Box: An Experimental Approach with Conjoint Analysis,” Frontiers in Psychology, February 7, 2018.
2. Pankaj Ghemawat and Herman Vantrappen, “How Global Is Your C-Suite?,” Sloan Management Review, Summer 2015.
3. Corporate Executive Board Global Labor Market Survey, Q3 2012; Russell Reynolds Associates, Asia Leadership Survey, 2012.
4. J. Stewart Black and Alan Morrison, “The Japanese Global Leadership Challenge: What It Means for the Rest of the World,” Asia Pacific Business Review 18, no. 4 (2012): 551–566.
5. Naoyuki Iwatani, Gordon Orr, and Brian Salsberg, “Japan’s Globalization Imperative,” McKinsey Quarterly, June 2011.
6. Justin Wolfers, “Fewer Women Run Big Companies Than Men Named John,” New York Times, March 2, 2015, https://www.nytimes.com/2015/03/03/upshot/fewer-women-run-big-companies-than-men-named-john.html?_r=0.
7. Heidrick & Struggles Route to the Top, 2018, https://www.heidrick.com/Knowledge-Center/Publication/Route_to_the_Top_2018.
8. Daniel Goleman, “Leadership That Gets Results,” Harvard Business Review, March–April 2000.
9. Weinberger, David, “‘Powering Down’ Leadership in the U.S. Army,” Harvard Business Review, November 2010.
10. Devin Hargrove and Sim Sitkin. “Next Generation Leadership Development in a Changing and Complex Environment: An Interview with General Martin E. Dempsey,” Academy of Management Learning & Education 10, no. 3 (2011): 528–533.
11. Stanley McChrystal, Tantum Collins, David Silverman, and Chris Fussell, New Rules of Engagement for a Complex World (New York: Portfolio/Penguin, 2015).
12. David J. Armstrong and Paul Cole, “Managing Distances and Differences in Geographically Distributed Work Groups,” in Distributed Work, ed. Pamela Hinds and Sara Kiesler (Cambridge: MIT Press, 2002), 167–189.
13. Cristina Gibson, Laura Huang, Bradley Kirkman, and Debra L. Shapiro, “Where Global and Virtual Meet: The Value of Examining the Intersection of These Elements in Twenty-First-Century Teams,” Annual Review of Organizational Psychology and Organizational Behavior, no. 1 (2014): 217–244.
14. Faaiza Rashid and Amy Edmondson, “Risky Trust: How Teams Build Trust Despite High Risk,” Rotman Magazine, Spring 2012.
15. Catherine Cramton and Pamela Hinds, “An Embedded Model of Cultural Adaptation in Global Teams,” Organization Science 25, no. 4 (2014): 1056–1081.
16. Amit Mukherjee, “The Effective Management of Organizational Learning and Process Control in the Factory,” DBA thesis, Harvard University, 1992.
17. Karen Christensen, “Thought Leader Interview: Amy Edmondson,” Rotman Magazine, Winter, 2013.