11 Leadership Guidelines for the Digital Age
The old ways of running
a company won’t cut it in a digital world.
Ten
years ago, when we would ask senior executives or company directors what
“digital” meant to them, their response would usually be something related to
social media. Today, it might be apps, Big Data, 3D printing, “the cloud” or
another current example of digital technology. All such answers are equally
correct – and equally in error. More important than the specific innovations
introduced by the digital revolution is their earth-shaking cumulative impact
on business and on organisations. There is no border anymore between the pre-
and post-digital worlds. Digital is business and business is digital.
Yet,
top corporate leaders are not taking charge of digitalising their
organisations, as was made clear to us by a survey we conducted in 2016 – to
which 1,160 managers, executives and board directors responded – that developed
into a report available for free online.
We discovered that most board members lack the knowledge and awareness
necessary to lead a digital transformation.
To
help top management catch up, we recently issued a follow-up report – “Directing
Digitalisation: Guidelines for Boards and Executives”.
It presents 11 strategic implications and recommendations (grouped into three
categories), summarised below. These are based on the previous findings, our
combined business and teaching experiences, and professional collaborations
with organisations across multiple regions and industries.
The
business environment
1.
Digitalisation requires an unbiased understanding of the external environment.
Analogue-era
frameworks such as Michael Porter’s “five forces” will need to be revisited,
now that the impact of digitalisation is rapidly replacing traditional physical
barriers to entry with intangible barriers (e.g. relevant purpose, resonant
mission, authenticity and trust) that no amount of industry prominence or cash
can overcome.
The
organisation
2.
Digitalisation may require a reformulation of the firm’s mission.
The
environmental shift caused by digital may challenge the very existence of
individual companies, even entire industries. Boards and executives will need
to question all pre-existing assumptions about the firm’s mission and
industrial positioning, as well as the sustainability of its business models
and methods.
3.
The meaning and impact of digital to the firm must be clearly stated.
Digital
advantage resides largely in the opportunity to customise not only products and
services but also organisational strategy and structure. Rather than searching
for a blueprint to guide them through digitalisation, firms should define their
own digital road map. Leaders can start by developing an in-house dictionary,
including entries for “digital” and all related keywords, terms and concepts.
Like any other dictionary, it will need frequent updates.
4.
Digital understanding and capabilities are required across the firm.
Digitalisation
may involve a great many experts, but the ultimate responsibility for digital
transformation belongs to all functions within a firm. Successful change also
requires cooperation from junior contributors all the way up to the board by
linking digital savvy millennials with the business experience and wisdom of
senior executives and directors.
5.
Digitalisation must be supported by the firm’s corporate culture.
The
digital revolution is indeed cultural, not merely technological. As with any
large-scale cultural change, digitalisation will never take hold unless it
is driven by top executives, under the board’s leadership.
6.
Digitalisation demands a greater level of collaboration.
Business
success can be achieved only through continuous collaboration and ongoing
conversations between shareholders, boards, executives and “frontline”
employees. In addition, digitalisation is blurring the lines between
different industries, heightening the importance of cross-functional and
external collaboration.
7.
Digitalisation requires greater engagement with the public.
In
the past, customers were subdominant. We spoke at them; we marketed to them. With
digital, anyone can create and monetise value with size, scope and speed. Just
as easily, consumers can destroy value by, for example, dismantling a massive
company one tweet at a time. It has never been easier or more essential to
co-create with customers and crowdsource ideas, and firms that position
themselves as facilitators of customers’ dreams will win in the future.
Strategy
8.
Business strategy in the digital age becomes a continuous process.
Gone
are the days when companies had the luxury to think in terms of five-year
strategic plans. With major business trends shifting constantly as they are
today, strategy formulation and execution need to happen simultaneously and
ideally in a seamless feedback loop.
9.
Decision-making in the digital age is increasingly data-driven.
Compared
with the plethora of advanced predictive and analytics tools available to
businesses today, the old-fashioned executive summary laying out binary choices
is a primitive instrument. In the absence of Big Data, what used to be
allowable as an “educated guess” will become at best a stab in the dark.
10.
Digitisation requires firms to enter uncharted territories.
Planning
for disruption entails exploring new business models and revenue
streams. Organisations will have to launch ambitious experiments and
quickly take learnings on board. For their part, boards and executives must
raise their comfort level as regards uncertainty, ambiguity and risk.
11.
Digitalisation is about continuous management of change.
In
the pre-digital world, a one-off change management programme could pay
dividends for years if not decades. Not anymore. Directors and executives must
ensure that the will and ability to continuously change are built into the very
fabric of the organisation.
Responding
to revolution
The
digital revolution, like every revolution, can be viewed either as a
catastrophe or as a world of opportunity – depending on whether your
allegiances lie with the old order or the new. Optimism is a prerequisite for
survival. Digital will undoubtedly force boards and executives to attain
unprecedented levels of innovation, competence, effectiveness, leadership and
responsibility – with fundamentally positive results for both firms and
society.
It
is unlikely that familiar forms of organisational leadership will survive the
digital revolution. In order for boards and executives to fulfil their
roles effectively in the future, a reshaping, if not a disruption, of these
functions is necessary.
Liri Andersson, INSEAD Guest Lecturer, founder of this fluid world, and Ludo Van der Heyden, Chaired Professor of Corporate Governance & Professor of Technology and Operations Management at INSEAD
Read more at
http://knowledge.insead.edu/leadership-organisations/11-leadership-guidelines-for-the-digital-age-5516?utm_source=INSEAD+Knowledge&utm_campaign=22c9114447-EMAIL_CAMPAIGN_2017_03_23&utm_medium=email&utm_term=0_e079141ebb-22c9114447-249840429#dt70mMOEhsuFWQ4B.99
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