The Leadership Challenge: Digital Transformation
Written By: Cahide Akkuzu
Reading time: 6 minutes
I am continuing to write about leadership by addressing a very vital topic. Digital transformation has been one of the most critical initiatives of companies in recent years. There are many studies about the success rate of digital transformation initiatives. Unfortunately, all studies indicate that many of these initiatives do not reach the target. The pandemic has accelerated digital transformation, specifically by enabling people to work from home at a scale. A recent survey from Gartner indicates that 69% of boards of directors reported accelerating their digital business initiatives, and nearly half predict changing their business model, as a result of the pandemic.
Findings from the ‘2021 Future Of Leadership Global Executive Study and Research Project’ published by MIT Sloan in January 2021 confirm the challenge that leaders are facing:
‘’Serious business leaders worldwide accept that their markets, customers, and workers have gone digital. In our recent global management survey, 93% of workers across industries and geographies affirm that being digitally savvy is essential to performing well in their role. The idea that effective digital transformation delivers agility, adaptability, and customer centricity is now both managerial mantra and leadership inspiration.
Digital talent now expects more from leadership than greater flexibility, better compensation, and/or productivity-supporting work environments. Our research suggests that digitally savvy workforces expect digital transformation to better reflect and respect their concerns and values, not just ensure superior business capabilities and opportunities.
These expectations disruptively alter how leaders exert power, influence, and control.’’
Unfortunately, the track record of leaders succeeding in digital transformation initiatives is poor. So, how do leaders need to transform themselves to lead a successful digital transformation? Digital transformation is about radically changing how the organization works so that it can survive and thrive in a business world that is more and more driven by technology. The leadership and human dimension of the issue is critical because we know that although digital transformation is connected to technology, we are actually talking about a change of corporate culture.
Forbes Technology Council points out that silo structures in companies negatively affect the success of digital transformation. Digital transformation requires different business units and different business functions to work together, to coordinate and to collaborate. It requires the whole company to focus on its digital transformation goals, not just certain people. On top of that, the potential generation gap between the leaders who manage the digital transformation and the people in the functions that execute it can make digital transformation initiatives more difficult and can lead to unnecessary waste of time. Research revealed that an information worker can only use 39% of his/her time to actually perform critical job responsibilities, spending the rest of his/her time on tasks that do not contribute to the effective development of the company, such as e-mail, meetings, information search, persuasion, approval processes and administrative issues.
The most basic definition of digital transformation is for a business to integrate digital technology into all its processes while providing value to its customers. Since technology is constantly evolving, it requires a leadership culture that continuously initiates and manages change. For a lot of companies, this means getting out of the comfort zone, making decisions amid uncertainties, being creative, being flexible, being transparent, being collaborative and adapting quickly to change. We already see this kind of a culture in companies whose processes and business models have been set up in recent years with digital technology. On the other hand, companies having a more traditional culture and structure must change themselves to survive. Every initiative of change starts from the top, the leaders have a massive responsibility here. Leaders must start their own transformations first so that they can create a culture that will enable digital transformation in their companies.
One of the leaders’ most important tasks, especially in critical cultural change initiatives such as digital transformation, is to focus the attention of the entire company to where it should be. To do this, of course, the leader needs to choose the right initiatives for change to achieve success, but s/he also needs to be able to say ‘no’ to things that hinder transformation in order to maintain focus. My article: ‘How Can Leaders Take A Critical Look At Themselves? – Part 3’ focuses specifically on this topic, to read click: LİNK
Dan Shapero, Vice President of Global Solutions at LinkedIn, summarizes the leadership approach that is required to masterfully lead organizations through transformation as follows:
‘’What makes a great leader in this new economy? In a way, it boils down to a few things: Do they build great teams? Do they understand the implications of technology on the business? Are they able to adapt to the speed at which business is happening? Can they operate at a high level and a low level simultaneously? And do they have the ability to build trust across the organization to get things done?’’
It’s clear that leaders need to learn new leadership behaviors in order to appeal to a new generation of technology savvy employees and at the same time continue to inspire trust, build a sense of community, and motivate employees to improve performance.
“The New Leadership Playbook for the Digital Age: Reimagining What It Takes to Lead.” is a global executive study and research report that aims to explore how the changing nature of competition, work, and society is influencing the future of leadership. The recent report published by MIT Sloan in 2020 offers interesting insights about the leadership challenges that leaders need to address in order for companies to thrive in the digital economy:
‘’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.’’
A mindset is an operating system that guides our behavior. Our behaviors determine what kind of outcome we create. For leaders to create successful outcomes in the new digital economy, leaders need to create behavior change that lasts over time. This can only be achieved with a new mindset. It’s all about changing the attitude and believes about what leadership is, it’s about how leaders look at the business, the organization and the human factors that make up that business.
Based on extensive research, the report has identified four specific mindsets that represent the hallmarks of great leadership in the digital economy. These mindsets reflect the principles, values, and norms of successful leadership:
‘’Developing and embracing these mindsets requires a complete reimagining of what it means to lead in the digital economy. 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 find the approach of focusing on developing specific mindsets very impactful. This means that leaders go to the root, change their beliefs and attitudes, and equip themselves for any kind of challenge they face on their path. I will provide a summary, but highly recommend that you read the whole report. I have enclosed the detailed reference information at the end of this article.
Here is a summary of the four key mindsets outlined in the report:
Producer Mindset
The producer mindset combines a focus on customers with a focus on analytics, digital savviness, execution, and outcomes. The Producer Mindset focuses on using analytics to accelerate innovation to address shifts in customer preferences and improve customer and user experiences. It is about having analytical capability to identify the most important problems and at the same time to have a perspective that enables leaders to see beyond the numbers in order to understand what the numbers mean.
Companies need to be clear on just what it is that makes them special and execute along those dimensions. 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. In the old model, designers showed their work on the runways, and had also a long supply-chain process. 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. 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.
Investor Mindset
Leaders with an investor mindset pursue a higher purpose beyond shareholder returns. They are dedicated to growth, but in a sustainable way. 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 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.
Cranfield University School of Management professor emeritus David Grayson points out that it’s critical for leaders to help their organizations define their broad purpose as “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.’’
Connector Mindset
In an increasingly connected world, mastery of relationships, partnerships, and networks is a new currency that drives organizational effectiveness. Lori Beer, global CIO of JPMorgan Chase, states:
“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.”
Leadership teams with a connector mindset operate in this way. 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. John Tyson, chairman of the board of Tyson Foods says:
“It is so important to have a diversity of voices at the table. 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.”
Explorer Mindset
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, says:
“Leaders have to be extremely open to change and extremely flexible in different situations. 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.
Reading about the leadership mindsets described in this report is exciting me. To me leadership is really about creating a common purpose that is meaningful for all parties. Whatever the challenges are, whether it’s digital transformation or any other transformational initiative, it is possible to face all challenges with the right mindset.
“To be truly successful, companies need to have a corporate mission that is bigger than making a profit.” – Marc Benioff, Salesforce
Resources:
Schrage, B. Pring, D. Kiron, and D. Dickerson, “Leadership’s Digital Transformation: Leading Purposefully in an Era of Context Collapse,” MIT Sloan Management Review and Cognizant, January 2021.
Ready, C. Cohen, D. Kiron, and B. Pring, “The New Leadership Playbook for the Digital Age,” MIT Sloan Management Review, January 2020
Context Professionals Corporate Coaching and Consulting
https://www.contextprofessionals.com/en/
