TOWARDS A NEW LEADERSHIP OPERATING MODEL
Download Part Three of our CEO Summit Report
Download Part Three of our CEO Summit Report
Transforming organizations in the face of disruptive change is arguably the most important challenge facing leadership teams.
Existing practices that focus almost exclusively on execution are simply not up to that challenge. Leaders need to find ways to place an equal emphasis on adaptability, exploration, and learning.
How would a new, more balanced leadership operating model work? What would it look like? What kind of disciplines, practices and literacies do tomorrow’s leaders need in order to thrive in a world of increasing ambiguity and uncertainty?
In Part 3 of our 2018 CEO Summit series, we distill leadership lessons from our Boston summit – and explore what we can learn from the organizations that are at the forefront of this new approach.
Mark Johnson, cofounder and senior partner of Innosight, describes the challenge by identifying the barriers that inhibit long-term “visioning” and ultimately prevent significant resources being allocated toward new growth and transformation.
The Vision Paradox. Leaders typically don’t see a pressing need to develop a long-term vision of the future. But they can only discover the fault lines that could dramatically disrupt their business if they engage in visioning.
The Future Is Indeterminable. This is the belief that the future beyond five years is completely unpredictable, so it’s pointless to think longer term. As a result, planning efforts are “present-forward,” essentially extrapolating on the current strategy and extending today’s model—even if that is the wrong strategic choice.
The Tyranny of the Urgent. Top executives may feel over-burdened with everything they need to do to run the current business. As a result, “Operate and Execute” conversations crowd out “Explore, Vision, and Discover” conversations. Both are critical but require different cadences and approaches to be successful.
Overcoming these barriers requires a new mindset of adaptability, exploration and learning. This mindset is central to a new leadership operating model – one that would enable companies not just to execute its current operations but to balance that with actionable plans for long-term transformation (see chart).
Few large companies have been able to pull this off. One predictable example is Amazon, a company that is both admired and feared. The organization led by Jeff Bezos is “built to transform,” Johnson says, because it continually redefines markets by innovating new business models.
But beyond Amazon, there are long-established firms like Johnson & Johnson and the Ford Motor Company that are finding ways to break down these barriers to visioning in their executive suites.
TOWARDS A WORLD WITHOUT DISEASE
Benjamin Wiegand, global head of J&J’s World Without Disease Accelerator (WWDA), describes leading an R&D venture working to intercept and prevent diseases such as Type 1 diabetes with new approaches and business models.
This venture would never have been launched and funded without the active engagement of J&J’s top leaders. They empowered Wiegand to focus on the year 2030 and beyond, rather than just trying to optimize the current treatment pipeline, where all the revenue is. He’s assembled a team of scientists and managers with expertise in new kinds of capabilities, including startup-paced decision making.
As a result, the WWDA venture is free to define and explore the opportunity landscape of the future. That’s already leading to the development of an initial slate of internal and external projects around Type 1 diabetes, cervical cancer, perinatal depression and cataracts. These new approaches may not pay off for years, but that is the point: only by exploring the future can you create the business of the future.
REINVENTING THE CAR COMPANY
Another example of a leadership mindset shift is Ford Motor Company. A few years ago, there was a misalignment about the future of electric vehicles to the point that there wasn’t any serious movement and investment. “It was more of a follower mentality that was going to be driven by the regulatory environment and other factors,” says Johnson, “as opposed to concluding that the industry is going to transform this way, and we really need to be ahead of it.”
But when the leadership team engaged in a visioning process and drew up a picture of the industry and the company in 2030, they realized that being a follower of the market wouldn’t suffice. John T. Lawler, Ford’s Vice President of Strategy, notes that the firm is now investing deeply in a portfolio of electric and hybrid vehicles, partnering with developers in China, while experimenting with new subscription-based business models in order to build a leadership position for the future.
Changes like these could not have happened without a different approach to leadership. Ford CEO Jim Hackett came from outside the industry and joined the firm to lead its West Coast innovation ventures, including the development of autonomous vehicles. His perspective has informed hard choices at the company, especially when it came to deciding what not to do.
John Rich, Ford’s Director of Corporate Strategy, explains that established enterprises typically “become captive to your prior successes, and the answer is usually, let’s try harder.” But given the decline of sedans and the long-term unprofitability of small cars, exiting lines ranging from the Fiesta to the Taurus became imperative. That has freed up billions of dollars in capital to invest in creating the future.
“The auto industry is on the cusp of major change,” Rich concludes, “The convergence of electric, autonomous, and connected technologies means the business model will fundamentally shift away from transactions to subscription.”
EMBRACING NEW LEADERSHIP LITERACIES
Stepping back and taking these kinds of big-picture views of the way the world is changing is critical yet uncomfortable for many leaders. Institute for the Future president Bob Johansen argues that many of today’s leaders were trained to operate in an environment that no longer exists.
Consider the past few decades. We’ve moved from a centralized, command and control model of leadership to a decentralized and distributed model, where no one person can know a fraction of what is going on in a single company. Industries such as banking and telecom no longer operate under a set of rigid certainties, as disruptive startups and distributed technologies are changing the rules of engagement.
To thrive in this intimidating landscape, leaders will need to cultivate a set of “new leadership literacies” that embrace foresight, insight, and action. Tomorrow’s organizations will need to invest considerable time and effort understanding market shifts and setting a long-term vision that is consistent with the company’s narrative, thus enabling the company to move quickly to seize new opportunities.
Johansen characterizes the future as one dominated by volatility, uncertainty, complexity and ambiguity – or VUCA. Paradoxically, as unsettling as this future sounds, an important new literacy in an era of VUCA is what he calls “voluntary fear engagement.” This is the idea of creating readiness for a frightening world.
But this does not necessarily mean the future will be bleak. Matthew Flannery, President of United Rentals, the world’s largest rental equipment company, talked about the fear of widespread job losses should autonomous construction equipment replace human operators. But what if autonomous or remotely operated equipment took over the most dangerous jobs such as installing solar panels on treacherous terrain? It’s a future where instead of being replaced by machines, human operators are safer and spared from high-risk activities, says Flannery.
5 NEW LEADERSHIP LITERACIES
1: Looking backwards from the future: differentiate between the waves of change that you need to ride versus ones to be avoided.
2: Voluntary fear engagement: creating readiness for a frightening and unpredictable world.
3: Leadership for shape-shifting organizations: designing companies that grow from the edges and have no traditional center.
4: Being there when you’re not there: embracing new digital tools for telepresence leadership.
5: Creating and sustaining positive energy: telling hopeful and compelling stories about the future.
The last literacy requires constant attention. Ideally, you have a master story which carries everyone forward. “Our brains are wired for stories, and if your people don’t hear a good one, they will make one up.”
At the same time, even though strategy may be set from top down, the infinite decisions needed to execute the strategy must be peer-driven. “By 2030,” he said, “the organizations that will thrive will be liquid and shape shifting.” All the more reason to empower employees at all levels to execute the vision with little to no daily direction.
LEADERSHIP MODEL TAKEAWAYS
Delegates left both events with new perspectives on operating their companies with a future-focused perspective integrating strategy, innovation, and leadership. Some of the messages that resonated most included:
- Extend the time frames for your vision of your organization: Leadership teams cannot spend nearly all their efforts executing near-term plans but must make time and space for visioning the year 2030 and beyond.
- Don’t become captive to your prior success: You will need to make the hard choices about present lines of business in order to reallocate capital to the future.
- Be precise about your assumptions about the future: It’s not enough to be aware of general trends like AI or the sharing economy but to put numbers on where the market is heading, so that you can allocate resources against it.
- Embrace VUCA – volatility, uncertainty, complexity, and ambiguity: Only by recognizing the turbulence can you achieve the clarity to navigate storms of change.
- Your master narrative is what carries the company forward: Spending time shaping and communicating a purpose-driven story of the future will pay off in terms of motivating employees to embrace the strategy.