Digital or Dinosaur: Are Your Leadership Capabilities Fit for the Digital Age?

Digital disruption is changing the shape of business as we know it. Multiple industries are seeing their basis of competition being transformed, whether it’s Airbnb becoming the world’s largest accommodation provider while owning no hotel rooms, Uber becoming the world’s largest taxi company while owning no vehicles, or Alibaba becoming the world’s most valuable retailer while holding no inventory.

For businesses to survive and adapt to this fast-changing context, they have to build the capacity to pick up on signals in their business environment, anticipate changing customer needs, develop new business models and adapt at speed to emerging competitors and market evolutions.

However, it’s not just organisations that have to adapt to this new reality – leaders must too.

The latest CRF research report – Digital Disruption: Exploring the – co-authored with leadership expert Professor Jay Conger, sets out our findings of the key capabilities leaders need to develop to be successful in the digital age.

Although the essentials of leadership remain constant – we still need leaders who are effective strategists, good communicators who can unite people around a common vision, deep self-awareness, and so on – leadership has to adapt to the context within which it is exercised. We are not suggesting that we should discard all our existing models of good leadership. However, we see shifts along three major leadership dimensions.

A. How leaders set direction: from detailed top-down planning to scanning, envisioning and course-correcting

B. The organisational infrastructure leaders need to build: tools, metrics, processes and an underlying culture that enable experimentation, continual feedback and rapid execution

C. The new relationship skillsets required: leading through networks and influence rather than expertise, and leveraging digital communication tools to lead virtual teams.

Unpicking these further, we identified seven key capabilities that leaders need to develop for the digital age:

  1. Dynamic decision-making anchored to a core purpose

Leaders have to manage a polarity: on the one hand they need a clear, consistent sense of vision and purpose, and on the other they need to reorient the organisation rapidly to respond to emerging threats and opportunities.

The pace of response required to handle digital disruption is leading to more distributed and autonomous decision-making. To avoid chaos, leaders need to draw a broad strategic outline that provides a framework for individuals to evaluate decisions against the broader organisation purpose. It is therefore all the more important for leaders to have a clearly defined and articulated ‘North Star’ that guides the organisation’s or the project team’s direction.

  1. Catalytic environment scanning

As the speed of change accelerates, so too does the need to grow organisational capacity to scan for weak market signals, identify patterns and develop insights. What’s different here is that this needs to be an ongoing activity, not just something that’s done every few years. Using data analytics and social media sentiment analysis to understand customer behaviour and feedback in real time are tools senior leaders need to learn to tap into to understand how customer needs and perceptions are changing.

  1. Build capacity for rapid execution

It’s not sufficient to just detect changes in the market that require a change in strategy; leaders have to be able to take action to respond to competitive threats or shifting customer expectations quickly, and adapt in response to what the data tell them. Leaders need to build agility into processes for decision-making and execution, for example through increasing contact points with customers or taking a more iterative approach to developing and testing strategies.

  1. Create a culture of experimentation and learning

Responding to the business opportunities afforded by digital means experimenting with many different solutions – not all of which will be successful. For example, at any one time Facebook may have 10,000 different versions of its platform running, as it constantly tests and refines the user experience.

The problem with many modern organisations is that the desire to get things done fast, ‘right-first-time’ and at lowest cost gets in the way of the experimentation, iteration and learning needed for innovation-driven growth. The processes and systems that enable rapid execution won’t succeed unless leaders create a culture that encourages and values behaviours related to innovation, experimentation and learning from failure.

  1. From managing through hierarchy to leading collaborative networks

One of the features of the digital economy is that work is done more and more through collaborative networks rather than through the traditional organisational hierarchy. Whereas historically a leader may have directed work from the top of a hierarchy with all employees reporting through the chain of command, now delivering work is about orchestrating a looser network of contributors who may well share in acts of leadership. This may involve leading cross-functional teams across internal silos, or leading a network of partners that reaches beyond the organisation boundaries to bring the right people together to address the problem at hand. This requires more inclusive and collaborative leadership styles, based on influence and vision rather than leveraging positional authority.

  1. Mastering digital tools for leadership effectiveness

Digital communications technology is playing a major role in changing the way that leaders lead. Smartphones, social media and online collaboration tools such as Slack make it easier for teams to stay in constant communication, but also make it harder to switch off. As well as mastering these technologies themselves, leaders have to work out how to build trust with remote team members, which is much harder than face-to-face. They also have to devise team communication norms that enable collaboration and delivery of the work without burning people out.

  1. Leaders as enablers of experts

Finally, leaders in the digital age have to become adept at striking a balance between being experts in their own right and being enablers of other experts. Leaders do need expertise in their field, of course, but the demands of leaders are less about telling others what to do and more about creating a context for others to do their best work and make good decisions. There are multiple implications for leaders: the role becomes more about coaching and asking good questions rather than being directive, they have to create frameworks for effective decision-making in contexts with highly uncertain outcomes, and they have to steer a delicate course between decentralisation and chaos.

Clearly these findings have implications for how we select and develop leaders.

To find out more, join us at our events in London on 3 April 2019 and at IMD in Lausanne on 4-5 April. You can also download the full report, Digital Disruption: Exploring the Implications for Leadership and Leadership Development, here.

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