May 03

Effective Leadership in the Digital Age

What is driving digital disruption?

‘Digital disruption’ is fundamentally changing the way we do business. At the turn of the 21st Century, nobody could have predicted the challenges that companies, both large and small, are having to adapt to. Emerging technology, such as the Internet of Things (IoT), sensors, and Artificial Intelligence (AI), has turned every business into an information business.

It is estimated that in the next ten years, half of the companies on the S&P will be replaced. Whilst uncertainty can be a barrier to progress, the essential task of leadership is winning the future. Fundamentally, digital technology is changing the landscape of business; hyper-connectivity and deregulation are disrupting business value chains. For this reason, understanding the trends that drive digital disruption are crucial to effective leadership.

The key trend that has seemingly reshaped whole industries and brought forth new players is diversification. Diversity and global ambition are therefore critical at the c-suite level. Emerging markets, for example, are characterised by significant cultural, economic, and political differences that have placed renewed companies to embed themselves in other cultures.

Similarly, as customer bases have become more diverse, companies must deliver a product that is increasingly personalised. Consumers are empowered by technology. Society is scrutinising the social impact and the sustainability of a business. Companies risk being ‘blindsided’ by risk or opportunity, or perhaps even worse, leaders will be reluctant to innovate because of the complexity that businesses face.

Source: MIT – Common Traits of the Best Digital Leaders

 

Why is effective leadership relevant in the digital age?

To put it simply, leaders must be able to effectively guide their organisations into a business environment where seemingly the only certainty is uncertainty. The above infographic clearly implies that leaders do not need to have in-depth technical knowledge. Instead, they require a basic digital literacy that acts as a “compass guide” for employees operating in a distributed environment.

Leaders must embed a culture that provides platforms to allow people to experiment with new ideas and business models. Of course, these can be virtual or physical platforms. According to a BCG study of forty digital transformations, companies that emphasised a strong digital culture were 5x more likely to achieve a ‘breakthrough’ performance than companies that neglected culture.

With a business environment marked by digital disruption, leadership must adopt a visual orientation that is experimental, inclusive and transformative. The complexity that digital disruption poses to a business should be embraced. Leaders must leverage data and technology to fulfil changing customer needs. In order to do so, they must pursue “economies of learning”. These decisions should not be based on plausible asserts. Rather leadership in the digital age requires an empirical understanding of what works and why.

Source: Deloitte Insights – The six signature traits of inclusive leadership

 

Should this alter perceptions of leaders and leadership?

Although it may seem cliché to use military leadership as a benchmark for executive leadership, US Navy SEAL officer Leif Babin explained in an interview: “even though the environment changes, leadership doesn’t change”. The dichotomy of leadership is unifying a diverse team behind a plan to execute the mission efficiently and effectively as possible.

More significantly, in the digital age, the basics of leadership do not need to be overhauled. Critically, traits of leadership, such as not over-complicating the decision-making process or taking shortcuts, are still applicable.

The challenge is, however, to empower sub-teams, making them leaders in their own right. In terms of digital technology, this means successfully implementing “human and machine” hybridity. The traditional top-down decision-making process has to evolve with horizontal alternatives that allow for a certain degree of autonomy that rewards risk-taking, regardless of its outcome.

In sum, leadership in the digital age requires new approaches. More importantly, this does not mean we are “back to square one” because the basics of leadership are more relevant than ever. On the other hand, an MIT Sloan Management Review study indicates that 68% of global executives require new leaders to succeed in the digital age. In light of this, there is clear progress to be made. Nonetheless, leadership agendas will be determined on their ability to ‘win’ the future.

 

Summary: 

  • Organisations with effective leadership are two to three times more likely to outperform their peers financially.
  • Inclusivity is vital to the changing way in which leadership is executed in this environment.
  • Companies must deliver a product that is increasingly personalised to a customer base that is extraordinarily diverse.
  • 4,300 global executives asked whether their organisation needs new leaders to succeed. 68% indicated that they do need new leaders to succeed in the digital age.
  • Companies that emphasised a strong digital culture, in a study of 40 digital transformations, 5x more likely to achieve a ‘breakthrough’ performance than companies that neglected culture.

By Tom Booker
The London School Of Economics

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