ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

ESSENTIALS FOR LEADERS AND THOSE THEY LEAD

?Introduction

?Organizations are rapidly changing due to the increasing need to adopt digital technologies. This evolution has wide-ranging ramifications for employees and their leaders. A growing number of jobs require extensive use of technology and the ability to keep up with fast-paced developments. From low-level leaders to executives, roles are changing in the wake of increased transparency and accountability across all levels of the organization.?A specific term has been coined for a new profile of leaders who are at the forefront of digitization and technological advancement in their organizations:?the e-leader. As digital enablers, they play a crucial role in driving positive results from investment in new technologies. To accomplish that and effectively lead employees through these massive changes, leaders need to adopt a new leadership style.?

?Pace and power go hand in hand for digital leaders, which typically run four times faster and pull critical strategic levers two times harder than other companies do. Most executives have a powerful, intuitive feel for the rhythm of their businesses. They know how hard and fast to pull strategic levers, move their organization, and drive execution to achieve their objectives. Or at least they did. Digitization has intensified the rhythm of competition in many industries, leaving executives adrift, with information-gathering systems that are too slow or disconnected, direction-setting approaches that are too timid, and talent-management norms that are misaligned and incremental. These leaders?know their companies must adjust and accelerate. Digital is putting pressure on profit pools as it transfers an increasing share of value to consumers. Furthermore, those profit pools?are bleeding across traditional industry lines?as advanced technologies enable companies to forge into adjacencies, changing who in the value chain is making money, what share of the pie they capture, and how. The slow and inefficient are left behind, competing for scraps.

?Faster and harder: Behind the numbers

What is?unclear?to these executives, however, is how much and how fast to adapt their business rhythms. The exhortation to “change at the speed of digital” generates more anxiety than answers. We have recently completed some research that provides clear guidance: digital leaders appear to keep up a rhythm in their businesses that can be four times faster, and twice as powerful, as those of their peers. The responses of the best-performing companies—those in the top decile for organic revenue growth—suggest that the accelerated repetition of certain critical practices is closely associated with adaptive cultures that are comfortable with change, learning all the time, and swiftly responsive. These practices fall into two different categories. One is a set of actions that a company must take continuously (monthly, or even weekly) to increase the pulse of the organization. The other is a set of activities done intermittently (often quarterly) and involves taking a step back to review all that the company has learned, as well as making powerful adjustments or realignments accordingly. It can’t be faster the pace of an organization by fiat. We must build it by accelerating the frequency of manageable practices that are integral to achieving key goals, such as serving the customer or driving internal efficiency. These “light-touch” actions are low risk and low investment, but they can provide high-yield returns. We have grouped them into two buckets that can help mold incumbents into digital players.

??How digitization and technology change the way leaders need to lead

?We observe three main developments that impact leadership in the ultra-modern organization.?

?1.???Leading virtual teams?

?Any restrictions that required employees to be in one location are vanishing due to modern technologies. As a result, leaders manage increasingly diverse teams with different cultural backgrounds in various locations and time zones. And with the rise of the gig economy, they not only have to supervise internal employees but also independent workers. Solid communication and cross-cultural skills are the keys to leading virtual teams to success.?

?2.???Facing new power structures within the organization

?Increased connectivity and free-flowing information are quickly breaking down traditional hierarchies and boundaries. Many organizations are adopting a project-based approach to work that calls for shared leadership in teams. Members share the decision power instead of relying on one sole leader. The result is a higher sense of responsibility for the tasks and outcomes at hand, reducing the compulsion for controlling employee’s actions as previously exerted by leaders.

?3.???Facilitating employee development??

?Leaders, especially those at high levels are responsible for helping their workforce cope with the changes in the digital transformation. They will need to adapt their approach to the employee’s skill level: On the one hand, the war for talents demands leaders to retain highly skilled, thought-after workers. Exhibiting coaching behaviors that promote the individual’s development and provide essential resources becomes increasingly important. On the other hand, leaders must upskill and motivate lower-level employees to deal with the challenges of greater job demands and steep learning curves. Workers require assistance to embrace the upcoming changes that may be a threat.?

?Which skills do leaders need right now??

?While pushing the digital agenda forward, leaders need to create a positive, connected, and highly collaborative work environment that doesn’t leave anybody behind. The new organizational culture should foster a strong sense of unity and belonging among employees.?Traditional social skills, such as the ability to actively listen and understand others’ emotions and points of view, are now more important than ever. In an environment that’s rapidly changing, providing and receiving clear feedback is essential to improve continuously. In addition, a concept like feedforward can be useful to gather actionable ideas for the future.?E-leaders have to integrate these skills with the capability to apply a variety of virtual communication methods. They increasingly require IT skills to understand and manage the use of various technologies effectively.?Only leaders who adopt a life-long learning approach will be able to develop and hone the necessary digital and social skills. A leadership coach can assist in this vital transformation.?

?How often does an organization analyze customer data to look proactively for new ways of delighting its customers? How frequently do senior business leaders take the time to investigate and understand new digital technologies so that they recognize which ones are truly relevant to their areas of business? How quickly and consistently does your company share lessons acquired from test-and-learn experiments performed by those on the front lines? If like most organizations, which aren’t performing the above tasks fast enough. Learning: From quarterly to monthly.?Top-performing companies are voracious opportunists, and it starts at the top. Senior leaders take time to tune up their understanding of the digital tools and practices Engaging with data: From monthly to weekly.?Nearly half (44 percent) of digital leaders collect and analyze their businesses' need to stay ahead. customer data weekly (or more frequently) to identify new ways of winning over buyers, compared with just 16 percent of laggards, which, on average, dig into customer data only monthly. And the drive for urgency is omnipresent. A company with a database of 2,000 customers, for example, decided to generate online sales by offering a discount code. Instead of simply sending a single email to its customers, it tested two different promotional offers, one demanding faster action from customers than the other. The more time-sensitive offer generated a 60 percent higher response rate, which became the standard for future promotional emails. Sharing results: From quarterly to monthly—or even weekly.?To ensure that results such as those in the previous example permeate the organization, top-performing companies encourage employees to share their lessons from lower-performing tests and successes from better-performing ones. As basic as this practice might seem, top-decile performers are five times more likely than others to do this weekly. And top performers are committed to sharing with the broader organization what has been gleaned from any test-and-learn activities. Top-performing companies are voracious opportunists, and it starts at the top. Senior leaders take time to tune up their understanding of the digital tools and practices their businesses need to stay ahead.

?It goes back to the?elements of organizational culture—risk-taking, customer focus, silo-busting—that our past research has highlighted as core to digital effectiveness. Focusing on frequent inputs about what your customers are wanting, and how new technologies can help you deliver, drives both a more customer-centric view and greater confidence about what direction to take new offers. Sharing insights about what is working and what is not beyond the team that launched a particular initiative helps break down siloed views of both the business and the customers, and it can spur calculated risk-taking in other parts of the organization.

Adapt and deploy

The top-performing companies are just as opportunistic when it comes to redistributing talent. This often comes through the formation, dissolution, reformulation, and work of agile teams, whose many small, low-risk steps enable swift progress, rapid talent reallocation, and massive change. At agile companies, incrementalism enables breakthroughs by lowering the risks at each step:

Talent reallocation: From yearly to quarterly.?

Companies must expand their use of agile methodology beyond IT. Agile ensures that organizations bring together small multidisciplinary teams aligned on common goals. These groups make iterative progress on—and continuously manage their backlogs of—those activities that matter most in achieving critical outcomes. Their work enables rapid, large-scale reprioritization of digital initiatives and has the added merit of lowering the risk on bold moves.

Agility in action: From every two months to every two weeks

?Agility accelerates everything. Cross-functional “squads” of nine people or fewer focus on delivering solutions for the specific needs of their customers in ways that were impossible in the old organization. Squads with a shared overarching mission (such as mortgages, payments, or consumer credit) are united in “tribes” of 150 employees or fewer. The reallocation of talent is executed swiftly, with a focus on value. Each tribe is headed by a lead who can deliver key resources, including IT engineers, as needed. These tribe leaders convene once a quarter in a quarterly business review (QBR). Before the QBR, tribe leaders share a brief memo with all of their peers, documenting what the tribe achieved in the past three months, as well as what it was unable to accomplish and why. They also share, in writing, their commitments for the coming quarter and document the resources and support they require to achieve these ambitious goals. Based on this input and related conversations, the bank’s top management reallocates talent to the tribes with the greatest opportunities. The process has unleashed creativity and productivity. At the beginning of the journey, ING could only deliver four new software releases a year, a pace that would have left it hopelessly behind its customers. These days, ING delivers new software on an ongoing basis, at an astonishing rate of more than 20,000 small releases per month. Big moves that turbocharge digital effectiveness are underpinned by strategic clarity and adaptability. The two go hand in hand because keen insights and a view of the future are more powerful when combined with learning through experimentation. Companies with both have the confidence to make big calls when others are frozen in wait-and-see mode. Two of the most important such calls are major acquisitions and capital bets. Not only are these two of the five big moves shown by our colleagues in?separate research?to be the greatest contributors to exceptional corporate-performance improvement, they also loomed large in our findings—powerful differentiators that separated digital leaders from laggards: Digital winners typically allocate 9 percent of their capital expenditures toward digital-transformation efforts, while others allocate half that much—again, twice the power for digital leaders. The results are transformative as well: expenditures that lead to better analytics tools or greater automation can be key in building a competitive advantage over digital competitors.

?Strategic power and rapid pace are mutually reinforcing. When digital leaders launch initiatives at a greater rate than peers do, they create opportunities to collect data, analyze them, and learn faster than other companies. Learning about the evolution of markets, consumer attitudes, and behavior, in turn, sets those companies up to make the bigger, better, faster acquisition and capital-expenditure decisions—which, in turn, fuel new initiatives and more learning. The speed and power with which digital leaders move are best illustrated through examples. So let’s examine a group of financial-services players that dramatically increased the rhythm of their business in response to emerging digital challenges. One company, which had performed well by steadily improving productivity, was seeing leaner digital players cherry-pick its clients, forcing consideration of radical digital interventions to its core business model. Another company had seen its portfolio of new, B2C businesses, which delivered the highest profit growth in the company, getting hammered in the press for poor customer experience and unimaginative offerings.

The CEO and heads of the business lines in these organizations agreed?something?had to be done—they just weren’t sure what. To accelerate learning, one company empowered a new group to examine the end-to-end journeys of their customers and built out an insights and analytics group to uncover unmet needs. This gave the company the knowledge it needed to do a clean sheet redesign of its current offerings and to create some new ones. Another company launched a tech-enabled productivity transformation of its core business, aimed at embedding artificial intelligence and automating a variety of functions. The direction was starting to crystallize for these organizations. But the companies needed to take five interrelated actions to support their digital goals.

Robotics was no longer about building machines but about automating the assembly of digital apps that would be immensely important to ongoing customer interactions. Rather than inundate business leaders with educational material, one organization launched a cross-functional initiative to discover jointly how AI-supported robotic process automation could boost productivity, drive down costs, and expand strategic options. Cross-functional teams cocreated pilots and shared their models, assumptions, and findings in monthly meetings attended by the business leaders, including those whose headcounts were in question. This practical and open approach simultaneously gave key leaders a valuable education in the potential of digital and crafted consensus around resource reallocation.

Talent was a bottleneck holding back the pursuit of digital initiatives in the organizations we spoke with. Matters were made worse by the many different ways individual divisions deployed, prioritized, and ran the operating expenses associated with digital talent. While the marketing function, for example, might have completed its part of a project, the initiative would stall if the operations function hadn’t prioritized launching the new initiative. Resources in one company were truly agile only within silos, not across the organization, and divisions reviewed talent allocation at wildly different intervals. Resources in one company were truly agile only within silos, not across the organization, and divisions reviewed talent allocation at wildly different intervals. To get this right, the senior-leadership team formulated a consistent set of criteria for prioritizing the deployment of digital talent. As a group, it came to grips with resource trade-offs, such as productivity versus customer experience, and core versus new business. These criteria were reconsidered every quarter, and they changed as the company learned more about the efficacy of different elements of the digital strategy. The reallocation, however, was done weekly, in keeping with the urgency of digital initiatives and competitive threats.

The frequent sharing of insights, successes, and failures buoyed the confidence of key leaders. And on the front lines, the freedom to make many small moves quickly diminished risks and started shifting the culture: managers and employees became less afraid of failure as they pursued digital initiatives. Considerations of M&A and capital expenditure, meantime, became more about business impact and well-understood risks (thanks to better data) and less about organizational politics. As leaders became clearer on how, exactly, their digital efforts were contributing to the twin goals of driving down costs and creating new and improved customer journeys, they grew more comfortable making bigger bets and swiftly reallocating human and financial capital.?The full transformations are still underway because of the complexity of the organizational change, but the momentum is building with each success the companies achieve.

Conclusion

?Digitization, in general, entails increased sharing of information. Leaders need to adapt to this new transparency, also regarding their own development and challenges. Openly inviting direct feedforward, rather than feedback, from coworkers on their behaviors is now the key to success.?

However, this?feedforward process?is not ingrained in most leaders, yet. That’s where leadership coaches can greatly facilitate the leader’s development. By establishing coworkers’ feedforward as a fundamental element of the coaching journey, they can systematically drive lasting behavior change in leaders.?This concept is a major building block,