Four Leadership Imperatives for a Volatile World

By unfreezing past constraints, the routines, habits and ‘ways of doing things around here’, the wrecking ball of COVID-19 has provided us with a once in a lifetime opportunity for driving transformation, building the modern, intelligent, agile, resilient, human-focused, purpose-driven workplaces essential for a VUCAD world (Volatile, Uncertain, Complex, Ambiguous and Digital).

To achieve this, organisations will need to reconfigure and re-energise their modus operandi in the four key areas shown in Figure 1. A brief review of the most recent and relevant literature in each area is presented below.

Figure 1: Leadership Imperatives for a VUCAD World

Source: the author

The Strategy Imperative

The so-called ‘new normal’ does not exist. For the foreseeable future, the only ‘normal’ will be a prolonged period of turbulent, unpredictable change. With the threat of disruption coming from many different directions, leaders can no longer rely on the assumption of stability built into traditional approaches to strategy development and strategic management.

In a dynamic and complex environment, the essence of strategy now is how to transform. Consequently, leaders need to shift focus from what is stable to what is changing; accepting that historical sources of advantage may be under threat at the same time as new opportunities arise (Knowles and Hunsaker, 2020). Strategic leadership today is about adaptability, speed of response to unanticipated shocks, expecting the unexpected, rebounding quickly and taking advantage of unforeseen opportunities (Teece, Raspin and Cox, 2020).

To ensure speed of response, organisations should implement a robust VUCAD Monitoring System - a proactive, continuous and comprehensive set of processes for identifying emerging threats and opportunities. The actionable insights derived from this process should be used to reimagine your organisation’s underlying business model.

In an era of pervasive uncertainty, tinkering is not an option when trying to build a future-ready organisation. A radical, blue ocean, scorched earth approach is required.

The thoughts of INSEAD professors Woodward, Padmanabhan and Hasija are very relevant here. In their recent book entitled The Phoenix Encounter, the authors develop a strong case supporting Scorched Earth Thinking for COVID Times. Leaders should use monitoring of the external and internal environment to ruthlessly identify current weaknesses, envisage destruction of their current business model, set fire to the status quo, then rise, phoenix-like, from the ashes with a vision of renewal - a future-facing blueprint for survival and growth encompassing new strategic and organisational priorities. The current environment should be viewed as an opportunity to reconfigure and pivot. This will require unprecedented thinking if organisations are to withstand storms on the horizon, coming out on top.

A useful question for leaders to address is how would an agile, well-funded start-up business disrupt your industry, your organisation?

In addition to reimagining underlying business models, the issue of organisational purpose will become increasingly important. COVID-19 has significantly accelerated the trend away from the myopic view that the only real purpose of business is to maximise shareholder value (and directors’ remuneration). Companies will be expected to adopt a more holistic view, maximising benefits to all stakeholders - customers, employees, suppliers, communities as well as shareholders.   

Calamities such as COVID-19 can be a threshold experience dividing one era from another - a moment to dream big, to rethink our priorities and what we value. With the virus destroying the myth of self-sufficiency, it has demonstrated our mutual dependency and common vulnerability. An opportunity exists for this becoming a launchpad for new business and politics for the common good (see Guardian Review of Let Us Dream).

Change leaders also need to be crystal clear in communicating the new vision and strategy throughout the organisation. The lack of clearly defined outcome-based objectives, captured in agreed KPIs and targets, is one of the main reasons for change failure (see later).

The Organisation, People & Culture Imperative (OPC)

To build future-ready organisations, leaders will need to excise the legacy organisational structures, management thinking and cultures that stifle innovation.

In a pioneering study entitled Do You Know How Bureaucratic Your Organisation Is?, published in the Harvard Business Review 2017, Hamel and Zanini estimated that an excess of bureaucracy costs the US economy more than $3 trillion in lost economic output per year. For the 32 countries in the OECD, the cost of excess bureaucracy rises to nearly $9 trillion per year.

The authors build on this analysis in their 2020 book Humanocracy, presenting a passionate, data-driven argument for excising bureaucracy and replacing it with something better.

‘In a world of unrelenting change and unprecedented challenges, we need organizations that are resilient and daring. Unfortunately, most organizations, overburdened by bureaucracy, are sluggish and timid. In the age of upheaval, top-down power structures and rule-choked management systems are a liability. They crush creativity and stifle initiative. As leaders, employees, investors, and citizens, we deserve better. We need organizations that are bold, entrepreneurial and nimble as change itself…...excising bureaucracy and replacing it with humanocracy’ (Hamel and Zanini, 2020).

The book presents a 'detailed blueprint for creating organizations that are as inspired and ingenious as the human beings inside them. The ultimate prize: an organization that's fit for the future and fit for human beings’.

A useful starting point for change leaders would be to undertake an OPC Dexterity Audit.

While few would argue with the need to excise bureaucracy, the key question now is the HOW. For change leaders, three major challenges exist:

• People - how do we unleash the creative potential of our people?

Employee empowerment has become critical to building the modern, agile workplaces essential for survival and growth in a volatile, uncertain world. Engagement levels, however, remain stubbornly low with surveys consistently showing very low levels of employee engagement across the globe. Gallup’s annual State of the Global Workplace Survey, for example, reports that only 15% of employees worldwide feel engaged with the organisation they work for. The position in Western Europe is even worse, with only 10% feeling engaged. These are quite staggering statistics and are consistent across occupational categories and countries. Building employee empowerment and engagement has become one of the key leadership challenges of the 2020s.

• Teams - how do we build and sustain high performing teams?

Successful and sustained transformation takes place through small, agile teams working on innovative projects that deliver value in months rather than years. Teams have become the fundamental building blocks of the modern organisation, with business success depending not on how people work but how effectively people work together. A successful team can deliver results far outperforming a collection of even the most talented individuals.

Despite over 50 years of research and practice, however, most organisations are still notoriously inconsistent in creating high-performance teams. New approaches are urgently required (see To create dream teams, allow ‘a thousand flowers to bloom).

• Culture - how do we build a modern culture?

According to the authors of Changing Culture is Central to Changing Business Models, culture provides the foundation for organisational and industry stability. However, it can also be the force that keeps leaders stuck in their old ways of doing things. Leaders serious about creating the organisations of tomorrow have a simple choice to make - they can stay with the cultural norms that created their prior success, or they can do the hard work to change themselves to ensure success in the future. Today’s leaders need to take a personal journey to avoid the fate that has befallen companies such as Blockbuster, Kodak, Sears, and so many others. The journey starts with three steps: examining personal values in order to redefine them, communicating the new values widely, and measuring what matters - the performance of the new initiatives and investments that are necessary.

In concluding this section, it is important to note the vital role middle managers play in the transformation process. The widely accepted narrative here is that change efforts fail because of resistance or laziness from the layer of “permafrost” (aka long-serving middle managers) who are not working fast enough or getting things done.

However, new research from Johnson, published in the MIT Sloan Management Review, questions this assumption:

“When change efforts are failing, I lay the blame not on lazy managers but on lazy leaders. And by lazy, I don’t mean they’re not working at all, but rather that they aren’t doing the right work: the heavy lifting of thinking and decision-making that lays the groundwork for a successful change that the managers under them can then deliver” Lazy Leaders and Heroic Managers

The author claims that senior executives are failing to deliver in three main areas critical to successful change efforts:

• Being crystal clear on what they want by communicating clearly defined outcome-based objectives captured in agreed KPIs and targets. Outcomes and targets which are ambitious and time-bound, not cosmetic.
• Being realistic about timelines and costs. One of the biggest complaints from middle managers, especially in the second and third years of a change, is that leaders’ expectations were unrealistic. They expect too much too soon. This impatience is compounded when leaders fail to devote sufficient financial and human resources to the change.
• Consistency in the signals being sent out. Inconsistent signals make it difficult to identify what the real priorities are. These mixed signals can happen right at the start of the change or can creep in overtime. Leaders need to be disciplined in how they talk about the new strategy.

The Technology Imperative

To support modern operating models and ways of working, leaders will need to develop the skills and competencies for leveraging the full potential of existing and emerging technologies for building organisational resilience, reimagining how they engage with customers, how they operate internally, reinventing their underlying business model in the process.

While many organisations have utilised technology effectively to maintain operations during the pandemic, COVID-19 has also acted as a reality check highlighting the growing gap between leading digital organisations and digital laggards.

In a December 2020 update to their best-selling 2014 book Leading Digital, Bonnet and Westerman warned of a worrying gap between the current use of digital technology by most organisations and the rapid pace of digital disruption taking place.

‘Digital mastery is more important than ever because the risks of falling behind are increasing…..We are seeing digital transformation grow increasingly complex, with a new wave of technological and competitive possibilities arriving before many companies mastered the first….. The first phase of disruption has given way to a new one with advances in technologies such as the internet of things, artificial intelligence, virtual and augmented reality, and 5G opening up new avenues for value creation. While some companies have successfully graduated from the first phase of digital transformation and are diving into the second, most remain floundering. With COVID-19 accelerating the shift to digital activity, digital masters are widening the gap between their capabilities and those of their competitors” (The New Elements of Digital Transformation).

Leaders in many organisations need to urgently correct a chronic underinvestment in core and emerging technologies – especially, but not exclusively, in sectors such as health, education, local and central government, financial services, energy and others. While technology on its own will not deliver transformation (a wide range of non-technology barriers also need to be overcome), successful transformation cannot take place unless supported by robust technology and software.

Change leaders should consider a two-step process here:

• The immediate requirement is to build resilience ensuring that the right IT infrastructure, software and other digital tools are in place to support a prolonged period of remote working securely and efficiently. For 2021, priorities for IT spend should include the Cloud; technologies and software for supporting remote working, collaboration, improved productivity and cost reduction; digital customer and employee experience platforms; actionable insights derived from data; and the enhanced security required when moving from 1 office of 500 people to 500 offices of 1 person.
• Simultaneously, there is a need to build on the 2020 ‘innovations born of necessity’ by exploring the potential of emerging second wave technologies including AI, Virtual and Augmented Reality, Big Data, IoT, the Blockchain and others.

Even before Covid-19, a strong positive correlation existed between digital maturity and performance with leading digital organisations outperforming others across a wide range of measures. This gap will widen significantly during the second wave of digital disruption.

A useful starting point for your organisation would be to undertake a Digital Dexterity Audit – an honest assessment and audit of your organisation’s technology readiness to become modern and intelligent.

In undertaking this audit, it is important to remember that the journey to becoming modern and intelligent is not just about technology. While making the right technology and software decisions is critical, the MIW journey requires the effective integration of strategy, people, processes, systems, organisation, culture AND technology. Non-technology issues are often the main barriers to transformation progress.

The Leadership Imperative

Finally, with disruptive change coming from many different directions, it is time to reimagine the concept of leadership itself.

As stated in a short opinion piece by Wharton Dean Geoffrey Garrett:

'In an era of pervasive uncertainty, leaders need to adopt a more humble, open and committed approach to thrive under these circumstances......To be successful, all organizations will need not only different leaders, but also a whole new style of leadership…..We need to turn our traditional thinking about leadership on its head. We can no longer afford to rely on heroic leaders who are inveterate risk-takers, from whom we want confident certainties to allay our anxieties, and whom we place on pedestals far above the rest of us (think quintessential wartime Winston Churchill). Instead, what we need today are anti-Churchillian leaders - leaders who admit to their limitations, are open about challenges, and reduce the distance between them and us.’ Leading in Uncertain Times: Be Real - Not a Hero 

Garret’s thoughts have been developed further by Chima and Gutman in a recent HBR paper entitled What It Takes to Lead Through an Era of Exponential Change. Most leadership models were not built for an era of 3-D change - perpetual, pervasive and exponential. A new leadership vision, better equipped to navigate a volatile world is required - Sapient Leaders. Leaders who exhibit authenticity, humility, and vulnerability, inspiring the necessary trust and psychological safety that drives shared learning and intelligence, resulting in enhanced collective performance and a better future for all. The days of ‘leader as hero’ - the solo, individualistic leader who inspires certainty in a deterministic way forward - are over.

The four key pillars of Sapient Leadership are:

• Leader humility, authenticity, and openness which instills trust and psychological safety.
• Trust and psychological safety which empowers individuals and teams.
• Continuously learning teams enabling effective navigation of 3-D change.
• Shared purpose and values which enhance focus, cohesion, and resilience during 3-D change.

According to the author, navigating perpetual, pervasive and exponential change has become the quintessential test of effective leadership. Leaders, teams and organisations need to adapt fast, or become irrelevant. Change that used to take place over years and decades is now taking place in weeks or days. Sapient Leadership is a framework that enables accelerated adaptation in a wise and humane way. It builds into its structure the imperative for leaders, teams, and organisations to continuously evolve in order to overcome the challenges of 3-D change.

Based on our previous comments about the critical importance of employee empowered teams, we also need Leaders Who Can Create Leaders. The ability to develop the leadership potential of those on your team used to be a ‘nice to have’ skill. Today, it has become a necessity. We need to enable leaders at every level to think steps ahead and take decisive action.

Conclusions

For organisations across the public and private sectors, the biggest threat of COVID-19 will come from the accelerated disruption generated by far-reaching changes in customer behaviour and employee expectations; combined with a broad range of social, political, economic, environmental, gender and race-related issues.

To succeed in this volatile, uncertain and increasingly digital world, organisations will need to reconfigure and re-energise their modus operandi. Radical new approaches to strategy, organisation, people, culture, technology and leadership will be required.

It is a legitimate question to ask whether our organisations have the leadership dexterity to drive such change. The evidence would suggest not!!!!!

Pre-COVID-19 research undertaken by MIT, and supported by other studies, concluded that we are facing an emerging leadership crisis. Only 9 percent of the executives surveyed agreed that they had the skills at the top of their organisation to thrive in the digital economy (Leadership Playbook for the Digital Age).

With COVID-19 highlighting the major deficiencies in our ‘industrial age’, bureaucratic approaches to management, technology, organisation and culture, the crisis of leadership has reached a tipping point. As a consequence, the speed and unpredictability of change are now outpacing the ability of even the most agile of organisations to respond.

We urgently require new approaches to leadership development for a volatile, digital world.

The time for action is now – or will we wait until the next global crisis before acting?

Take care.

Jim H