Learning while teaching the next generation of leaders

I just finished my fourth year of teaching at Stanford Graduate School of Business. I teach a course called “Systems Leadership.” In it we discuss leadership through disruption and volatility. My co-teacher is Rob Siegel, one of the most popular teachers at the school. Rob has written a great book on leading through the digital/industrial integration, called “Brains and Brawn.” You should pick it up on pre-order at Amazon or at your favorite bookstore when it comes out next month.

Our course studies change through the eyes of leaders from legacy companies and start-ups. How can incumbents leverage digital technologies? How can start-ups scale? How can you harness complexity and diversity? Our thesis is that companies need to master physical (brawn) and digital (brains) skill to succeed.

In the class we learn from great leaders who help teach our students. This year we hosted CEOs and executives from GEICO, NBCU, Peloton, Sila Nano, Carbon, Aeris, GE Appliances, Bright Health, and The Ohio State University. They tell stories of systems leadership, which are enhanced by our students’ discussions.

Here are some of the “systems themes” from this year’s class:

Strategy is about the “and” not the “or.” Business books and investors teach that strategy is about focus and choices, that core competencies should be narrow (and outsource the rest), and that simplification is an overreaching goal. In class, we see that the best companies focus on the intersections, the “and.” They harness complexity to beat competition. They are physical and digital, global and local, etc. They are willing to backward/forward integrate to get control of their ecosystem and win.

Bright Health integrates healthcare risk and outcomes; Peloton integrates fitness content with equipment logistics; Carbon makes equipment and parts; NBCU seeks excellence in content and distribution. We saw that long-term winners follow market trends, not investing themes.

Stamina really matters. Great companies are created from solving big problems, but it takes time. Today, everyone loves batteries…or telehealth…or IOT. But these markets have taken 10+ years to develop. Hundreds of companies quit before the glory days arrive. In many markets, change happens slowly…and then all at once. Our students get a sense that important things in business and society take time.

One of our founders talks about “staying on the bus” to see how the journey ends. And the President of Ohio State told stories of the generational impact and responsibility of education. This is the leadership paradox: in a world of instant communication, short-term investors, and wild market swings…real change takes decades. Are leaders really for this?

Business Schools need to recommit to manufacturing. The pandemic has triggered a localization wave. Meanwhile, governments demand middle-class job creation. So, manufacturing is the “new marketing.” When you are creating manufacturing jobs in local markets, your brand value grows. The next wave of disruptive digital technologies are targeting the factory floor. Physical skills stand in the way of many start-ups gaining momentum. Finally, it is difficult to worry middle class jobs if you don’t know how to create them.

Clearly, learning new digital tools is essential for this generation. But increasingly, the benefits won’t be felt without physical execution. Most students have never seen a factory floor. They would agree that the most empathetic CEO they saw this year was the one that worked a manufacturing shift twice each month.

Teaching also gives me a front row seat to the next generation of business leaders. Many want to start their own companies. This is not an economic decision; but having lived through the Financial Crisis and COVID, they want more control over their life. They believe in causes, but not politics. I think we are developing a generation of problem solvers, not philosophers. They are complicated and funny and kind. I never thought about mental health when I was growing in my career. The rules were clear and career pathways were well established. Not now. In this era of uncertainty, I see mental health as something to be acknowledged and managed through coaching and support. There is a mismatch in expectations, between impact and time. It will take decades to reverse climate change, yet software is developed in weekly sprints. I’m not sure that this generation is ready for both cycles. They are massively talented, but shaped by different events. If we can inspire them, they will change the world.

They have the talent and desire. Our job is to show them the way.