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Liri Andersson

Innovation

Eleven Leadership Guidelines for the Digital Age

The digital revolution can be viewed either as a catastrophe or a world of opportunity

Published: Monday, June 26, 2017 - 11:01

Ten years ago, when we would ask senior executives or company directors what “digital” meant to them, their response would usually be something related to social media. Today, it might be apps, big data, 3D printing, the cloud, or another current example of digital technology. All such answers are equally correct—and equally in error. More important than the specific innovations introduced by the digital revolution is their earth-shaking cumulative impact on business and organizations. There is no border anymore between the pre- and post-digital worlds. Digital is business and business is digital.

Yet, top corporate leaders are not taking charge of digitalizing their organizations, as was made clear to us by a survey we conducted in 2016 to which 1,160 managers, executives, and board directors responded. That survey developed into a report available for free online. We discovered that most board members lack the knowledge and awareness necessary to lead a digital transformation.

To help top management catch up, we recently issued a follow-up report—“Directing Digitalization: Guidelines for Boards and Executives.” It presents 11 strategic implications and recommendations (grouped into three categories), summarized below. These are based on the previous findings, our combined business and teaching experiences, and professional collaborations with organizations across multiple regions and industries.

The business environment

1. Digitalization requires an unbiased understanding of the external environment.
Analogue-era frameworks such as Michael Porter’s “five forces” will need to be revisited, now that the impact of digitalization is rapidly replacing traditional physical barriers to entry with intangible barriers (e.g., relevant purpose, resonant mission, authenticity, and trust) that no amount of industry prominence or cash can overcome.

The organization

2. Digitalization may require a reformulation of the firm’s mission.
The environmental shift caused by digital may challenge the very existence of individual companies, even entire industries. Boards and executives will need to question all preexisting assumptions about the firm’s mission and industrial positioning, as well as the sustainability of its business models and methods.

3. The meaning and impact of digital to the firm must be clearly stated.
Digital advantage resides largely in the opportunity to customize not only products and services but also organizational strategy and structure. Rather than searching for a blueprint to guide them through digitalization, firms should define their own digital road map. Leaders can start by developing an in-house dictionary, including entries for “digital” and all related keywords, terms, and concepts. Like any other dictionary, it will need frequent updates.

4. Digital understanding and capabilities are required across the firm.
Digitalization may involve a great many experts, but the ultimate responsibility for digital transformation belongs to all functions within a firm. Successful change also requires cooperation from junior contributors all the way up to the board by linking digital-savvy millennials with the business experience and wisdom of senior executives and directors.

5. Digitalization must be supported by the firm’s corporate culture.
The digital revolution is indeed cultural, not merely technological. As with any large-scale cultural change, digitalization will never take hold unless it is driven by top executives, under the board’s leadership.

6. Digitalization demands a greater level of collaboration.
Business success can be achieved only through continuous collaboration and ongoing conversations between shareholders, boards, executives, and frontline employees. In addition, digitalization is blurring the lines between different industries, heightening the importance of cross-functional and external collaboration.

7. Digitalization requires greater engagement with the public.
In the past, customers were subdominant. We spoke at them; we marketed to them. With digital, anyone can create and monetize value with size, scope, and speed. Just as easily, consumers can destroy value by, for example, dismantling a massive company one tweet at a time. It has never been easier or more essential to co-create with customers and crowdsource ideas, and firms that position themselves as facilitators of customers’ dreams will win in the future.

Strategy

8. Business strategy in the digital age becomes a continuous process.
Gone are the days when companies had the luxury to think in terms of five-year strategic plans. With major business trends shifting constantly as they are today, strategy formulation and execution need to happen simultaneously and ideally in a seamless feedback loop.

9. Decision-making in the digital age is increasingly data-driven.
Compared with the plethora of advanced predictive and analytics tools available to businesses today, the old-fashioned executive summary laying out binary choices is a primitive instrument. In the absence of big data, what used to be allowable as an educated guess will become at best a stab in the dark.

10. Digitalization requires firms to enter uncharted territories.
Planning for disruption entails exploring new business models and revenue streams. Organizations will have to launch ambitious experiments and quickly take learnings on board. For their part, boards and executives must raise their comfort level as regards uncertainty, ambiguity, and risk.

11. Digitalization is about continuous management of change.
In the pre-digital world, a one-off change management program could pay dividends for years if not decades. Not anymore. Directors and executives must ensure that the will and ability to continuously change are built into the very fabric of the organization.

Responding to revolution

The digital revolution, like every revolution, can be viewed either as a catastrophe or as a world of opportunity, depending on whether your allegiances lie with the old order or the new. Optimism is a prerequisite for survival. Digital will undoubtedly force boards and executives to attain unprecedented levels of innovation, competence, effectiveness, leadership and responsibility—with fundamentally positive results for both firms and society.

It is unlikely that familiar forms of organizational leadership will survive the digital revolution. In order for boards and executives to fulfill their roles effectively in the future, a reshaping, if not a disruption, of these functions is necessary.

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About The Author

Liri Andersson’s picture

Liri Andersson

Liri Andersson is the founder of the business consultancy, this fluid world, and a guest lecturer at INSEAD.