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Leadership guidelines for the digital age

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Fluid World

The old ways of running a company won’t cut it in a digital world, wrote Liri Andersson, Insead Guest Lecturer, founder of this fluid world, and Ludo Van der Heyden, Chaired Professor of Corporate Governance & Professor of Technology and Operations Management at Insead a few months back. They created one of the most read articles this year coming out of the French Business School. “It is unlikely that familiar forms of organisational leadership will survive the digital revolution. In order for boards and executives to fulfil their roles effectively in the future, a reshaping of these functions is necessary,” is their conclusion. Andersson and Van der Heyden present a series of strategic implications and recommendations (grouped into three categories) for the digital age:

The business environment

1. Digitalisation 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 digitalisation is rapidly replacing traditional physical barriers to entry with intangible barriers.

The organisation

2. Digitalisation may require a reformulation of the firm’s mission.

The environmental shift caused by digital may challenge the very existence of a company, even entire industries. Boards and executives will need to question all pre-existing 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.

Rather than searching for a blueprint to guide them through digitalisation, firms should define their own digital road map.

4. Digital understanding and capabilities are required across the firm.

Digitalisation may involve a great many experts, but the ultimate responsibility for digital transformation belongs to all functions within a firm.

5. Digitalisation 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, digitalisation will never take hold unless it is driven by top executives, under the board’s leadership.

6. Digitalisation 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.

7. Digitalisation requires greater engagement with the public.

With digital, anyone can create and monetise 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.

10. Digitisation requires firms to enter uncharted territories.

Organisations 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. Digitalisation is about continuous management of change.

In the pre-digital world, a one-off change management programme 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 organisation.

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