Digital disruption arrived a long time ago but organisations still haven’t developed their leaders for it, according to expert in leadership development Jay Conger and research chair in leadership studies at Claremont McKenna College Henry Kravis.
Speaking at the Corporate Research Forum (CRF) event, Conger said: “The future arrived a long time ago but it tends to arrive on cat feet quietly and we don’t notice the cat entering the room. Now four decades later we’re staring down a lion… and we’re debating whether to embrace the lion or run like hell. That’s where we are now.”
Conger explained that this started in the 1980s when there was a new drive for efficiency. “In the '80s you as a manager had five people at the most reporting into you”, he said, but the average manager today has 10 to 15 reports. This shift is “pushing us towards pod-based organisations and away from hierarchy”, he explained.
Conger gave the example of the Pharaohs and the pyramids as a traditional hierarchy. “You knew who was in charge,” he said. “But technology allowed things to happen that undermined the pyramid.”
In modern times, first came the “asset-light business models” such as the tech firms that had no saleable assets and yet displaced traditional companies, said Conger. Second came “the transparency effect”, he said, pointing to how overnight the death of Cecil the lion created headlines and led to policy changes at a number of airlines: “Technology allows people to mount public campaigns for you or against you and senior leaders have to grapple with overnight sensations or overnight disasters which many are not prepared for.”
Conger predicted that “the pyramid and the pod will co-exist” in the future. “There will be a hybrid system of hierarchy and the new model,” he said. “The question is where do you need the pods? Put your best people in charge of the future.”
The event coincided with the launch of CRF's new research, Digital disruption – Exploring the implications for leaders and leadership development, which interviewed more than 50 leaders, leadership experts and leadership development practitioners, and surveyed CRF and CEO members. More than half (57%) of respondents said that the digital economy had led to fairly extensive or fundamental changes to their business model, strategy or competitive landscape, while 87% said they expect further change in the future.
The research also found that there are seven main shifts from traditional leadership to leadership in the digital age, which can be grouped into three main themes: how leaders set direction; creating the organisational infrastructure for rapid execution, experimentation and learning; and the new relationship skills leaders need.
On the first theme Gillian Pillans, research director at the CRF, explained that one of the shifts is “catalytic environment scanning”, meaning it is “important to pick up on noises on the edge of the system”.
“Agile organisations have a larger surface area with the outside world," she said. This is the most important capability of a digital leader, added Conger: “If I could select one capability you need to be a digital leader it would be catalytic learning.”
Yet, despite the survey showing organisations are aware of the impact of digital disruption on their business models, they have made little progress in building digital leadership capability. Less than a quarter (23%) of survey respondents said they have formal programmes for developing digital leadership capabilities. When asked what stage they would describe their organisation as being at, just 2% said they have well-developed, evaluated methods for building digital leadership capability, while 29% have just started to think about it.
“We also asked where the focus has been on bringing in new leadership development methods to support leaders in developing their digital leadership capability,” said Pillans. “A lot [of focus] has been on sending leaders into digital start-ups… but that’s different to bringing skills into your own company.”
Conger went on to explain that leadership development can be built around two notions: procedural knowledge versus declarative knowledge. “Declarative is knowledge that has unique components that can’t be replicated,” he said. He explained that procedural would be a chef “following a recipe”, whereas declarative is a “chef who doesn’t follow a recipe but creates something great”.
“We have been trapped in the procedural mindset,” he said, when “70% of leadership is situational”.
Digital education tools are part of the issue, Conger continued. This is because, he explained, “technology is pushing us to procedural knowledge rapidly because of the scale and efficiency, and [because] we want to educate as many people as possible [on digital skills]. But in doing that we have stripped the power to make situational decisions”. HR and business leaders should instead turn their attention to “action learning” when developing leaders, said Pillans and Conger.
Conger also spoke about the concept of followership, meaning leaders can only be considered leaders if they have followers. He gave the example of one company that “built a culture of accountability, and [which] talks about not having managers or leaders”.
“They do [have leaders] but the way leaders are appointed is because a bunch of followers get together and say 'we need to do this so let’s have a leader', and they choose who is best placed to take on that role; so it’s a democracy,” Conger explained.
Pillans added that organisations must remember that leaders are just one part of a bigger system. “We focus so much on individual leaders without realising leadership is exercised within a system,” she said. “To be an effective follower is as important as being an effective leader.”
Conger warned companies to be realistic about how well they are developing digital leadership capability. “What worries me most about change and transformation is the Potemkin villages that will be built,” he said, referencing constructions built with the sole purpose of deceiving others that a situation is better than it really is: “Your organisations have Potemkin villages and a false sense of tackling the future.”