Growth in digital technologies is powering business and changing the world – but it appears the thinking and problem-solving capability in the C-Suite is lagging some way behind.
That might sound like a bold claim, but research from the Corporate Executive Board (CEB) estimates that a staggering 50% to 70% of executives will fail within their first 18 months in role. (Of those, about 3% “fail spectacularly”, while nearly 50% “struggle quietly”). This is regardless of whether they were recruited externally or an internal hire.
I’m regularly impressed at the wealth of talent, insight and experience that resides in an executive team and yet disheartened that the wisdom and insight is somehow locked-in and constrained by the processes and approaches the team uses to solve problems and make decisions.
All executive teams, whatever their industry, now operate in a digital world. The speed, scope and scale of the disruption to business means leaders need the cognitive skills and mindset that is up to the job. You otherwise risk being one of those failure statistics the CEB has identified. Perhaps the most critical learning from this research is that the need for executive leaders to think and operate at scale will grow exponentially.
I believe that individual executives and their teams must become collectively proficient in three mindsets and cognitive skills in order to lead their organisations successfully in a warp-speed world. Together they deliver a new level of strategic literacy in the C-Suite. They are: Complexity Literacy, Foresight Literacy, and Digital Literacy.
Complexity is an over-used word these days, and it’s used in inter-changeable ways. But there is a very specific use of the word ‘complexity’ that is being studied as a science (at the world-renowned Santa Fe Institute, for example). In complexity science, organisations are viewed as ‘complex adaptive systems’.
Complex adaptive systems are non-linear and emergent. They are also nested which means each system is located within the context of other systems. So, as an example, our health service is nested within an economic system and funding decisions are made within the tension of the sometimes differing needs of both.
Seeing an organisation in this way recognises it as part of a deeply interconnected whole, all parts are able to adapt to their environment and in doing so can impact everyone else within it. Think, for example, of the impact of the Chinese government reportedly delaying what it knew about Covid-19 to the World Health Organisation last December and the impact of an alleged delay on the global situation that unravelled.
Typically, leaders strive for efficiency in operations and how they do things – and in many cases this is the right thing to do. But when the environment is complex, this operational default applies the wrong logic to the problem at hand. It’s what is called a category error: treating an issue that belongs to one category with a solution that belongs to another.
Complexity challenges much of our historic understanding of how organisations operate. Change does not happen in linear, incremental steps, but is highly emergent and unpredictable.
I believe the key skill of effective executives in the 2020s and beyond will be to lead their business challenges within the frame of complexity science. It is already being used in some of the most impressive and successful organisations across the world.
The CEB research mentioned above also highlights that one of the key reasons for executive failure is too much of a focus on the internal and the short term. In combination, this creates a machine that functions well but is completely unadapted to what the market needs.
It’s said that we’re all addicted to being effective…How do we typically know we’re being effective? We get immediate feedback, an instant gratification that releases the dopamine hit our brains love so much. This increases the seductive pull of focusing on things that end satisfyingly with a sense of completion. But it also leads us to focus too much on the immediate and the proximate.
And so, another core executive literacy that successful executives must cultivate is looking outside and into the future. This future focus is where opportunity and innovation reside. Executive teams in organisations of all sizes need to hone their foresight literacy to spot the emerging patterns of societal issues that may affect their business profoundly.
Escaping from the comfort of the probable and preferable to instead consider the possible and plausible requires executive teams to engage differently, with different material. Out goes certainty; in comes imagination.
Predictive methods such as forecasting depend too heavily on what has happened in the past. This does a good job at tracking past events, but experience shows it consistently misses major inflection points that lead to long-run transformative changes. It can lull executives into a sense of having exhausted all available options, thereby narrowing the actions and possibilities in their scope of consideration.
Focusing on likely outcomes may obscure potential outcomes that, although less likely, may be more desirable and create more business value and sustainability. This impaired strategic capability may even prove fatal in our fast-changing world. The simple truth is this: executives cannot avoid the future, so they need to become literate in working with it.
A research study with more than 1,000 CEOs, conducted by the Harvard Business Review and Massachusetts Institute of Technology, found that 90% believe their businesses are being disrupted and transformed by digital business models. Alarmingly, 70% go on to say they don’t possess the right leadership skills in themselves or within their team to adapt; the same is true for their operating structure.
Just let that sink in. Most CEOs think their business is being disrupted by an unstoppable and external force, but very many of them think they (and their executive team) lack the skills and structure to adapt to it. What other outcome is there beside adapting? Only one – business failure, in some form and some timeframe.
All of this is why we can no longer leave the digital strategy to the CTO or CIO. Digital strategy is no longer simply a business tool or platform; it has become so central to how the organisation operates that everyone in the C-suite needs at least enough digital proficiency to engage in the strategic conversation. Recent reports from DDI and others confirm that digital literacy is one of the most important business skills to have.
Digital literacy is now so much more than the ability to use software or operate a digital device. It requires an understanding of disruptive technologies and the ability to manage digital talent effectively (yes, they are different). To be digitally literate, you need to understand that most of what your company does now has the potential to become digital, and to work proactively to innovate and change.
And that unstoppable change that is happening outside your organisation? It is happening inside it too. Business models established in the physical world need to be reimagined for the new digital age. Digital talent in your organisation is disrupting not just how projects are managed, but the very expectations of what it means to work and to be led.
We owe it to those people who have succeeded in getting to an executive role to support them as they take on challenges that require different paradigms for how organisations work. We need to help executives to increase their skills in looking out and beyond their own organisational boundaries and near term horizons.
Those who are literate in all these aspects of digital strategy will be the leaders who create the organisations of the future.
DDI. 2020 Executive Leadership Outlook. March 2020
Carucci, R. Executives fail to execute strategy because they’re too internally focused. Harvard Business Review. Nov 2017.