The pace of technology and the changes in customer behaviour it has wrought over the first 20 years of the 21st century is changing the way that companies are managed.
Primarily, what the new paradigm has done is increase the uncertainty management faces in setting and executing their business plan.
That impacts on everyone from the Board and CEO through the ranks of the entire company.
It’s changed expectations about how a CEO will manage the firm, it shortens the time senior mangers and the board allow themselves to prove a concept or business line, and its accelerated the pace with which ideas and strategies are jettisoned.
It sounds impossibly difficult.
But there is a way forward, Ignacio García Alves, Rick Eagar, Gregory Pankert, Raf Postepski, Sean Sullivan from Arthur D. Little say in their paper, “The CEO – Lost in space and time”.
Arthur D. Little’s Chairman and CEO, Alves, and his colleagues are dealing with the role of the CEO in their paper but what is true for the man or woman at the top is also true for the whole company.
The authors highlight, “being a CEO today is a very different experience than it was even a decade ago – in the past a new CEO would know the space where their company operated and be given time to effect change. This has been transformed – space has expanded, while time has contracted dramatically”.
Space expanded, time contracted – sounds like science fiction.
But Alves and his colleagues explain this with reference to the reality that the “traditional strategic approaches are increasingly inadequate.
That, they say, is because “of significant changes in two basic dimensions in which companies operate. First, there is an unparalleled requirement to consider potential extensions to the scope of the business (space); and second, there is a huge acceleration in the required pace of the business (time)”.
They identify seven key drivers of the extension of space and the acceleration in time: ecosystem emergence, millennial mind-set, “make it mine”, everything faster, start-up disruptions, electronic marketplaces and intelligent enterprises.
And they have a prescription to help managers impacted by these changes.
Alves and his colleagues highlight that the CEO – and I’d argue by extension the Board and management – “needs a new paradigm to bridge effectively across control and creativity, and to be able to meet the challenges of space extension and time acceleration”.
The key, the authors say, “is to focus on five leadership priorities covering Why, What, Who and How”.
Sense of Purpose
The authors say that a “purpose-driven strategy (or WHY strategy) starts with clarifying why the company is, and will remain, relevant. It then focuses on the way it can create a sustainable competitive advantage, and only then does it focus on what products and services it will provide”.
A purpose driven strategy they say, “needs to replace cumbersome and often very rigid decision-making processes with an aspirational driver for change”. To do this management and the CEO need to revisit, “their companies’ sense of purpose” by ‘taking a step back to watch the world from a different perspective”.
At its simplest, the authors argue that business managers should have a, “strong and active business portfolio-review approach”. That means building value around the core business but also, “creating new growth opportunities, identifying possibilities for disruption, and innovating around new ways of creating customer value – not just developing new products”.
To build this customer value, Alves and his colleagues say, the organisation needs to set up a team that will genuinely break the paradigm and think outside the usual box. This should include partnering with external partners.
Naturally working with the external partners the authors suggest as part of the Dynamic Portfolio approach means it is “possible for companies to create ecosystems of delivery partners in which the combined core competencies unlock new opportunities and competitive advantages”.
The authors sight Volvo’s turnaround as a key example of this where the company recognised, “the importance of establishing a wider network of specialised partners to complement Volvo’s core car production capabilities”.
The first three leadership priorities will seem pretty straight forward and intuitive to modern managers assailed by the economic and business changes of the past decade or more.
But it is in building an “ambidextrous organisation’ where Alves and his partners really get to the nub of the challenge of choosing the path forward.
“Corporate strategies specifically address the implications of factors such as changing customer requirements, market developments and digitisation. However, most lack tangible guidance on the organisational capabilities needed to address these challenges,” they say.
That means organisational “development is typically one-dimensional and short-term focused, aimed at either becoming ‘fast & creative’ or alternately fostering the ‘scale & productivity’ dimension”. That’s not good enough they say, “Winning today requires CEOs to embrace both of these”.
Easier said than done, especially when they sight the most successfully and disruptive force in modern commerce – Amazon – as the champion of this.
But the roadmap is there with, Alves and his co-authors noting, “finding their unique organisational equilibrium requires CEOs to adopt new thinking towards organisational development”. Naturally, “there is no silver bullet…development requires a modular approach” but the key is “organisational development requires a much closer link with strategy development”.
That makes sense when a manager, the CEO, or the board steps back to evaluate from a different perspective as the authors advise. It makes that step critical to the success of the business.
Cultural, Process and Strategic Agility
Of course another critical element to success in this digital age is organisational culture.
That’s something that comes out time and again in case studies of companies who have successfully made the transition from the analog world to the new digital operating environment. Tech is just the enabler. Culture is the key to success.
Alves and his colleagues from Arthur D Little make this point too.
That is, “culture underpins and ultimately enables all of the previous dimensions to allow a CEO to help drive the sense of purpose and effect change”.
The point is delegation and empowerment across the organisation which allows the company to be “empowered to take responsibility and work autonomously under the guiding principles outlined in the vision and sense of purpose”.
That in turn requires the CEO to ensure, “the organisation understands and buys in to the sense of purpose is critical, and it is the CEO’s ultimate responsibility to ensure that everyone understands the rationale for change, as well as the risks of keeping the status quo”.
There in lies one of the big risks for businesses in the current environment – the status quo.
The CEO and management then need to go a step further to make strategy “a verb” to allow the culture to be agile enough to cope with the constancy of change that is part of the operations of a modern business.
The journey is a continuing one, business and the economy will probably never again move as slowly as they do today. This road map though, will help keep the destination in view.
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