Based on the discussions at the recent Global Peter Drucker Forum, dubbed “the Davos of Management”, one can conclude that: It’s the dawn of a new leadership. A NewLeadership approach is required to transport organizations successfully into the intelligent age – or disappear as darkness disappears with the onset of light.
We conducted a three-year research for our book Radical Business Model Transformation and worked with hundreds of top leaders to distill both the mental model and next-practice capabilities of NewLeadership. We found that top leaders underestimate the gap between the actual and target leadership approach in their organization. Closing this gap will have a double leverage effect.
So, what distinguishes the winners in the intelligent age in terms of (a) the leadership mental model and (b) the leadership next-practices? And how can we close the gap in our organization?
NewLeadership Mental Model:
Integrating Human, Physical, Digital Machine World
Today’s leaders must appropriately balance and integrate three dimensions – the human, the physical and the digital machine world. In this still uncharted terrain for most leaders today, let us do the test and check if our leadership mental model is ready for the new intelligent age.
Automation Age – Integrating Human Labor and Physical Automation
In the industrial automation age, leaders needed to find the right combination between us human beings and the once new physical machines. Historically, wind, water and steam power mechanized production, later electric power enabled mass production, then information technology automated processes. With the establishment of Ford’s “automation department” in 1947, the term and concept became widely used. Automation partly replaced former human work, transformed existing job profiles and created demanding new jobs for better skilled humans. Over many technology waves and standards, the combination of human work and machines led to a substantial increase in economic productivity.
Digital Age – Integrating Physical Assets and Digital Machine Assets
In the ongoing digital age, our task as leaders is to balance and seamlessly integrate the physical and the digital world, at the same time acknowledging that the underlying profit pool is shifting to the digital end of the spectrum. But not everything will be digital – even 3D printing turns digital into physical results. In the Washington Post and Whole Foods, Amazon’s Jeff Bezos acquired two “analogue” firms for a reason – namely to integrate them with his digital empire.
Same with the rising number of digital twins, in which a digital equivalent of a physical asset is built to achieve better management of its lifecycle. The MAPAL Group, a hidden champion in precision tool manufacturing for e.g. robots, has transformed themselves into a data content provider with the digital twin as the heart of its digital strategy. Based on operations data from its installed base worldwide, it can distill out the best-practice parameters for optimal tool usage, like ideal cutting speed, and offer them as digital value-added services on top of the hardware business. The digital winners have understood that today’s leadership playing field is characterized by vastly “phytigal” co-existence.
Intelligent Age – Combining Digital Machine Intelligence and Human Intelligence
The intelligent age – portrayed in “The Age of Intelligent Machines” by Ray Kurzweil way back in 1990 – has now begun to manifest itself in earnest, and digital machines are becoming ever more performant. The greater variety of data sources and exponentially higher levels of computing power, allows for novel use cases at entirely different levels of cost-benefit ratios. At the same time, and there was wide agreement on this at the forum, the human dimension is often undervalued and underused. As leaders, how can we make sure that new technologies – such as AI and blockchain – take over the heavy lifting of boring, routine activities while humans stay in control by using technologies as enabler to focus on higher-value tasks, then leveraging originally human competencies? These include empathy and emotional intelligence, real creativity and effective networking, finally coaching and leadership.
To become great leaders, we must first be able to lead ourselves. This is another, neglected, aspect of management’s human dimension. If leaders can’t change, the organization can’t either. It starts with us. The new wave of growth of our economy and society will be at the intersection of “thinghood” (Heidegger) of physical assets, speed of the digital machine, and emotions and judgement of humans. This leadership triad, which starts and ends with the human, can either drive a virtuous circle of integrated economic as well social value creation or adverse consequences. It is the most critical leadership challenge of our times.
NewLeadership Next-Practice Capabilities:
Entrepreneurial, Digitally-Versed, Transformational and Grounded in Moral Integrity
We started by reflecting on our leadership mental model. Perspective is not about what you look at but about what you see. Remember that the sun never actually sets; it is our mental model that makes it appear to. In the next step, we focus on developing the next-practice capabilities from which NewLeadership draws its legitimacy.
NewLeadership is Entrepreneurial
“We are all born creative. Then why does criticizing, instead of creating, become the default practice in many organizations?” asked the MIT Sloan Management Review recently. Peter Drucker knew that innovation is the specific instrument of the entrepreneur. In this intelligent age, new technologies inherently enable new types of innovation and creativity in a domain, rather than simply enhancing traditional methods. Today, genius stems from a collection of many people with diverse experiences and perspectives, which we like to refer to as crowd and ecosystem and will be the theme of GPDF2019. Today, there is more power outside than inside the organization (In his GDPF post, Nicolas Collin calls this human “multitude”). Thus, NewLeadership is not about the leader, it is about the “ship” with its blurring borders between inside and outside. It is entrepreneurial in the sense that it shapes an organizational context for people co-creating the intelligent future.
NewLeadership is Digitally-Versed
From supporting more than 250 organizations in navigating their digital transformations, I learned one thing. Lack of imagination about digital-machine-enabled cases, such as the possibility to predict wildfires or landslides by training a neuronal network with satellite data, is still the key barrier to business and societal impact. While new “intelligent” examples combine exponential technologies and data sets in novel ways, leaders do not need to be digital natives or technology experts . They do not need an AI, blockchain or even digital strategy, which too often results in inside-out technology push programs. What leaders really need is a corporate or business mission, in which digital technologies have become an integral part of the organization’s value-creation system. If we understand both the horizontal winning patterns – like omnichannel experiences, platforms, ecosystems, digital forward integration (see also the WEF Digital Enterprise project report) – and the art of the possible in terms of intelligent applications, then we are truly equipped to shape the intelligent future.
NewLeadership is Transformational
The term “digitalization” is misleading. It is not an evolution that can be change-managed in a given trajectory. Nor does it happen automatically like the transition from caterpillar to butterfly. It requires active leadership to change gears to the next business and societal curve. A study from SAP’s Center for Digital Leadership of 280 transformation initiatives shows that most initiatives still focus on automation and efficiency gains. An increasing number can be classified as process reimagination. Only a minority of organizations transform the operating model or even drive business model transformation. The upside with such a strategic focus is that leaders can transform an organization holistically, with systematic delta-management and in a coherent way. Instead of transformations for the sake of transformation, every transformation needs to be innovation-led. Stop digitizing the past, innovate for the future!
NewLeadership is grounded in Moral and Ethical Integrity
In the light of the Cambridge Analytica scandal, the New York Times ran a headline: “Don’t Fix Facebook. Replace It!”. We had the Lehman moment; now we have the Facebook moment. In the intelligent age, organizations will win in the long-term when their leadership is based on a moral and ethical foundation – again, something only humans can provide. This requires a realignment of incentives between the supervisory board, investors and the firm’s management and includes the conscious handling of moral dilemmas: Do we support the military use of AI? Should your driverless car value your life over a pedestrian’s? Should your Fitbit activity be used against you in a court case? Initiatives like the Future Life Institute’s Open Letter on the use of AI exemplify this. Dan’l Lewin, the director of the legendary Computer History Museum in Mountain View, describes the new challenge for Silicon Valley as understanding the social and political problems that their business models cause. Eventually, leadership needs to secure an organization’s moral license to operate.
The measure of a good leader is not how many followers you have but how many leaders you create. In this spirit, leadership development cannot be delegated to the HR department but is the essence of leadership. The #NewLeadership movement with its entrepreneurial, digital-machine-versed, transformational leadership, which is grounded in moral-ethical integrity and combines the best of the human, the physical and the machine world, is gaining momentum. Will you join?
About the Author:
Dr. Carsten Linz is leading organizations to transform for the intelligent age. He is Global Head of SAP’s Center for Digital Leadership, author of Radical Business Model Transformation, advisory member of the World Economic Forum’s ‘Digital Enterprise” and ‘Digital Platforms and Ecosystems’ projects and teaches in executive programs at Mannheim Business School, European School of Management & Technology Berlin, University of St. Gallen, and Stanford Graduate School.
This article first appeared in Linkedin Pulse.