34 MIT SLOAN MANAGEMENT REVIEW SPRING 2019 SLOANREVIEW.MIT.EDU

L E A D I N G D I G I T A L C H A N G E : S K I L L B U I L D I N G

How Digital Leadership Is(n’t) Different

Leaders must blend traditional and new skills to effectively guide their organizations into the future. BY GERALD C. KANE, ANH NGUYEN PHILLIPS, JONATHAN COPULSKY, AND GARTH ANDRUS

W hen describing the new digital reality for organizations,

people tend to fall into two camps. Some argue that the

future will be more like the past than not, agreeing with

the sentiment, “Those who cannot remember the past are

condemned to repeat it.”1 Others think the future will be

more novel, believing, “No one can possibly know what is

about to happen: It is happening, each time, for the first

time, for the only time.”2

Either way you look at it, as organizations seek their

footing in a turbulent business environment, they require

strong leaders at the helm. Senior leaders must not only articulate a vision people can rally around but also

create the conditions that enable digital maturity, attracting the best talent and bringing out the best in the

talent they attract. The rapid changes associated with digital disruption can be disorienting, so many of us

assume the leadership handbook must be completely rewritten for the digital age. Is this true? Or are greater

and greater levels of uncertainty causing us to neglect the essentials? Is it possible the leadership challenges

of the digital world are more the same than different but we are overly focused on what’s different because

we are so alarmed by the threats to the status quo?

There is something to be said for both arguments. Over the past five years, in a joint research project with

MIT Sloan Management Review and Deloitte, we have studied how business and leadership are changing as

a result of digital disruption. (See “About the Research,” p. 36.) We have found that while many core leader-

ship skills remain the same, the particular demands of digital disruption call for certain new skills as well.

SPRING 2019 MIT SLOAN MANAGEMENT REVIEW 35PLEASE NOTE THAT GRAY AREAS REFLECT ARTWORK THAT HAS BEEN INTENTIONALLY REMOVED. THE SUBSTANTIVE CONTENT OF THE ARTICLE APPEARS AS ORIGINALLY PUBLISHED.

Here, we will explore which are which and what we

can learn from organizations that are digitally

maturing — that is, those that have been transformed

by digital technologies and capabilities that improve

processes, engage talent across the organization, and

drive new value-generating business models.

What Makes Digital Leadership Different Leaders face new challenges as a result of digital dis-

ruption. The biggest changes respondents cited in

our research are the increased pace of doing busi-

ness, the shift in organizational culture (and the

corresponding tensions between “change makers”

and employees with a traditional mindset), the need

for a flexible and distributed workplace, and greater

expectations of productivity. So it stands to reason

leaders need to adapt or augment some of their core

skills to navigate the digital world. To identify which

capabilities matter most in organizations, we asked

survey respondents, “What is the most important

skill organizational leaders should have to succeed in

a digital workplace?” (See “What’s Distinctive About

Digital Business and Digital Leadership?” p. 37.)

Taken together, the responses paint a compelling

composite picture of what effective leadership looks

like in a digital environment. The following traits

stand out as most critical.

Transformative vision and forward-looking

perspective. Providing vision and direction have

been long-standing essential components of leader-

ship. But in a digital environment, with the emphasis

on future change, they take on new significance.

In our survey, 22% of respondents say the most

THE LEADING QUESTION How can lead- ers seed their organizations with the man- agement talent needed to pull off a digital transformation?

FINDINGS * Leaders can bring in “anchor hires” with deep experience in digital transformation to jump-start the process.

* They can update the executive team’s digi- tal literacy through continuing education sessions and exercises.

* They can clearly articulate strategy to make it easier for emerging leaders to make decisions and then reward those who learn from failure.

36 MIT SLOAN MANAGEMENT REVIEW SPRING 2019 SLOANREVIEW.MIT.EDU

L E A D I N G D I G I T A L C H A N G E : S K I L L B U I L D I N G

important leadership skill to possess in a digital orga-

nization is a transformative vision, which includes

the ability to anticipate markets and trends, make

savvy business decisions, and solve tough problems

in turbulent times. The second most important is

being forward-looking (20%), which includes having

clear vision, sound strategy, and foresight. These skill

sets are closely related. We interpret the latter as

understanding how business trends are evolving be-

cause of technology and the former as being able to

guide the business in response to those trends.

Leaders with a transformative vision are equipped to

provide purpose and direction. How is that even pos-

sible when you’re facing an uncertain future? John

Glaser, senior vice president of population health at

Cerner, a health information technology provider,

had this to say when he described his approach to us:

“Work on things that are likely to be relevant to many

possible futures. Tell me a future in which engaging

patients to manage their own health is a bad idea, be-

cause I don’t see that future at all. So I may not know

how it’s going to play out, but under almost any con-

ceivable circumstance, these things will be relevant.”

Digital literacy. Understanding technology is the

third most important skill. Such a requirement may

seem obvious at a glance, but our survey respondents

define it in a particular way. They put a premium on

previous experience in a technology leadership role

but also say leaders need to have general digital literacy,

as opposed to hard-core technical skills like program-

ming or data science. Digital literacy is critical for two

reasons. First, it supports the first two leadership skills

cited: having transformative vision and being forward-

looking. A leader who is not digitally literate will

struggle to keep abreast of emerging trends and devel-

opments and will fail to grasp how those trends can

bring new value or represent a threat to the organiza-

tion. Second, understanding at a high level how

technology does (and does not) work enables leaders

to make more informed decisions in an uncertain en-

vironment. We observe in our research and consulting

work that it is often much easier and more effective to

help established business leaders become digitally

literate than it is to teach technologists the strategic

knowledge they need to lead effectively.

Adaptability. Tied for the third most important

capability, a leader must also be change-oriented —

that is, open-minded, adaptable, and innovative. Like

digital literacy, this skill supports other traits reported

as valuable. It helps leaders respond to a fluid envi-

ronment and change course if the technology and

market environments evolve in unanticipated ways.

This mindset also enables a digital leader to continu-

ally update his or her knowledge stores to account for

changes in technology and avoid obsolescence.

Leaders can replenish their knowledge stores through

formal continuing education, in-house training,

cross-generational reverse-mentoring programs, or

any of an abundance of online programs.

What Stays the Same Of course, even though some things change with

respect to digital leadership, that doesn’t mean ev-

erything does. Indeed, one of the biggest pitfalls is

to ignore the fundamentals of good leadership in

the face of digital change. We find that leaders often

become so focused on the technological aspects

that they forget why they are engaged in these ef-

forts in the first place: to improve the way their

company does business. So here, we’ll call out a few

core skills that remain essential.

Articulating the value change will bring — and

investing accordingly. Digital transformation is

driven by new technology, but that technology is only

as valuable as the new business strategies and practices

it enables. Before leaping into any new technology,

leaders must be able to clearly articulate why they

need to invest in it. Too few executives display this

kind of discipline in the midst of all the digital noise.

Making matters worse, leaders also tend to expect

projects to go well without giving them proper finan-

cial support and resourcing. But not surprisingly, 75%

of survey respondents who say their company has

made appropriate levels of investment report success-

ful initiatives, while only 34% of those who say their

company does not commit sufficient time, energy,

and resources report successful outcomes.

Owning the transformation. When executives

delegate responsibility for digital business to

the technologists, it is a recipe for near-certain

failure. For example, we’ve seen technologists

flawlessly implement enterprise social media or col-

laboration platforms without conducting any

training or behavioral change initiatives to accom-

pany the launch. The result is often a beautiful

technology platform that employees don’t actually

ABOUT THE RESEARCH Over the past five years, we have surveyed more than 20,000 business executives, managers, and analysts around the world to under- stand the challenges and opportunities associated with digital transformation. Each year, we have received between 3,700 and 4,800 re- sponses, capturing insights from individuals in more than 120 countries and 28 indus- tries, from organizations of various sizes. More than two-thirds of the respon- dents are from outside the U.S. The sample is drawn from a number of sources, including MIT Sloan Manage- ment Review readers, Deloitte Dbriefs webcast subscribers, and other inter- ested parties. We have also interviewed more than 140 business executives from a number of industries, thought leaders, and aca- demics to understand the practical issues facing organizations today. Their in- sights contribute to a richer understanding of the data. A more complete treatment of our research will appear in the forthcoming MIT Press book The Technology Fallacy: How People Are the Real Key to Digital Transfor- mation (April 2019)

SLOANREVIEW.MIT.EDU SPRING 2019 MIT SLOAN MANAGEMENT REVIEW 37

use. As with any change effort, top management in-

volvement and support signal prioritization and can

help align the rest of the organization behind a digital

transformation. It then becomes a cross-enterprise,

cross-functional endeavor, which makes it possible to

move from simply doing or adopting new technolo-

gies to being more digital as an organization. When

we asked respondents which part of the organization

was most likely to lead an organization’s digital initia-

tives, the least digitally mature companies tended to

situate projects in a functional area, such as IT

or marketing. (See “Strategy: Who Leads Digital

Progress?” p. 38.) Digitally maturing companies,

however, were nearly twice as likely to situate digital

efforts in the CEO’s office.3

Equipping employees to succeed. Another

aspect of good leadership that has not changed in-

volves enabling and empowering employees to carry

out new initiatives. A strong mandate from the top

isn’t enough. If you expect employees to engage in

new processes just because your company adopts a

new technology, you’re bound to be disappointed.

In the context of their existing job responsibilities,

employees typically don’t have the time or the know-

how to figure out new ways of working on the fly.

Leaders must set up employees for success. Among

respondents who report their organization provides

them with the resources and opportunities to thrive

in a digital environment, 72% say their digital initia-

tives are successful. However, among respondents

who say their company does not provide such

opportunities and resources, only 24% report suc-

cessful digital initiatives. Digital transformation is

both a top-down and a bottom-up effort.

Leaders can support employees in many ways —

for instance, by providing adequate training,

moving employees within the organization to learn

other ways of doing things from coworkers, and

giving them time and space to adapt so the neces-

sary learning feels doable in the context of their

other job responsibilities.

Developing the Right Muscles, Mindsets, and Mettle In the spirit of leading through others (which is,

after all, what senior executives are meant to do),

it’s critical to seed the organization with the man-

agement talent it needs to pull off and maintain a

transformation — and develop and enable the

right skills at all levels. To those ends, what can you

learn from digitally maturing companies? Here are

some lessons we gleaned from our research.

1 Hire digital leaders to get the ball rolling.

Many organizations have overlooked digital

transformation for so long that they don’t

even know where to begin. But they can make so-

called anchor hires to catalyze the process. These

are outside leaders with deep digital transforma-

tion experience who can provide the needed

expertise and perspective. For example, to begin

driving digital change, John Hancock hired a new

WHAT’S DISTINCTIVE ABOUT DIGITAL BUSINESS AND DIGITAL LEADERSHIP? When 3,300 survey respondents completed open-ended questions about how digital business differs from traditional business and what key skill leaders will need to develop, their responses broke down as follows:

What is the biggest difference between working in a digital environment versus a traditional one?

PACE OF BUSINESS: Speed, rate of change

CULTURE AND MINDSET: Creativity, learning, risk-taking

FLEXIBLE, DISTRIBUTED WORKPLACE: Collaboration, decision-making, transparency

PRODUCTIVITY: Streamlined processes, continuous improvement

IMPROVED ACCESS TO, USE OF TOOLS: Greater data availability, technology performance

CONNECTIVITY: Remote working, always on

OTHER/NO DIFFERENCE

What is the most important skill organizational leaders should have to succeed in a digital workplace? (Only one skill accepted per response.)

TRANSFORMATIVE VISION: Knowledge of market and trends, business acumen, problem solver

FORWARD-LOOKING: Clear vision, sound strategy, foresight

UNDERSTANDS TECHNOLOGY: Prior experience, digital literacy

CHANGE ORIENTED: Open-minded, adaptable, innovative

STRONG LEADERSHIP: Pragmatic, focused, decisive

OTHER: For example, collaborative, team builder

23%

19%

18%

16%

13%

10%

1%

22%

20%

18%

18%

11%

11%

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L E A D I N G D I G I T A L C H A N G E : S K I L L B U I L D I N G

chief marketing officer who brought a small team

of managers that then developed innovative digital

initiatives that were insulated from the bureaucracy

of the rest of the organization. Once the digital

initiatives began to flourish, the team used the suc-

cesses to serve as a proof of concept to begin driving

change across the organization.

So, what skills do you need to look for in anchor

hires? The focus should be on two major areas:

• Having a track record of producing digital prod-

ucts with measurable value.

• Demonstrating the ability to enable and system-

atize into the organization a new way of thinking

and doing.

Bringing these skills in from the outside will

support the organization’s transformation, but it is

also important to sustain what has been built. For

that, you’ll need an entirely different, operational

skill set, which you may well find internally.

2 Regularly refresh your senior team’s digital

literacy. Let’s say your company’s leadership

team graduated from college more than five

years ago (in most organizations, top leaders have been

out of school for much longer than that). The odds are

strong that you need to update their digital literacy if

you haven’t already been taking steps to do so. Data

and analytics, artificial intelligence, blockchain, auton-

omous vehicles, additive manufacturing, virtual and

augmented reality, and other emerging technologies

are poised to radically reshape the business environ-

ment over the next decade. Certainly, most executives

don’t have the time, skill set, or inclination to become

sophisticated data scientists or software developers.

Nevertheless, virtually all executives are capable of

understanding new technologies at a strategic level

so that they can make decisions accordingly.

One solution here is simply to have ongoing con-

tinuing education sessions with your organization’s

leadership. As a part of those sessions, leaders can

engage in what many in Silicon Valley call zoom-in/

zoom-out strategizing, guided by facilitators with

deep digital knowledge. In this process, your execu-

tives forecast what your business or industry will

look like in 10 years as a result of a particular tech-

nology or general digital trends, and then they plot

what moves will be necessary in the next 12 to 18

months for your organization to begin preparing for

that future. While it is unlikely you will accurately

predict the future, this exercise helps you avoid the

all-too-common trap of strategizing about the cur-

rent digital environment instead of the one that will

be here by the time your strategies come to fruition.

3 Create an environment where new leaders

can step up. Digital business moves too

quickly for your managers and employees to

wait for marching orders to deal with every situa-

tion. Leaders need to clearly communicate strategic

objectives so front-line and middle managers can

make sound decisions on the ground and have

enough time and opportunity to experiment with

new ways of leading in a digital environment. One of

the most critical skills everyone needs to develop is

the ability to lead networks of people and teams,

rather than leading via a hierarchy. Traditional

leaders who take a waterfall approach to managing

communications and decisions — that is, those who

favor a linear and sequential approach to organi-

zational leadership — create bottlenecks and choke

points when speed is needed. In contrast, a network

approach facilitates iterative, fast, collaborative con-

versations and decisions by proliferating many small

nodes of communication and decision-making that

extend far beyond organizational lines and boxes. If

decision rights are clear, enabling, and communi-

cated, senior leaders can enhance the quality and

speed of these expanding networks by opening doors,

removing barriers, engaging with teams in collabora-

tive work, helping them become more agile, and

focusing on innovating day-to-day work.

STRATEGY: WHO LEADS DIGITAL PROGRESS? Respondents in digitally maturing companies say their CEO’s office is primarily heading up transformation efforts. In early-stage companies, it’s often IT.

EARLY STAGE DEVELOPING DIGITALLY MATURING

Information technology 23%

CEO’s office 31%

CEO’s office 41%

CEO’s office 22%

Information technology 20%

Information technology 16%

Marketing 10%

Marketing 9%

Marketing 7%

Operations 7%

Operations 7%

Product development 7%

PERCENTAGES REFLECT THOSE RESPONDENTS RANKING THE CHOICE AS NO. 1.

SLOANREVIEW.MIT.EDU SPRING 2019 MIT SLOAN MANAGEMENT REVIEW 39

4 Cultivate a culture of experimentation.

Finally, leaders should think like innovators

and provide the space for employees to try

new things, learn from them, adjust, and scale.

Most organizations pay lip service to the concept of

failing fast but, in fact, send implicit messages that

“failure is not an option.” To avoid conveying mixed

signals, you can actively encourage and reward

learning that comes with less-than-successful

efforts — often called failing forward. As Richard

Gingras, vice president of Google News, told us,

“It’s really not that important if the experiment

succeeds or fails; it’s what they learn from it. Good,

bad, or indifferent, it is intelligence that they can lay

claim to. Maybe it didn’t work out the way we

thought it would, but we learned X, Y, and Z, and

we’re not embarrassed by the fact that our initial

assumptions were wrong. There are no failures. We

tried something, and we learned something.”

SO, WHAT KIND OF leaders do we need for the era

of digital disruption? Commanders who study past

battles with an eye toward gleaning lessons learned,

or intrepid adventurers who believe what is hap-

pening now is nothing like what has ever happened

before? The answer is a healthy blend of both: lead-

ers who have the core skills cultivated from the

insights of the past, but with the agile mindset and

digital savvy to allow them to pivot when necessary.

In short, we need leaders who can “be the change

we seek.”

Gerald C. Kane (@profkane) is a professor of infor- mation systems at Boston College and the faculty director of the Edmund H. Shea Jr. Center for Entre- preneurship. Anh Nguyen Phillips (@anhphillips) is a researcher and author from Deloitte’s Center for Integrated Research, where she leads research on digital transformation. Jonathan Copulsky (@jcopulsky) teaches marketing at Northwestern University and serves as program director for the Kellogg Executive Education Business Marketing course. Garth Andrus (@garth_ot) is a principal and global leader of Digital DNA solutions at Deloitte. They are the authors of the forthcoming MIT Press book The Technology Fallacy: How People Are the Real Key to Digital Transformation (April 2019), from which this article is adapted. Comment on this article at http://sloanreview.mit.edu/x/60309.

ACKNOWLEDGMENT

The authors would like to thank Stacey Philpot of Deloitte Consulting LLP for her contributions to this article.

REFERENCES

1. G. Santayana, The Life of Reason: The Phases of Human Progress, Vol. 1: Reason in Common Sense (New York: C. Scribner’s Sons, 1905), 284.

2. J. Baldwin, “The Devil Finds Work,” sec. 1, The Price of the Ticket (New York: St. Martin’s Press, 1985).

3. G.C. Kane, “Is the Right Group Leading Your Digital Ini- tiatives?” MIT Sloan Management Review, Aug. 3, 2018.

Reprint 60309. Copyright © Massachusetts Institute of Technology, 2019. All rights reserved.

THERE’S NEVER ENOUGH DIGITAL LEADERSHIP Whatever digital leadership consists of, one thing our research clearly shows is that it is very much in demand. When asked whether their organization needs to find new leaders to succeed in the digital age, 68% of respondents agreed that their organization does, indeed, need new leadership to compete. What is more striking is the consistency across digital maturity categories in these responses. As you might expect, 77% of respondents from early-stage companies report needing new leaders, but so do 55% of those from maturing companies.

Respondents who answered “strongly agree” or “agree.”

There just aren’t enough digital leaders who are meeting the challenges most companies face. But here is where digitally maturing companies distinguish themselves from their less mature counterparts: They are doing something to address the problem. When we asked whether organizations are effectively developing the leadership capabilities they need in a digital age, the difference in responses was considerable. While around two-thirds of respondents from maturing companies say that they are doing so, only 33% of developing-stage companies and 13% of early-stage companies say the same.

My organization needs to find new leaders for it to succeed in the digital age.

My organization is effectively developing leaders who have the capabilities necessary to lead the organization in a digital environment.

100%

80

60

40

20

0 1 2 3 4 5 6 7 8 9 10

EARLY DEVELOPING MATURING

Leadership Gap

Reproduced with permission of copyright owner. Further reproduction prohibited without permission.

ICELW Paper—Leadership 5.0: An Agile Mindset for a Digital Future

Leadership 5.0:

An Agile Mindset for a Digital Future

https://doi.org/10.3991/ijac.v13i2.17033

Fernando Salvetti(*), Barbara Bertagni Centro Studi Logos, Turin, Italy – Logosnet, Lugano, Switzerland and Houston, TX, USA

[email protected]

Abstract—This article is about a program aimed at fostering an agile mindset in young corporate leaders (under 40 years old) working in the energy sector, who are expected to be effective leaders in an ever more digitalized world; the program has been co-designed with Eni Corporate University (Milan and Rome, Italy) on behalf of the World Economic Forum (Davos and Geneva, Switzerland). Digital transformation is not only about technology. It is also mainly enabled by leadership that is grounded in 3 pillars: teamwork, start-up culture, and matrix management. Hot topics and key activities include: a business game for launching a new cryptocurrency; scenario analysis and immersive simulation within a mixed reality environment (e-REAL); online keynotes by seasoned faculty from Harvard, MIT and Stanford with moderated Q&A sessions to facilitate an interactive dialogue; a collaborative platform to enhance online learning and bridge between modules.

Keywords—Leadership Development, Agile Mindset, Digital Revolution

1 The Vision Behind the Program, Its Architecture and Main Pillars

“Leadership 5.0: An Agile Mindset for a Digital Future” is a program co-designed with the corporate university of Eni (Milan and Rome, Italy) on behalf of the World Economic Forum (Davos and Geneva, Switzerland) and in collaboration with select corporations in the energy sector. The kick-off is imminent.

Leadership 5.0 is intended