Knowledge Center: Publication
The Transformation Mandate
Leading transformation: Five imperatives for CEOs1/26/2016 Tracy R. Wolstencroft
As we enter the Fourth Industrial Revolution, hyperconnectivity is emerging as the defining characteristic of the era — with profound implications for CEOs, senior leadership teams, and entire organizations. In a hyperconnected world, incremental improvement is not enough to stay ahead of disruptive competitors. Winning requires continual transformation.
Technology that has enabled the always-connected consumer is generating massive economic opportunity for nimble, asset-light organizations. Uber, Alibaba, and Airbnb now have a combined implied valuation exceeding $300 billion. Each of these innovators has been able to quickly achieve scale with platform business models that efficiently match supply and demand to create value for all parties. The result has been major disruption to established brands in formerly capital-intensive industries that seemed impervious to rapid change because of high barriers to entry. CEOs around the world are now asking, “Can that happen in our industry?” or, more pointedly, “How can we disrupt our own industry or create a new one?”
The technological catalysts for transformation in the Fourth Industrial Revolution are already emerging. “Pervasive computing” exists in a world where the cloud, sensors, and mobile devices all intersect, enabling an Internet of Everything that makes machines smarter and people more capable. Driverless cars, 3-D printing, smart homes, smart factories, and smart cities demonstrate the range of possibilities ahead. Clearly, the hyperconnected world is ripe with opportunity. It is also fraught with risk. Competitive risks associated with disruption can quickly leave a market leader irrelevant. Risks of a malevolent nature, such as identity theft on a massive scale, cyber-piracy, and cyber-terrorism, can cripple an organization and threaten stakeholder trust.
Five imperatives for CEOs driving transformation
Make no mistake: transformation can be more difficult than disruption. Disrupters are often entrepreneurial upstarts, playing offense all the time. By contrast, transformation of an established enterprise with a substantial asset base and ongoing capital requirements calls for a strong defense as well as an aggressive offense.
From our work as a trusted talent and leadership advisor to CEOs and boards at many of the world’s most successful and influential organizations, we offer the following five imperatives for transformative CEOs today. The first three specifically address our hyperconnected world; the final two have stood the test of time but have additional urgency in an era of constant change.
1. Strengthen the core and embrace disruptive change. The transformative CEO in a hyperconnected world defends the core market and plays offense as a disruptor. The CEO must work diligently to continuously improve the competitiveness of the core business beyond incremental improvements to quality and cost, while simultaneously pursuing a strategy to reinvent the business. A healthy and growing core operation provides a stable platform (and necessary cash flow) to launch disruptive ventures with value-creating potential.
2. Invest with courage in both the short and long term. Winning CEOs move fast to act decisively on pressing priorities while maintaining progress on longer-term initiatives vital to sustainable success. Long-term investments can put pressure on current margins. Activist shareholders ratchet up the pressure for immediate returns on their investment. The forward-looking CEO thinks like an activist investor without being prompted, demonstrating a compelling case to clients, investors, and other stakeholders on the promise of value to be realized down the road.
3. Accept that the life cycle of a winning strategy is shrinking. Gone are the days of strategies defined in years. In today’s economy, it is no longer solely what one knows but what one is prepared to learn. Agility is now as important as strategy because the playing field is continually shifting. Strategic plans must be adapted to seize opportunities when fresh information points to emerging trends — as well as to defend against heightened risks. Winning CEOs embed a culture of innovation and a low resistance to change into the organization.
4. Define an enduring purpose as your compass. We all want to be connected to something meaningful. A well-articulated purpose serves not as strategy but provides a sense of “true north,” guiding the CEO — and the entire organization — through ambiguity and rapid change. Constancy of purpose provides a bedrock for the organization that would otherwise be unsettled by the constant change inherent in transformation.
5. Attract outstanding talent. The difference between good and great talent is orders of magnitude. The winning CEO’s passion, energy, drive, and vision serve as a talent magnet, attracting top talent from various backgrounds and geographies. Humbled by the scale and scope of hidden opportunities and unseen risks, the winning CEO draws strength from a truly diverse senior team, comprised of talented individuals who each bring a unique line of sight to the challenges ahead.
The successful CEO in a hyperconnected world will demonstrate, model, and cultivate each of these imperatives across three dimensions: the leader personally, the senior leadership team, and the entire organization.
These three dimensions — the individual leader, team, and organization — form the structure for the insights we offer in our compilation, The Transformation Mandate: Leadership imperatives for a hyperconnected world. We hope that our perspective informs and inspires your own thinking, sparks candid and productive conversations among your teams, and encourages your organization to both embrace and fulfill its purpose, bringing positive change to the world. Download the full report.