We Need Better Managers, Not More Technocrats
Digital technology is the biggest agitator of the business world today. Mobile technology, social media, cloud computing, embedded devices, big data, and analytics have radically changed the nature of work and competition. And digital innovations will continue to do so for the foreseeable future. Technology has tremendous potential to be the engine of increasing human, organizational, and economic prosperity.
However, digital technology is not the true story. Digital transformation is. Fulfilling technology's potential will require leaders to recreate the way their institutions operate in a world of digital ubiquity. Leaders need to engage their people in a process of redefining how they work and what their companies do. Digital transformation is therefore the key managerial imperative for today's business leaders.
So, are large corporations – or, more specifically, the leaders of those firms – ready to face the challenge? Or as Richard Straub of the Peter Drucker Society of Europe puts the question, "are managers equipped – in terms of skills, competencies and courage – to lead us toward the Great Transformation?"
Our research shows that some companies are ready, but they are in the minority. Over the past four years we have studied more than 400 large global firms around the world. We've talked with their executives and examined their performance. We've worked to understand how they approach all things digital, and what they have achieved. Our overarching conclusion is that, while many companies undertake digital initiatives, most do not manage to bring about transformative change.
There are, however, some inspiring exceptions. The companies we call "Digital Masters" are different. They use digital technology to drive significantly higher profit, productivity, and customer benefits. They take advantage of the transformative potential of digital technology to radically redesign how their organizations operate and compete.
Digital Masters achieve so much more because they maintain a dual perspective on the transformation they must bring about. The first one is the most straightforward: they make smart investments in digital technology to innovate their customer engagements, and the business processes and business models that support them. The second is too often forgotten. Digital Masters build strong leadership capabilities to envision and drive transformation within their companies and their cultures. They innovate the practice of management for a digital world. Along both lines, leadership capabilities are required to turn digital investment into the digital advantage that can lead us to greater human, organizational, and economic prosperity.
So, in a time of brilliant technological advances, the decisive and scarce source of advantage is actually leadership capability. What does this entail? Four key elements stand out in the Digital Masters we studied : their visions, their engagement of employees, the governance systems they establish, and the IT/business synergies they seek.
Digital transformation starts when you create a transformative vision of how your firm will be different in the digital world. Codelco, a Chilean mining company, started its digital transformation by picturing how it could improve its operations with real-time awareness and then automation, including driverless trucks. Its leaders are now envisioning ways to substitute machines for humans in the most dangerous underground environments – changing the economics of the whole company in the process. Codelco's leaders were not handed a blueprint for the digital future of the mining industry. They drew it. By pursuing their vision they are profoundly enhancing safety and quality as well as productivity.
But vision is not enough. You need to engage employees in making the vision a reality. Peter Drucker was on to this truth many years ago, writing that "your first and foremost job as a leader is to take charge of your own energy and then help to orchestrate the energy of those around you." Digital technology brings the possibility of real-time employee engagement on a global scale. When used well, new tools can give a voice to your employees, encourage collaboration across organizational boundaries, and foster new ways of working. This is where managerial innovation happens. Pernod Ricard CEO Pierre Pringuet puts it this way: "We needed to create new interactions where they did not previously exist. This networking of collective intelligence has been instrumental to speed up the group's digital transformation at every level of our organization."
But, as Drucker also said, "unless commitment is made, there are only promises and hopes, but no plans." Even with vision and engagement, it is difficult to channel an organization's energies. That's where digital governance comes in. In many companies, coordination, and sharing tend to be unnatural acts. Yet, the biggest benefits of digital transformation come exactly from engaging in these acts of cross-silo coordination and sharing. A senior executive in an international banking group highlighted: "Digital impacts firms globally, across traditional silos. It requires more coordination when we are making decisions and conducting actions, compared to the way we do business usually."
Finally, digital transformation requires executives to break down silos at the leadership level. In the ranks of Digital Masters, business and IT leaders fuse their skills and perspectives so that they drive digital transformation together. Zak Mian, a senior IT executive at Lloyds Banking Group, explains: "What gives me confidence is that although we know we need to continue to adapt and learn, the shared agenda and integration of business and IT teams is now in our DNA."
Driving digital transformation is not an impossible task or arcane art. It doesn't require that you hire away Google's top talent or spend 20% of revenue on technology every year. It does require some level of human capital and investment, of course, but the main requirements are time, tenacity, and leadership. With these, knowledgeable companies can assemble the elements of technological progress into a mosaic not just once, but continuously over time. Digital Masters, in short, keep making digital technologies work for them even though the technologies themselves keep changing.
Regardless of industry or geography, businesses will become much more digitized in the years to come. It's inevitable. But we do not subscribe to the view that technocrats will therefore become the new managerial masters. Quite the contrary, leadership and human-centric organizations will remain the path to innovation, fulfilling work, and value creation.
So let's end with another line from Peter Drucker: "What you have to do and the way you have to do it is incredibly simple. Whether you are willing to do it, that's another matter." If managers want digital innovation to yield greater prosperity, at the level of their firm or at the level of our economy, the time to start leading digital transformation is now.
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