Executive Summary/Management Implications
The “Great Transformation” is the current and on-going global economic transition from the “Industrial Age” (premised on physical production) to a “Knowledge/Creative/Human Economy” driven principally by globalization and technology (information/automation and the Internet). This great change is stressing an old industrial era top down/command-control leadership model with a new and emerging approach that more effectively addresses a complex and dynamic economic environment (“complexity leadership theory”) with a focus on learning, innovation and adaptability.
Companies who have responded to this economic transformation have shifted their leadership style have also recognized that it is the people who bring to work the essential traits that cannot be programmed or delivered by technology: creativity, passion, character and collaborative spirit.
These same organizations are also challenged by the fact that globally only 13% of employees are truly engaged in their business which presents a new challenge in how to dramatically improve the employee engagement function and to leverage as a force/effectiveness/competitive multiplier.
Many organizations are hiring great people and are turning them into average performers and doing so very, very fast. They are struggling to free up the potential in their people. Organizations are also giving up control to more fully leverage human talent and in doing so believe that they are gaining ability to be faster, closer to the customer, and more entrepreneurial (agile).
Three main aspects of The Knowledge Economy:
- Goal — shift from maximizing shareholder value to continuously adding value to customers
- Practices: collaboration — transition from hierarchical bureaucracy to leadership and management practices that are collaborative and which draw out the talents and capacities of the people doing the work
- Metrics: appropriate metrics — focused on solutions for human prosperity rather than narrow financial goals
Innovation
How is the organization building an innovation advantage? Many new companies have an opportunity to create their own innovation culture and climate from day one, and this can also be done with brown field organizations: (1) retrofit the old management model, (2) open up a company wide conversation, (3) ask where is there evidence of bureaucratic drag and how much is this costing us, (4) what are the new principles that will help us build the new organization around, (5) if we were serious about openness what would change, and (6) what would we change in the way we create strategy? According to the CEO of Whirlpool, “…I want innovation from anyone and everyone.”
Companies typically spend only 5% of attention and resources on exploring (innovating) — companies have to change that tooling and make innovation natural and habitual versus unnatural and reactive. To build innovation proficiency there is a need for appropriate governance and funding, and a culture of intelligent failures — “how to learn.”
Key to innovation is making it intrinsic and instinctive in your organization (less than 1% of organizations do this) and then enable the organization to change as fast as markets — making them adaptable at their core.
Technology
Digital technology: (1) systematically and substantially reducing the barriers to entry and barriers to movement on a global scale — intensifying competition, (2) accelerating pace of change, (3) connectivity — tiny events cascade into extreme events and disrupt our big plans — creates mounting performance pressure.
From 1965 to today the ROA for public companies has declined 75% — that is an indicator of mounting performance pressure. There is an increasing disconnect between the world being shaped by digital technology and the mindsets, practices and institutions that we operate. And in closing the gap we may need to ask how we re-purpose our institutions — a fundamental shift that may have to happen and move from rationale, scalable efficiency to scalable learning.
Next Steps
For some organizations, orchestrating wholesale changes to effectively “transform” leadership style, employee engagement, innovation and technology can and may find the process to be daunting, but quite doable. Consider chunking and starting with just a single area of focus, achieving some traction and then expand — it will likely take on its own life and pace. Possibly there is a way to introduce the broader concepts and then allow some enterprising group business leader to run with it, and then drive through the organization. The key is first recognizing the need, benefits and value to these changes and allowing the management teams to determine the best courses of action.
These transformative and strategically significant focus areas can, of course, be evolutionary or revolutionary. The worst choice would be doing nothing (watching and seeing as the market passes by) likely resulting in business decline and stagnation. I believe that those early adopters will clearly experience competitive and sustainable advantage and will achieve an enterprise culture and climate of meaningful engagement, purpose, performance.
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A blog following the Global Peter Drucker Forum 2014. An opportunity to share experiences and learn from one another in the context of The Great Transformation.