I read Tom Peters' classic, "In Search of Excellence," many years ago while in grad school. In many respects the forthcoming book, "Beyond Digital: How Great Leaders Transform Their Organizations and Shape the Future," by Paul Leinwand and Mahadeva Matt Mani is a successor to that book, but for the digital age. While "Beyond Digital" is a great read for CIOs who are on the front lines of digital transformation, it's an even better choice for CIOs to buy for their CEOs. "Beyond Digital" will provide CEOs with the knowledge and — hopefully — the fortitude to help CIOs drive the transformation needed to grow a business's longevity.
Shedding Old Beliefs to Shape a More Resilient Future
Leinwand and Mani start by taking stock of how the nature of business has changed. Without a doubt, the basis of competitive advantage has shifted. No longer can businesses sustain their advantage by narrowly focusing on products or services. Yet creating competitive advantage requires more than the digitization of existing business capabilities.
The authors assert digital today isn't simply digitizing analog processes. Instead, businesses with a continuing 'right to win' use it to generate whole new business models. Digital allows firms to reimagine their corporate future. Similarly, Karim Lakhani and Marco Iansiti asserted in their book, "Competing in the Age of AI" that "digital allows firms to recast business models and operating models. This includes a firm’s value proposition."
Smart companies focus their attention on building differentiation in what they do and how they operate.
According to Leinwand and Mani, the future belongs to organizations willing to shed past belief systems and define new and bolder value propositions. Leaders need to challenge every dimension of their company including its purpose, its business model, its operating model and its people. Part of this process is asking what capabilities will allow them to create better value than anyone else. A good place to start is realizing, if done right, you can build on digital connections with customers and create relationships so close that you anticipate their needs and desires in real time and in a very granular way. Leinwand and Mani are clear that the path forward isn't easy, but achieving it will create business capabilities competitors will find hard to replicate.
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What's Changed for Businesses?
Multiple forces have brought about this moment in time. Smartphones and the web have given customers visibility into a much wider range of choice, increasing every company's list of competitors tenfold in the process. At the same time, customer loyalty and retention have declined. Customers now buy from vendors with the best value propositions.
Leinwand and Mani note customers are increasingly demanding experiences come with products and services. The notion of scale and experience have diminished in importance in the process. According to the authors, industries have become much less capital-intensive and scale has lost its importance. At the same time, the barriers to cooperation have lessened. This creates an opportunity to gain broader market position through partnership with other organizations.
Companies operate in a context of growing complexity. As many organizations discovered during COVID-19, operating based on profitability alone no longer works, which relegates to old playbooks to the dustbin. To win, businesses need a mutually reinforcing capabilities system. It is unwise to just digitize what you are currently doing or increment the future. Cynthia Beath, Jeanne Ross and Martin Mocker describe the nature of this change in their book, "Designed for Digital" in this way: “Digital technologies are game changing because they deliver three capabilities: ubiquitous data, unlimited connectivity and massive processing power.” (Designed for Digital, MIT Press, page 1).
Leinwand and Mani identify seven imperatives of success going forward.
1. Reimagine Your Company's Place in the World
With this step, the leadership team takes a stand on the position their company will occupy. The job of a leader today is not to maintain the status quo or even to protect current profitability. Instead, it is to develop a point of view about the changing definition of value and to then create an organization that can succeed for decades.
Leinwand and Mani stress the focus here is about aligning the company, not necessarily about writing a detailed strategy. With their clear vision of the unique value the company brings, leaders need to define a system of distinct business capabilities that allow the organization to deliver on this value and identify any new or additional capabilities they'll need.
Focus your energy on how digital can help you improve the value you bring to customers. Value is created when businesses answer customer needs and wants. Ask customers about their unsolved problems. Determine how your industry will evolve. Look for analogs in other companies and industries. In the process, make bold choices and play to your strengths.
2. Embrace and Create Value via Ecosystems
Leinwand and Mani suggest that developing an ecosystem will widen a company’s aperture, including providing greater insights into customer problems. Partnership allows organizations to be more strategic and relevant to customers. At this point, many customer problems are larger than a single company can solve.
With an ecosystem, businesses can quickly scale up the required critical capabilities. No one company can provide an end-to-end solution. The book provides some amazing examples of ecosystems in action. One example is from Komatsu and its Landlog platform, which customers use to create smart construction processes. The platform uses APIs to help customers extend beyond just Komatsu data.
3. Building a System of Privileged Insights With Customers
The authors define the concept of "privileged insights" as achieving unique and relevant insights about customers. When done correctly, the knowledge these provide will be unique to your organization.
A key part of this requires leaders to look at the entire experience of their customers. And this kind of insight is built on data. Leinwand and Mani share the example of what Cynthia Stoddard did at Adobe to eliminate data silos and build a better understanding of customer’s journeys with Adobe’s products. A key element is creating a common language around data. Achieving this requires leaders to:
- Establish a data foundation of purpose and trust.
- Lay out a purposeful customer insights approach and roadmap.
- Build and enhance the mechanism for gaining customer insights.
- Wire your insights to how you work.
4. Make an Outcome-Oriented Organization
Successful transformation requires expertise, knowledge, technology, data, processes and behaviors. Leaders need to need to make measurement part of their organization's DNA and create organizations that transcend the traditional functional model of an enterprise. This is built upon what Stanley McChrystal labeled a "team of teams."
In designing teams, leaders should consciously break down silos. As an organization transforms, it is critical it creates outcome-oriented teams, teams whose members are dedicated to building and scaling differentiating capabilities. As importantly, leaders provide these teams with the resources and the executive sponsorship to deliver.
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A final element is ensuring these team members stay relevant. To do this, organizations need to untrain or retrain people to meet organizational needs. Success metrics should focus on the outcomes the business wants to achieve.
5. Invert the Focus of the Leadership Team
Change may reach the leadership teams too. Does leadership also have the right skills mix? Leaders must shift their focus toward driving transformation, not just responding to today’s demands. For Leinwand and Mani, this means that leaders need to take ownership for how their team collaborates and behaves.
CEOs need to take a hard look at if they have the right team for the future. As part of this, leaders should make sure not to be outsourcing the company’s digital challenges and opportunities. Outsourcing is never a sustainable model. A clear understanding of how technology is changing the world around them and how to use technology to improve customer interactions is also required. Leinwand and Mani write, “We argue that if they don’t recognize the need to become digitally savvy and show no interest in developing that skill set, then they may not be the leaders who will lead your company to a successful future.”
6. Reinvent the Social Contract
COVID-19 has pushed the social contract with a company’s workers to the forefront of the agenda according to Leinwand and Mani. As others have suggested, they believe this contract can no longer be based on salary or work location alone. Leaders need to reassure employees of their importance and allow them to help shape the company's future.
Leinwand and Mani stress that delivering future business capabilities is built on people, a lesson too many companies still haven't recognized. With a social contract that creates a fundamentally more engaged and committed team, it will help shape and secure the organization's place in the world. The book shares a study from Strategy& that found only 28% of employees across industries feel fully connected to the company’s purpose.
Organizations that want to transform need to connect people directly with their company’s purpose and value creation system.
7. Disrupt Your Leadership Approach
The final imperative is for business leaders to transform themselves. Multiple successful leaders told Leinwand and Mani that without taking this step, they would not have been able to reimagine how their company creates value.
These leaders stress that success occurs through people and influencing their beliefs and behaviors. Things that matter include:
- Being a strategist and executor. “They need to have their heads in the sky and their feet in the mud.”
- Being a tech savvy humanist. Understand how to use technology to drive success, but also understand and care about people's wants and needs.
- Having high integrity. Be authentic, but know how to compromise and to be flexible. Like CIO Paige Francis who says, “You have to learn how to get buy-in across wildly different populations. Without humility, authenticity and vision, short wins will quickly become one-hit-wonders.”
- Being a humble hero. Have courage, decisiveness, stamina and the humility to know what they don’t know.
- Acting as a transitional innovator. Don’t just look at the past. Have the courage to fail and allow others to fail.
- Being a globally minded localist.
- Reinvent yourself and the next generation of leaders.
Leinwand and Mani stress that personal transformation is every bit as exciting and arduous as organizational transformation. Organizations today need strategists and executors. They need tech savvy and deeply human executives. And they need people who create coalitions and make compromises while being guided by integrity, humility and knowledge of personal limitations.
The Path Forward
Digital transformation is never easy. Leaders must see opportunities before the rest of their industry and determine the gaps to success. Leinwand and Mani stress this is a multi-year journey which starts when leaders articulate the future and what it demands. As a part of this, leaders need to give themselves amnesty from past decisions. GE is a good example here: former CEO Jack Welch made its name in plastics, but jettisoned the business entirely a few years ago and recently announced the company will divide into three distinct companies.
Transformational leaders can’t do transformation alone. It requires partnership with a broad stakeholder group. "Beyond Digital" can also be a partner for those on a transformation journey, offering clear examples, well-argued requirements and next steps for business leaders to reference.
Harvard Business Review Press will publish "Beyond Digital: How Great Leaders Transform Their Organizations and Shape the Future" on Dec. 7.
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