27 Nov 2018
Getting the C-suite across the digital divide
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Are you cultivating a digitally relevant leadership model? If not, writes Natasha D’Souza, the result could be catastrophic.
Digital transformation remains an unstoppable evolutionary force in business. The key to successfully navigating these choppy seas is to upgrade the digital expertise of a company’s leadership.
“In the next five years, we will experience just as much change as we’ve seen in the last three decades, thanks to a growing confluence of emerging and next-generation technologies.”
Shivvy Jervis, a tech futurist and innovation expert, is talking about deep learning, immersive reality, second-generation biometrics security, and advanced data science. The digital economy is growing at twice the rate of the wider GDP. Business leaders must recognize and respond without delay.
The digital divide
Digitally-aware corporate leaders must cultivate a digitally-relevant leadership model. If they don’t, the digital divide will continue to widen. Companies run the risk of fading into oblivion. Remember Kodak and its underestimation of the smartphone revolution?
A 2015 McKinsey study revealed that most companies have yet to realize the full value of digital, primarily because of deficits in leadership and talent. To close the gap, simply adding more digital roles, infusing existing roles with a digital orientation, launching function-specific digital initiatives and up-skilling existing senior leadership is not enough.
A new era in C-suite leadership
Karen Greenbaum, President, and CEO of the Association of Executive Search and Leadership Consultants (AESC), says the mandate for digital transformation no longer rests solely with a Chief Digital Officer or Chief Innovation Officer.
“Digital transformation can no longer be a siloed activity in the C-suite. It requires a collaborative, intersectional approach that cuts across the enterprise and it doesn’t need a technologist leading the charge.”
Digital leadership by the CEO is key. In fact, extensive management research emphasizes that setting the tone for digital transformation must be a top-down exercise.
“Most organizations recognize that change is imminent and that the strength of the enterprise depends on senior leaders being agile. Not just managing digital change, but learning to drive it as well,” adds Paul Vella, Partner and Head of the Leadership Practice at Odgers Berndtson in the Middle East.
As companies attempt to rapidly digitize and adapt to competitive pressures, some are bringing in CEOs from different industries, with fresh thinking. Top CEOs at digitally-advanced enterprises are also getting younger, especially in growth markets such as India and China.
“Asian companies are fundamentally more agile in the way they operate, in large part because their founders run them very entrepreneurially,” says Mark Braithwaite, Managing Director for Asia-Pacific at Odgers Berndtson. The average Asia-Pacific CEO is around 15 years younger than the average CEO in the US.
Digital deficit in the boardroom
Even with a digitally-savvy CEO, a ‘digital deficit’ in the boardroom can be a major roadblock to digitization. The board – not just the CEO – must guide an organization through its digital transformation.
The challenge at the board level is often generational. The average age of independent directors in S&P 500 companies in 2017 was 62.4 years. Unsurprisingly, information technology firms boast the most age-diverse boards, with a spread of eight years.
A common ‘quick fix’ is to bring in a director with deep digital expertise. For example, Facebook’s COO, Sheryl Sandberg, was appointed to The Walt Disney Company’s board in 2010.
Board members must constantly ramp up their knowledge about digitization and new business realities. High-performing boards must ensure that their composition evolves to serve new strategic imperatives.
To that end, boards need to expand their view of the ideal directorial candidate, particularly when it comes to credentials and age. Consider this: boards of US public companies expect members to have corporate C-suite experience. However, this criterion excludes many start-up veterans with a wealth of experience in an environment that demands agility, risk-taking, and collaboration.
“It’s time for younger individuals to have a seat on the board, particularly when they bring with them visionary thinking and proven deep expertise in value creation,” suggests Shivvy Jervis.
In this, Asian companies seem ahead of the game. “In APAC, most C-suites have someone in their late 30s or early 40s. On boards, we have yet to see this change, but this will surely follow,” says Odgers Berndtson’s Mark Braithwaite.
The talent question
“The quest for talent proves even more competitive as companies seek to rapidly identify and secure a competitive advantage,” adds AESC’s Karen Greenbaum.
“The most intrepid performers are courted by some of the world’s most formidable companies. The presence of a well-enmeshed digital culture is one of the first things they look for.”
An MIT Sloan study found that, among digitally maturing companies, 71% of respondents believe their company is significantly better able to attract new talent based on its digital advancement. Only 10% of those from early-stage organizations, which tend to rely on short-term digital consultants weren’t that confident. In fact, an extended reliance on external short-term digital experts can impede a country’s long-term talent and culture development.
Greenbaum notes that roles that evolved within the start-up world are now percolating into traditional enterprises. So where will digitally ambitious organizations unearth the talent they need to take them forward?
“In Silicon Valley or [another] constantly innovating environment,” says Greenbaum, adding: “Former start-up and tech executives possess a coveted blend of agility, inventiveness, curiosity, and fearlessness which makes them a very desirable hire.”
For this kind of hire to succeed at a legacy corporate, there is one important condition: “Entrepreneurial talent recognizes that failure is inevitable. They seek an environment that accepts failure as part of the innovation process.”
Creating a digital culture
An enterprise that continuously evolves in the digital landscape depends on an entrepreneurial and innovation-driven culture set by the CEO.
Greenbaum explains, “A culture of continuous learning and embracing failure is important. Employees should feel empowered to ask questions and encouraged to try, even if they fail. Diversity and inclusion are also vital as multiple perspectives ensure a better final product.”
As this internal culture develops and matures, it acts as a magnet for fresh digital talent. Integrative, intersectional and collaborative teamwork is also crucial.
The next level
When it comes to enterprise leadership in the digital era, we’re at the tipping point with exponential gains to be achieved from digitizing.
McKinsey’s report concludes that, within three to five years, digitization within complex enterprises will focus on “creating knowledge-sharing and collaboration cloud platforms at the level of strategy.” These platforms will offer predictive insights on technology, new tools for the C-suite to use to remedy gaps, address crises and create effective change.
And isn’t that what every organization wants?
This article is from the latest ‘Talent and Potential’ edition of the Odgers Berndtson magazine, OBSERVE.