By way of structure for our diagnosis, we take the five key dimensions that determine the success or failure of any transformation and examine them. As the transformation affects the entire system, the diagnosis invariably looks at three levels from the same perspective: the CEO, the management team and the organization as a whole.
1. Generating Strategic Intent
Arriving at a shared picture of what transformation is going to mean for the company is a first step. This will often produce a list a challenges, driven by unpredictable changes in the external environment; changes that defy conventional strategic planning. But if a shared goal can no longer be described in terms of predictable tasks spread over the next five years, how to get a handle on it? How can the unifying force of “We all know where we’re heading” take effect if, in actual fact, we don’t know? This demands a new set of skills from corporate leaders. If the goal can no longer be determined at the level of “What are we going to do?” then management must proactively shift to the next level and locate the unifying force at the level of institutional capabilities, i.e. by asking “How are we going to square up to the future?” If the uncertainties are so great that this question too cannot be answered, all that remains is the ultimate level of commonality, captured in the question “Why do we exist as a company? What would the world lack if we didn’t exist?” Deciding which of these questions will point the way forward is one of the key tasks of leadership. Not for nothing do so many players in the new economy spend so much time considering their own raison d’être, their purpose. But this kind of unifying goal can only take full effect if it is defined in the course of a shared process and then, in a cascade of self-appropriation, taken on board by the entire company. Our diagnosis will reveal not only the repertoire of skills applied here by leadership but also the extent to which the process succeeds.
2. Orchestrating Creativity
Leaders must task themselves with turning the entire company into a sounding board for the dynamics of innovation. How close does the company get to this aspiration? What leadership skills can be drawn upon to propagate behaviors that are not prescribed top-down? (Because curiosity, courage, unconventionality and perseverance cannot be turned up to full volume by applying KPIs.) What needs to happen for all levels of the company to see themselves as part of an ecosystem of ideas that must be fostered and implemented? Together with our clients we strive to make best use of those projects that could enable the whole company to navigate this sea change successfully. Today these will often be themed around digitalization, such as ensuring a company-wide focus on the customer experience and customer journey. Whether or not they will have the power to drive holistic transformation also Leaders must task themselves with turning the entire company into a sounding board for the dynamics of innovation. How close does the company get to this aspiration? What leadership skills can be drawn upon to propagate behaviors that are not prescribed top-down? (Because curiosity, courage, unconventionality and perseverance cannot be turned up to full volume by applying KPIs.) What needs to happen for all levels of the company to see themselves as part of an ecosystem of ideas that must be fostered and implemented? Together with our clients we strive to make best use of those projects that could enable the whole company to navigate this sea change successfully. Today these will often be themed around digitalization, such as ensuring a company-wide focus on the customer experience and customer journey. Whether or not they will have the power to drive holistic transformation also is revealed by our shared diagnosis of the organization, its management team and the CEO.
3. Growing Emotional Commitment
Emotion is the flywheel of change. It generates the momentum that leads more and more employees to take the initiative, providing the catalyst for a movement that sweeps across the entire organization. So we help leaders to become aware, initially at a personal level, of what it is that makes the company an inspiring and meaningful environment for them. Which parts of the corporate culture and the shared goals for the future do they find energizing? What sets the company apart and will continue to do so in the future? Which parts of the shared identity need reshaping and which should and indeed must be abandoned? It is only by cross-linking the desired transformation with the meaningful elements at the personal, emotional level that each individual finds their answer to: “Why do I get out of bed in the morning for this?” In this context, authenticity in dealing with the positive and negative consequences of change is absolutely crucial, while false enthusiasm or cynicism represent the greatest danger owing to the widening gap between aspiration and reality. This dimension too calls for a set of leadership skills that can be defined through diagnosis and, if necessary, acquired.
4. Anchoring in Society
As many examples have recently shown, a company is not a universe in its own right that can create its own reality regardless of the approval or disapproval of society at large. Quite the opposite, in fact: It is only with the positive legitimation of society that value can be sustainably created – and investors kept happy. The ability of the CEO, the management team and the organization as a whole to give due consideration to the societal impacts of all their decisions and actions is crucial to their capacity for transformation. Only those who, in a process of active dialogue, regularly rehearse the difficult business of weighing up the different interests against one another and communicating their decisions in a credible manner will be able to rely on the organization responding correctly in the event of a crisis. And those who succeed in anchoring their social responsibility so firmly in their corporate goals that a positive drive for change ensues, which in turn unleashes creativity, are well on the way to successful transformation.
5. Developing Leadership and Accountability
The dimensions of transformation described above impose huge demands in terms of the kind of leadership required. Clearly, these demands will not be met with either the structures or the mindset of the prevalent functional and fragmented distribution of responsibility. In this respect, our diagnosis rapidly reveals whether or not a rethink is in progress. Which groups of managers can be jointly entrusted with tasks that they can only master through collaboration? What is the nature of the dialogues that take place, and do they lead to new solutions? Which behaviors are lived out in credible fashion? And how is all of this channeled into the structure of the organization and its core processes? Here our shared and structured diagnosis enables the distance between point of departure and goal to be determined.
Together with our clients we consider each dimension and determine the scale of change that is necessary in order to master the challenges: Where it is sufficient to reinforce existing skills or enhance specific fields in a targeted way, we speak of continuous improvement. The aim here is to help the company reach a state in which it can readily keep pace with the market. If, however, new competencies must be acquired to master the challenges of the future, we talk about renewal. In this case the company aspires to have old and new co-existing side by side and in this way to proactively help shape the market. At the third level of transformation the external dynamics call for the genuine reinvention of the business model. In this case new patterns of collective behavior need to crystallize that put the company in a position to take a leading role on the road to a radically revised market reality, or even recreate the market and divide it up.
What is vital here is to arrive at the correct assessment of the requirements. Overestimating them, and triggering reinvention in response to what was a moderate need for change, is just as fatal as failing to realize the need for reinvention when it is actually called for. And in the everyday working life of a CEO, all three levels will be encountered simultaneously, albeit in relation to different business fields and functions. At this point it is important to be precise and arrive at a shared understanding of exactly where which form of leadership will lead to a successful outcome. Our analytical toolbox enables us to counter the call for sweeping (digital) transformation with a differentiated evaluation of “how much” is necessary and “where” it is best applied.
The Spark that Lights the Flame
- Part 2: The Five Dimensions of Transformational Leadership