Vast complexity and change are visibly altering markets and with it changing the needs of leadership. In the utilities sector, we see very specific examples of this. Utilities companies have been led through massive disruption due to several factors including the burgeoning demand to power AI data centers. As a result of accelerated demand, market forces are causing utilities to move from a slow-planned, regulated, rate-based environment to one of competition amongst IPPs and “behind the meter” solutions. The complexity of the situation increases as customer with massive balance sheets consider contracting for their own sources of power, which could disintermediate utility companies.
Given these huge changes, the specifications for utilities leadership roles are significantly shifting and expanding. Utilities companies now need to greatly enhance the business capabilities of their current leaders as well as attract new types of leaders who they have never previously targeted or focused on. It’s bringing them into a whole new and pressing playing field around talent development and acquisition.
A New Leadership Profile
Managing the emerging environment of increased risk and complexity, utility leaders of the future will need to have more curiosity, advanced commercial acumen, and be capable of both building and leading effective teams. They must be able to shift and lead the culture across transformation, from one of conservative protection to one of more thoughtful risk-taking and growth which is a major leadership undertaking.
Future utilities leaders will need to exhibit more advanced business competencies than their predecessors, demonstrating the ability to generate and sustain new commercial options for their companies that drive profitability beyond their own areas and into other parts of the business. This elevated commercial acumen will translate into leaders capable of conceiving and recognizing promising new initiatives and driving breakthrough ideas across the entire enterprise and, most likely, across more new partnerships as well.
But these leaders are not ready-made. The existing leadership and those in the wings do not yet have the competencies necessary to lead over such massive cultural transformation. The new leadership of utilities companies will need to have more capacity to build their companies out further and to be more nimble and quicker as they do so, across whatever further disruptions will inevitably surface. They will need to be big thinkers, able to “hold the dream” for the organization, and big executors and they will need to be able to motivate others to be the same.
Developing Future-Ready Leadership
Getting to this point of expanded leadership capacity requires an investment in assessment and development. In an outcome analysis of our work, we have found that our assessment approach has proven to predict executive performance with up to ~90% accuracy. We’ve found that having good leaders isn’t good enough. Today’s challenges require more. When executives reach higher levels on Egon Zehnder’s competencies, revenue grows. We’ve also found that for above-average growth, companies need a critical mass of senior executives with superior levels of leadership. To belong to the top quartile of growth companies, at least 40% of the senior executives must excel in critical competencies.
The growth of the leaders we assess is greatly enhanced by our experience with and commitment to their vertical development. In the past, leadership development centered primarily on horizontal development and therefore on adding to the relevant knowledge, skills which sharpen what leaders need to know and what to do. This way of supporting leaders has been helpful. Still, as the world is becoming increasingly less predictable and more complex, increased attention to the vertical development of leaders’ underlying thinking structures has come to matter more.
Vertical development refers to advancement in a person’s thinking and therefore aims to influence how individuals can enhance their identity as impactful leaders. We find that, generally, leaders know what to do, but they often ask, “How can I show up differently?” Answering that question is at the heart of vertical development; it is about discovering how to access a greater sense of curiosity and engagement. This enables leaders to actively meet the requirements of an expanded role by demonstrating superior levels of leadership in critical competencies.
So, in addition to assessing the current competencies of leadership teams, we now need to develop and strengthen leaders to expand to hold more (or build capacity).
Potential utility leaders and teams who undertake this development work will easily step into the higher competencies needed, including commercial and strategic orientation; moreover, they will begin to show up differently overall—as self-aware, emboldened leaders ready to find and take on new and emerging prospects for growth.
As the utilities sector sets out on a major transformational journey, now is the time to think ahead towards the new leadership needed. Careful assessment and development of those who show the most potential now will reap significant future rewards and bring abundant success to the changing utilities model overall.
