A winning operating model for digital strategy

A winning operating model for digital strategy

Digital is driving major changes in how companies set and execute strategy. New survey results point to four elements that top performers include in their digital-strategy operating model.

For many companies, the process of building and executing strategy in the digital age seems to generate more questions than answers. Despite digital’s dramatic effects on global business—the disruptions that have upended industries and the radically increasing speed at which business is done—the latest McKinsey Global Survey on the topic suggests that companies are making little progress in their efforts to digitalize the business model.

The online survey was in the field from May 15 to May 25, 2018, and garnered responses from 1,542 C-level executives and senior managers representing the full range of regions, industries, company sizes, and functional specialties. Respondents who participated in this year’s and last year’s surveys report a roughly equal degree of digitalization as they did one year ago.

As measured by the shares of the organization’s sales from products, services, or both sold through digital channels; of core products, services, or both that are digital in nature (for instance, virtualized or digitally enhanced); and of core operations that are automated, digitized, or both, as well as the volume in the organization’s supply chain that is digitized or moves through digital interactions with suppliers.

The previous survey was in the field from June 20 to July 10, 2017, and garnered responses from 1,619 C-level executives and senior managers representing the full range of regions, industries, company sizes, and functional specialties. Of those who completed the survey in 2017, 345 also completed the 2018 survey.  suggesting that companies are getting stuck in their efforts to digitally transform their business.

The need for an agile digital strategy is clear, yet it eludes many—and there are plenty of pitfalls that we know result in failure. We have looked at how some companies are reinventing themselves in response to digital, not only to avoid failure but also to thrive. In this survey, we explored which specific practices organizations must have in place to shape a winning strategy for digital—in essence, what the operating model looks like for a successful digital strategy of reinvention. Based on the responses, there are four areas of marked difference in how companies with the best economic performance approach digital strategy.

We define a top economic performer as one that has, according to respondents, a top-decile rate of organic revenue growth (that is, of 25 percent or more in the past three years), relative to other respondents. We also looked at respondents in the top decile for growth in earnings before interest and taxes (EBIT) and have made note of any practices for which the top-decile revenue and top-decile EBIT results correspond or differ. compared with all others:

  • The best performers have increased the agility of their digital-strategy practices, which enables first-mover opportunities.
  • They have taken advantage of digital platforms to access broader ecosystems and to innovate new digital products and business models.
  • They have used M&A to build new digital capabilities and digital businesses.
  • They have invested ahead of their peers in digital talent.

Increase the agility of creating, executing, and adjusting strategy

One of the biggest factors that differentiate the top economic performers from others is how quick and adaptable they are in setting, executing, and adjusting their digital strategies—in other words, the velocity and adaptability of their operating models for digital strategy. Both are necessary for companies to achieve first-mover (or very-fast-follower) status, which we know to be a source of significant economic advantage.

So how do they do it? We looked at the frequency with which companies follow 11 operational practices of digital strategy. With the exception of M&A—which typically requires a much longer time frame than the other ten, often due to regulatory reasons—respondents in the top revenue decile say their companies carry out each one more frequently than their peers (Exhibit 1). The link between frequency and performance also holds up when looking at earnings before interest and taxes (EBIT).5 5.In our analysis, we looked at the relationship between frequency and economic performance in multiple ways. The results indicate that when these digital strategy practices are carried out more frequently, revenue and earnings before interest and taxes (EBIT) are greater. The inverse also is true: when companies carry out these practices more slowly, their revenue and EBIT performance is worse. Exhibit 1

That speed in strategy links with financial outperformance is not surprising and is consistent with our other work on strategy planning. As the pace of digital-related changes continues to accelerate, companies are required to make larger bets and to reallocate capital and people more quickly. These tactical changes to the creation, execution, and continuous modification of digital strategy enables companies to apply a “fail fast” mentality and become better at both spotting emerging opportunities and cutting their losses in obsolescent ones, which enables greater profitability and higher revenue growth.

Invest in ecosystems, digital products, and operating models

The companies that outperform on revenue and EBIT also differ from the rest in their embrace of the economic changes that digital technologies have wrought. Based on the results, they have done so in three specific ways: taking advantage of new digital ecosystems, focusing product-development efforts on brand-new digital offerings, and innovating the business model. We know that digital platforms have enabled the creation of new marketplaces, the sharing of data, and the benefits of network effects at a scale that was impossible just a few years ago. As these factors have converged, the digital ecosystems created by these platforms are blurring industry boundaries and changing the ways that companies evaluate the economics of their business models, their customers’ needs, and who their competitors—and partners—are.

The top EBIT performers are taking better advantage of these ecosystem-based dynamics than other companies—namely, by using digital platforms much more often to access new partners and customers. Respondents at these companies are 39 percent more likely than others are to say they do so. And while the share of global sales that move through these ecosystems is still less than 10 percent, other McKinsey research predicts that this share will grow to nearly 30 percent by 2025, making platforms an ever more critical element of digital strategy. The needs of customers become broader and more integrated in an ecosystem-based world, and the companies that are already active in their respective ecosystems are better positioned to understand these needs and meet them (either on their own or with partners) before their peers do. It makes sense, then, that the top performers seem to be developing much more innovative offerings than their peers.

On average, companies’ digital innovations most often involve adjustments to existing products. Yet respondents at the top-performing companies say they focus on creating brand-new digital offerings (Exhibit 2). What’s more, these respondents are about 60 percent more likely than others are to agree that they are more advanced than peers in adopting digital technologies to help them do so. This result is consistent with our previous findings that first movers and early adopters of digital technologies and innovations also outperform their peers. Exhibit 2

Last, innovation of the business model is more common at the top-performing companies. In our past survey, only 8 percent of respondents said their companies’ current business models would remain economically viable without making any further digital-based changes. In the newest survey, we see that the companies that have embraced digital are well ahead of their peers in their preparation for digital’s new economic realities. At the top performers, respondents say they have invested more of their digital capital in new digital businesses, compared with all other respondents (Exhibit 3).

Our research also shows that companies overall invested a greater share in new digital businesses as the overall digital maturity of their sectors increased. The more successful companies appear to be the ones that made these moves earlier than their peers, rather than being forced into making such investments late in the game.Exhibit 3

Use M&A to build digital capabilities and businesses

According to the results, M&A is another differentiator between the top-performing companies and everyone else. Not only are they spending more than others on M&A, but they are also investing in different types of M&A activities (Exhibit 4). At the winners, respondents report spending more than twice as much on M&A, as a share of annual revenue, as their counterparts elsewhere.

Includes only respondents working at privately owned companies, n = 767. Respondents working at publicly owned companies (n = 318) were asked how much their organizations invested in M&A as a percentage of market capitalization over the past three years. The same is true of respondents reporting top-decile EBIT growth, relative to respondents at other organizations. Exhibit 4

Given the pace of digital-related changes and the challenges companies face to match that speed through organic growth alone, this isn’t so surprising. What is surprising, however, is that top economic performers take a different approach to their M&A activities. While top performers and their peers have used some part of their overall digital investments to acquire new digital businesses in recent years, the top performers are investing more in acquiring both new digital businesses and new capabilities. By contrast, other respondents say their companies focus most of their M&A spending on nondigital ventures—an area where lower-performing companies seem to be doubling down. Exhibit 5

Invest ahead of peers in digital talent

From earlier work, we know that getting the right digital talent is a key enabler for digital success—a point that our latest findings only reinforce. Talent is also a major pain point: qualified digital talent is a scarce commodity, as the pace of digital still outstrips the supply of people who can deliver it. But the top economic performers are making a greater effort to solve this problem. Compared with others, these respondents say their companies are dedicating much more of their workforce to digital initiatives (Exhibit 5).

It’s not just the degree of investment that distinguishes top performers, though. They are also much nimbler in their use of digital talent, reallocating these employees across the organization nearly twice as frequently as their peers do. This agility enables more rapid movement of resources to the highest-value digital efforts—or to clearing out a backlog of digital work—and a better alignment between resources and strategies.

Looking ahead

  • Make your strategy process more dynamic. By definition, a digital strategy must adapt to the digital-driven changes happening outside the company, as well as within it. Given the breakneck pace of these changes, such a strategy must keep up with the pace of digital and enable first-mover opportunities by being revisited, iterated upon, and adjusted much more frequently than strategies have been in the past. Companies need their digital strategies to act as a road map for ongoing transformation—a living organism that evolves along with the business landscape. In other work, we laid out the four main fights that companies must win to build truly dynamic digital strategies.
  • Organizations must educate their business leaders on digital and foster an attacker’s perspective, so people are more likely to look at their business, industry, and the role of digital through the eyes of new competitors. They must galvanize senior executives to action by building top-team-effectiveness programs. Organizations also must leverage data-driven insights to test and learn—and correct course—quickly. And they must fight the diffusion of their efforts and resources—a constant challenge, given the simultaneous need to digitalize their core business and innovate with new business models. These steps will put companies in a better position to move first in delivering new products and meeting customers’ and partners’ evolving needs in the new ecosystems that platforms are creating.
  • Invest in talent and capabilities early and aggressively. Talent is already known as one of the hardest issues to solve as companies transform themselves in their pursuit of digitalization. The results confirm that companies need to embrace this reality and then look at how they can solve it best, whether through smarter, more dynamic allocation of these resources or the use of M&A to accelerate the building of new digital capabilities. Digital is driving an ever-faster pace of innovation, and companies can take advantage of the potential benefits only if they have the capabilities to harness it. For the survey’s top performers, one way forward is leveraging M&A to help build their digital capabilities, rather than trying to build them through a slower, organic approach. These companies are also getting the most from their digital capabilities and investments by deploying them in much more agile ways and creating a more flexible, responsive operating model.
  • Redefine how you measure success. The digital era requires that companies move nimbly in order to succeed. Yet many are still measuring performance with the same metrics they used previously—which were designed for a slower pace of business and a rigid strategy-setting process. Companies must move away from old metrics (market share, for example) that are no longer meaningful indicators of economic success. With markets becoming ill-defined due to shifts in industry boundaries and shrinking economic pies within a given sector, market share is no longer a gold-standard metric or even relevant. Companies need to hold themselves to new standards that will indicate whether or not they are truly leading the pack on innovation, productivity, and the adoption of digital technologies. In our experience, outcomes such as being first to market with innovations, leading on productivity, and working with other businesses in the ecosystem (that is, moving from an “us versus them” mind-set on digital to one of partnership) are better indicators of future digital success.

About the author(s)

The survey content and analysis were developed by Jacques Bughin, a director of the McKinsey Global Institute and senior partner in McKinsey’s Brussels office; Tanguy Catlin, a senior partner in the Boston office; and Laura LaBerge, a senior expert in the Stamford office. They wish to thank Soyoko Umeno for her contributions to this work.MeasureMeasure

Why Your Talent Strategy Is the Key to Agile at Scale?

Why Your Talent Strategy Is the Key to Agile at Scale?

If you want to go fast, go alone. If you want to go far, go together. ~ African Proverb

The authors of the recent HBR article Agile at Scale make compelling arguments for why executives at leading enterprises should push their companies to become more agile.

In our experience working with leaders at 30% of the Fortune 1000, we’ve seen the importance of leaders reflecting agile principles in their own work, resourcing critical business initiatives with silo-busting teams, and thoughtfully sequencing agile rollouts as critical ingredients for success.

1. This isn’t just about innovationit’s about how your company works.

The article focuses on agility to drive innovation, and innovation teams are indeed promising places to pilot. We believe that this transformation to a more agile workforce need not center on innovation. It’s about getting work done faster, better, and more efficiently. Companies we see deploying an agile workforce effectively take the most important initiatives at the organization and use agile workforce concepts to deploy the best resources against them, regardless of where those resources are. This is consistent with the authors’ notions of removing bureaucracy and breaking through silos, and not just for innovation — indeed, for the most important work at the company. One leader at a Fortune 50 company framed it this way to us: agile lets his business operate more like a nimble flotilla of ships than like a large and lumbering tanker, which is especially important in rapidly-changing business conditions. It’s about prioritizing speed.

2. The days of Talent Acquisition are over. It’s time to think about Talent Access.

The article touches on the importance of changes in talent acquisition and motivation needed to support agile at scale. Reconsidering incentives, the role of managers, and performance management are all key. And we believe that this is just the tip of the metaphorical iceberg. Companies where we see successful agile workforce roll-outs stop building their talent strategy and infrastructure around talent acquisition (synonyms: purchase, possession, procurement) and instead build a competency in talent access (synonyms: connection, approach, introduction). This fits well with the idea of agile—which rests on the notion of engaging the right quantity of the right talent for a specific, well-defined mission. That does not always require a full-time employee—it just requires the right person with the right skills at the right time. Yes, talent will always include some portion of people with a company badge, and an agile workforce enables companies to engage employees in a more effective way. But it also includes the broader world of talent available to a company—freelancers, alumni, consultants. An organization should consider those options alongside employees and engage the best skills for the job to be done.

3. Ignore labor demographic trends at your own peril. 

Shifting from talent acquisition to talent access is consistent with the way the world is already working. People beyond the borders of your company are working in a more agile way, and leveraging technology tools that make it possible. You’ve probably noticed many of your colleagues are choosing to work more in a more agile fashion outside your organization. This isn’t just about commoditized work; in fact, many of the very best people — think those with the most niche skill sets — are choosing a different way of working. For enterprises with skills gaps across their organization, losing these talented people is untenable. To maintain access to them (which may include keeping them full-time, or may not), you need to change how you do work inside the company to provide a similar experience to what exists outside.

4. Invest in the proper infrastructure, or agile won’t work at scale.

As the article highlights, modularizing workstreams is important. That is difficult to do without technology. How are you modularizing work? How are you accessing and matching the right skills at the right time? How are you tracking outcomes? How will you do that across your entire organization? Without the right enabling technology, you may miss the mark. When you bring those tools into your company and allow people to engage projects they otherwise didn’t have access to, value results.

Imagine an internal version of the gig economy that enables you to discover and engage the skills and interests of your employees across the far-flung reaches of the company… What would it mean to your high-performers—and to your company—for them to be able to raise their hand and apply their talents on projects across your business? What would it mean for your organization to better understand the competencies that exist within the company, and to have visibility into the skills your colleagues go outside the company to engage?

5. Start small, think big, move fast.

As the article mentions, starting with a full-scale transformation to become radically agile is unlikely to lead to success. Starting small is critical. We also believe that small pilots must be designed with the end in mind. As you roll out tests in your organization, consider what you need to learn about what it would take at scale. We’ve seen companies start with pilots and think they’ve learned what it takes to scale, without realizing that there are fundamentally different implications for a scaled solution that can’t be tested in a smaller, controlled environment. If you’re still reading this and have ideas we haven’t considered, we’d love to hear your thoughts! And if you want to discuss further, we’re always happy to talk.Read more aboutCatalant’s take on workforce agility or download our recent research,Reimagining Work 2020.

Imagine an internal version of the gig economy that enables you to discover and engage the skills and interests of your employees across the far-flung reaches of the company

What would it mean to your high-performers—and to your company—for them to be able to raise their hand and apply their talents on projects across your business? What would it mean for your organization to better understand the competencies that exist within the company, and to have visibility into the skills your colleagues go outside the company to engage?

5. Start small, think big, move fast.

As the article mentions, starting with a full-scale transformation to become radically agile is unlikely to lead to success. Starting small is critical. We also believe that small pilots must be designed with the end in mind. As you roll out tests in your organization, consider what you need to learn about what it would take at scale. We’ve seen companies start with pilots and think they’ve learned what it takes to scale, without realizing that there are fundamentally different implications for a scaled solution that can’t be tested in a smaller, controlled environment. 

A winning operating model for digital strategy

A winning operating model for digital strategy

Digital is driving major changes in how companies set and execute strategy. New survey results point to four elements that top performers include in their digital-strategy operating model.

For many companies, the process of building and executing strategy in the digital age seems to generate more questions than answers.

Despite digital’s dramatic effects on global business—the disruptions that have upended industries and the radically increasing speed at which business is done—the latest McKinsey Global Survey on the topic suggests that companies are making little progress in their efforts to digitalize the business model.

1.The online survey was in the field from May 15 to May 25, 2018, and garnered responses from 1,542 C-level executives and senior managers representing the full range of regions, industries, company sizes, and functional specialties. Respondents who participated in this year’s and last year’s surveys report a roughly equal degree of digitalization as they did one year ago.

2. As measured by the shares of the organization’s sales from products, services, or both sold through digital channels; of core products, services, or both that are digital in nature (for instance, virtualized or digitally enhanced); and of core operations that are automated, digitized, or both, as well as the volume in the organization’s supply chain that is digitized or moves through digital interactions with suppliers.

The previous survey was in the field from June 20 to July 10, 2017, and garnered responses from 1,619 C-level executives and senior managers representing the full range of regions, industries, company sizes, and functional specialties. Of those who completed the survey in 2017, 345 also completed the 2018 survey.  suggesting that companies are getting stuck in their efforts to digitally transform their business.

The need for an agile digital strategy is clear, yet it eludes many—and there are plenty of pitfalls that we know result in failure. We have looked at how some companies are reinventing themselves in response to digital, not only to avoid failure but also to thrive. In this survey, we explored which specific practices organizations must have in place to shape a winning strategy for digital—in essence, what the operating model looks like for a successful digital strategy of reinvention. Based on the responses, there are four areas of marked difference in how companies with the best economic performance approach digital strategy.

3.We define a top economic performer as one that has, according to respondents, a top-decile rate of organic revenue growth (that is, of 25 percent or more in the past three years), relative to other respondents.

We also looked at respondents in the top decile for growth in earnings before interest and taxes (EBIT) and have made note of any practices for which the top-decile revenue and top-decile EBIT results correspond or differ. compared with all others:

Findings

  • The best performers have increased the agility of their digital-strategy practices, which enables first-mover opportunities.
  • They have taken advantage of digital platforms to access broader ecosystems and to innovate new digital products and business models.
  • They have used M&A to build new digital capabilities and digital businesses.
  • They have invested ahead of their peers in digital talent.

Increase the agility of creating, executing, and adjusting strategy

One of the biggest factors that differentiate the top economic performers from others is how quick and adaptable they are in setting, executing, and adjusting their digital strategies—in other words, the velocity and adaptability of their operating models for digital strategy. Both are necessary for companies to achieve first-mover (or very-fast-follower) status, which we know to be a source of significant economic advantage.

So how do they do it? We looked at the frequency with which companies follow 11 operational practices of digital strategy. With the exception of M&A—which typically requires a much longer time frame than the other ten, often due to regulatory reasons—respondents in the top revenue decile say their companies carry out each one more frequently than their peers (Exhibit 1). The link between frequency and performance also holds up when looking at earnings before interest and taxes (EBIT).

5.In our analysis, we looked at the relationship between frequency and economic performance in multiple ways. The results indicate that when these digital strategy practices are carried out more frequently, revenue and earnings before interest and taxes (EBIT) are greater. The inverse also is true: when companies carry out these practices more slowly, their revenue and EBIT performance is worse. 5.In our analysis, we looked at the relationship between frequency and economic performance in multiple ways. The results indicate that when these digital strategy practices are carried out more frequently, revenue and earnings before interest and taxes (EBIT) are greater. The inverse also is true: when companies carry out these practices more slowly, their revenue and EBIT performance is worse.Exhibit 1

That speed in strategy links with financial outperformance is not surprising and is consistent with our other work on strategy planning.

As the pace of digital-related changes continues to accelerate, companies are required to make larger bets and to reallocate capital and people more quickly. These tactical changes to the creation, execution, and continuous modification of digital strategy enables companies to apply a “fail fast” mentality and become better at both spotting emerging opportunities and cutting their losses in obsolescent ones, which enables greater profitability and higher revenue growth.

Invest in ecosystems, digital products, and operating models

The companies that outperform on revenue and EBIT also differ from the rest in their embrace of the economic changes that digital technologies have wrought. Based on the results, they have done so in three specific ways: taking advantage of new digital ecosystems, focusing product-development efforts on brand-new digital offerings, and innovating the business model.

We know that digital platforms have enabled the creation of new marketplaces, the sharing of data, and the benefits of network effects at a scale that was impossible just a few years ago. As these factors have converged, the digital ecosystems created by these platforms are blurring industry boundaries and changing the ways that companies evaluate the economics of their business models, their customers’ needs, and who their competitors—and partners—are.

The top EBIT performers are taking better advantage of these ecosystem-based dynamics than other companies—namely, by using digital platforms much more often to access new partners and customers. Respondents at these companies are 39 percent more likely than others are to say they do so. And while the share of global sales that move through these ecosystems is still less than 10 percent, other McKinsey research predicts that this share will grow to nearly 30 percent by 2025, making platforms an ever more critical element of digital strategy.

The needs of customers become broader and more integrated in an ecosystem-based world, and the companies that are already active in their respective ecosystems are better positioned to understand these needs and meet them (either on their own or with partners) before their peers do. It makes sense, then, that the top performers seem to be developing much more innovative offerings than their peers.

On average, companies’ digital innovations most often involve adjustments to existing products. Yet respondents at the top-performing companies say they focus on creating brand-new digital offerings (Exhibit 2). What’s more, these respondents are about 60 percent more likely than others are to agree that they are more advanced than peers in adopting digital technologies to help them do so.

This result is consistent with our previous findings that first movers and early adopters of digital technologies and innovations also outperform their peers.

Last, innovation of the business model is more common at the top-performing companies. In our past survey, only 8 percent of respondents said their companies’ current business models would remain economically viable without making any further digital-based changes. In the newest survey, we see that the companies that have embraced digital are well ahead of their peers in their preparation for digital’s new economic realities.

At the top performers, respondents say they have invested more of their digital capital in new digital businesses, compared with all other respondents.

Our research also shows that companies overall invested a greater share in new digital businesses as the overall digital maturity of their sectors increased. The more successful companies appear to be the ones that made these moves earlier than their peers, rather than being forced into making such investments late in the game.

At the top performers, respondents say they have invested more of their digital capital in new digital businesses, compared with all other respondents (Exhibit 3). Our research also shows that companies overall invested a greater share in new digital businesses as the overall digital maturity of their sectors increased.

The more successful companies appear to be the ones that made these moves earlier than their peers, rather than being forced into making such investments late in the game.

Use M&A to build digital capabilities and businesses

According to the results, M&A is another differentiator between the top-performing companies and everyone else. Not only are they spending more than others on M&A, but they are also investing in different types of M&A activities.

At the winners, respondents report spending more than twice as much on M&A, as a share of annual revenue, as their counterparts elsewhere.7 7.Includes only respondents working at privately owned companies, n = 767. Respondents working at publicly owned companies (n = 318) were asked how much their organizations invested in M&A as a percentage of market capitalization over the past three years. The same is true of respondents reporting top-decile EBIT growth, relative to respondents at other organizations.

Given the pace of digital-related changes and the challenges companies face to match that speed through organic growth alone, this isn’t so surprising. What is surprising, however, is that top economic performers take a different approach to their M&A activities.

While top performers and their peers have used some part of their overall digital investments to acquire new digital businesses in recent years, the top performers are investing more in acquiring both new digital businesses and new capabilities.

By contrast, other respondents say their companies focus most of their M&A spending on nondigital ventures—an area where lower-performing companies seem to be doubling down.Exhibit 5

By contrast, other respondents say their companies focus most of their M&A spending on nondigital ventures—an area where lower-performing companies seem to be doubling down.Exhibit 5

Invest ahead of peers in digital talent

From earlier work, we know that getting the right digital talent is a key enabler for digital success—a point that our latest findings only reinforce. Talent is also a major pain point: qualified digital talent is a scarce commodity, as the pace of digital still outstrips the supply of people who can deliver it.

But the top economic performers are making a greater effort to solve this problem. Compared with others, these respondents say their companies are dedicating much more of their workforce to digital initiatives. It’s not just the degree of investment that distinguishes top performers, though.

They are also much nimbler in their use of digital talent, reallocating these employees across the organization nearly twice as frequently as their peers do. This agility enables more rapid movement of resources to the highest-value digital efforts—or to clearing out a backlog of digital work—and a better alignment between resources and strategies.

Looking ahead

  • Make your strategy process more dynamic. By definition, a digital strategy must adapt to the digital-driven changes happening outside the company, as well as within it. Given the breakneck pace of these changes, such a strategy must keep up with the pace of digital and enable first-mover opportunities by being revisited, iterated upon, and adjusted much more frequently than strategies have been in the past. Companies need their digital strategies to act as a road map for ongoing transformation—a living organism that evolves along with the business landscape. In other work, we laid out the four main fights that companies must win to build truly dynamic digital strategies.
  • Organizations must educate their business leaders on digital and foster an attacker’s perspective, so people are more likely to look at their business, industry, and the role of digital through the eyes of new competitors. They must galvanize senior executives to action by building top-team-effectiveness programs. Organizations also must leverage data-driven insights to test and learn—and correct course—quickly. And they must fight the diffusion of their efforts and resources—a constant challenge, given the simultaneous need to digitalize their core business and innovate with new business models. These steps will put companies in a better position to move first in delivering new products and meeting customers’ and partners’ evolving needs in the new ecosystems that platforms are creating.
  • Invest in talent and capabilities early and aggressively. Talent is already known as one of the hardest issues to solve as companies transform themselves in their pursuit of digitalization. The results confirm that companies need to embrace this reality and then look at how they can solve it best, whether through smarter, more dynamic allocation of these resources or the use of M&A to accelerate the building of new digital capabilities.
  • Digital is driving an ever-faster pace of innovation, and companies can take advantage of the potential benefits only if they have the capabilities to harness it. For the survey’s top performers, one way forward is leveraging M&A to help build their digital capabilities, rather than trying to build them through a slower, organic approach. These companies are also getting the most from their digital capabilities and investments by deploying them in much more agile ways and creating a more flexible, responsive operating model.
  • Redefine how you measure success. The digital era requires that companies move nimbly in order to succeed. Yet many are still measuring performance with the same metrics they used previously—which were designed for a slower pace of business and a rigid strategy-setting process. Companies must move away from old metrics (market share, for example) that are no longer meaningful indicators of economic success.
  • With markets becoming ill-defined due to shifts in industry boundaries and shrinking economic pies within a given sector, market share is no longer a gold-standard metric or even relevant. Companies need to hold themselves to new standards that will indicate whether or not they are truly leading the pack on innovation, productivity, and the adoption of digital technologies. In our experience, outcomes such as being first to market with innovations, leading on productivity, and working with other businesses in the ecosystem (that is, moving from an “us versus them” mind-set on digital to one of partnership) are better indicators of future digital success.

Stay current on your favorite topicsSubscribe

About the author(s)

The survey content and analysis were developed by Jacques Bughin, a director of the McKinsey Global Institute and senior partner in McKinsey’s Brussels office; Tanguy Catlin, a senior partner in the Boston office; and Laura LaBerge, a senior expert in the Stamford office.They wish to thank Soyoko Um

Leadership traits and the new talent ecosystem: What does it take to triumph?

Leadership traits and the new talent ecosystem: What does it take to triumph?

Leadership traits and the new talent ecosystem[1]: What are we speaking about? What do we mean by new talent ecosystem?

by Jean Luc Seguin CRHA – CHRP

First things first: an ecosystem is a community made up of living organisms and nonliving components such as air, water, and mineral soil. Ecosystems can be studied as structured systems and communities governed by general rules (Wikipedia).

The notion of a talent ecosystem is one in which everything on the people side of the business is connected – attracting and acquiring talent, managing, connecting and developing talent, understanding and planning talent. It is about the way an organization is and will manage critical capabilities to gain a competitive edge. In the new context of complex changes, executives and organizational leaders are facing unknown situations that may generate enormous puzzlement.

The complexity increases with the new way of sourcing and onboarding talent and building organizations. If, within this context, we react using established, obsolete strategies, skills and methods, seeking to obtain quick fixes in the short term, we may be putting the survival of our organization at risk. 

According to most of the major consulting firms, automation, cognitive computing, and crowdsourcing are paradigm-shifting forces that reshape the workforce and the way people are managed and interact. This is a great opportunity to rethink the way the C-suite leads and engages people to achieve results and create values. We will explore what type of leadership characteristics will be most beneficial in this new social and corporate environment.

According to Deloitte the top companies in those new paradigm-shifting forces are built around structures that encourage teams and individuals to meet, share information transparently and move from team to team, depending on the issue to be tackled. Organizations that empower their teams to make decisions and create this ability to move between teams without risk are critical characteristics of today’s high-performing and agile companies.

The successful organization would be the one empowering their people to make decisions and make them accountable for results. If people need freedom to act, think, perform, then organizations need their people to be accountable for results. In our world, one comes with the other. Before proposing what we think could be the right leadership traits in this new ecosystem, let us pause for a moment on those two critical characteristics in the workplace.

Empowerment and Accountability

According to the Cambridge dictionary, empowerment “is the process of gaining freedom and power to do what you want or to control what happens to you”.

Empower comes from the Latin noun “posse” meaning power, force, “to be able”, “have power”. It is someone armed with legal authority. Empowerment in the workplace is a philosophy and strategy that businesses use to entrust their employees with the power they need to make decisions and behave according to their understanding of business goals (Wiktionary).Empowering people to make decisions and relying on networks of interactions does not mean that people are no longer accountable for results.

‘Accountable’ comes from Medieval Latin imputabilisand from Modern Latin imputare “to charge, ascribe” (etymonline.com). Accountability (charging someone to deliver result) becomes more transparent as organizations use goal-setting to support success. It is then easier to measure and track. The sense of accountability this can create is critical to team and corporate effectiveness, and is among the top drivers of outstanding financial outcomes.If empowerment and accountability are two critical organizational traits, what type of leadership characteristics do we need for a dynamic new ecosystem?

Key leadership traits to triumph in the new environment

Facilitating the transition to the new paradigm requires executives and leaders to develop a set of attributes critical to engage and mobilize the new talent ecosystem.

There is no magic stick to engage people, especially when speaking about crowdsourcing. Nevertheless, if not all-embracing, there are key characteristics: authenticity, enthusiasms and resilience, creativity, and empathy and compassion.

Authenticity

“If you are your authentic self, you have no competition”Anonymous

Authenticity comes directly from Medieval Latin authenticus, from Greek authentikos “original, genuine, principal,” from authentes “one acting on one’s own authority” (online ethymology dictionary). In the modern world, authenticity means “true to one’s own personality, spirit, or character” (Merriam-Webster).

Janet Louise Stephenson, an American writer, teacher and social activist who wrote in the areas of civil rights, the women’s movement, the peace movement, the environment and the arts, said: “Authenticity requires a certain measure of vulnerability, transparency, and integrity.” Authenticity, with integrity, and a certain measure of vulnerability, would go a long way in engaging and mobilizing people around business vision and its execution. Humans can relate to one another more easily if the relationship is ingrained in honesty. Authenticity enhances credibility and reputation, as a positive differentiation to achieve effective leadership.

Enthusiasm and Resilience

“The happiest, most interesting people are those who have found the secret of maintaining their enthusiasm, that God within.”Earl Nightingale.

“The word ‘enthusiasm’ comes from the Greek word ‘entheos’ which means the God within. It is a great adjective for describing anything you do cheerfully.” Because it is vital to engaging the hearts and minds of all talent in the new ecosystem, enthusiastic leaders have the spark that can foster commitment and determination in people. They are the strong believers that inspire passion and the belief that we have the ability to achieve the unimaginable and create enchantment.As explained in a previous post by Jean-Luc’s, resilience is coming from the Latin verb “resilio”, literally “jump back,” “rebound, resist”. In physics, resilience is a term that characterizes the energy absorbed by a body during deformation (Test of Charpy). According to the French neuropsychiatrist Boris Cyrulnik, “Resilience is the ability of an individual to generate biological, psychological and social factors to resist, adapt and fortify himself in the face of a risk situation”. As a result, resilience generates individual, social and moral success. In a time of rapid and complex changes, a leader without resilience will drown in the midst of complexity and chaos.

Creativity

“Once we believe in ourselves, we can risk curiosity, creativity, wonder, spontaneous delight or any experience that reveals the human spirit”. E. E. Cummings

We often think about creativity as making something, but in fact the root meaning of the word means ‘to grow’. Though we’re tempted to think of creativity as having ties to the aesthetic world, creativity is a business tool as well – as leaders learn to look at challenges from different perspectives and find new opportunities emerge as a result.

According to the World Economic Forum, creativity is one of the fundamental skills toward 2020. It moved from the #10 skill set in 2015 to # 3 in 2020. It contributes, among other things, to the construction of an organizational culture to generate ideas and initiatives that will enrich the organization’s value, produce magic and rally people. 

Empathy and Compassion

“Love and compassion are necessities, not luxuries. Without them humanity cannot survive”. Dalai Lama

Empathy is the capacity to understand or feel what another person is experiencing from within. The English word empathy is derived from the Ancient Greek word empatheia, meaning “physical affection or compassion”.

According to Paul Ekman, an American psychologist and professor emeritus at the University of California, San Francisco who is a pioneer in the study of emotions, the term “empathy” is used to describe a wide range of experiences. It is generally defined as the ability to sense other people’s emotions, coupled with the ability to imagine what someone else might be thinking or feeling.The importance of empathy in business is rooted in data. 92% of HR professionals note that an empathetic workplace is a major factor for people retention.

Being empathetic in the workplace provides meaningful, concrete returns, it pushes people to listen to each other and care for one another. Coupled with compassion, it motivates people to go out of their way to help other people in the workplace which in return has a positive impact on business performance. Leading people to connect to one another helps sustain blooming companies built for the long term.

Into a New Adventure

As we move towards new organizational models with new types of interaction and networks, leaders need to embed in their fabrics simple human characteristics that shape the future, foster genuine engagement of people and in return, impact positively the bottom line.

Those key characteristics: authenticity, enthusiasm and resilience, creativity, and empathy and compassion are the lifeblood of brilliant possible outlooks. The more we tend to dehumanize our world, the more we need the cleanliness of the real self and the vibrant intensity of genuine encounters and relationships. The workplace isn’t different!


[1]Talent ecosystem is the new paradigm of people bringing and creating value for the organization from the most traditional form of being an employee to the most agile practice of crowdsourcing.