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Digital Leadership Summit Brief

September 20, 2017

The Future of the Corporate Hierarchy is a Management Nightmare and Governance Puzzle

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This article summarizes some key insights from the third annual Digital Leadership Summit presented by The Degroote School of Business, Sep 20, 2017.

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Corporate structures usually make for neat diagrams. They are all straight lines and clear-cut relationships, with the parent company on top and its divisions arrayed below in descending order of importance.

The Shape Shifting Organization of the Future

Bob Johansen’s charts are a mess.

When the futurist draws the organization of the future, he produces a lumpy grid of peaks and craters. Then a short time later, the lumps have all shifted places, popping up and plunging down in new locations as if the handiwork of a mad cartographer.

He calls it the shape-shifting organization, where there will be not one single structure but a landscape of constant evolution, as innovation and adaptation continually jumble the geography of the grid.

This is his model of the future of corporate hierarchy in the age of artificial intelligence and digital innovation. It is a management nightmare and a governance puzzle.

It is a future where the edge goes to those companies that keep a constant vision but adapt their execution to meet ever shifting reality. “The next decade will be characterized by one word — scramble,” says Johansen, a distinguished fellow of the Institute for the Future, a think tank in Palo Alto, Calif .

The future will “reward clarity but punish certainty,” he recently told the DeGroote School of Business’s Digital Leadership Summit in a live transmission from his home in California. The implication for boards: Make sure management keeps its vision clear, but be prepared constantly to assess and re-assess its execution.

The 21st Century Board and Board Member

For directors of organizations, both for-profit and not-for-profit, that presents a daunting prescription – to assist management in developing strategy, but with an eye to fostering a culture of constant adaptation. Johansen likes to quote management theorist Peter Drucker: “Culture will eat strategy for breakfast.”

To add to the challenge, today’s corporate leaders have brains born in the 20th century, while the success of their organizations depends on 21st century thinking, the conference was told.

Boards of directors must be prepared for a host of changes that will seem foreign to 20th century minds:

the introduction of gaming techniques to train employees
the rise of block-chain technology as a mainstream medium of exchange, and
surviving in an age when “digital” becomes redundant in the corporate vocabulary because, well, everything is digital.

While not addressing governance issues directly, the summit underlined the need for boards to be bastions of trust for a management and a workforce anxious about the road ahead.

Jacquie Matthews, the global CEO for research firm Ipso UU, said the single most asked question by her clients is : What is the future of my industry?

What’s more, recent Canadian research shows that 55 to 65 per cent of people are terrified about the future of their work and fear that they can’t keep up.

Yet corporate leaders have to overcome their own backgrounds in many cases. Barry Libert understands that dilemma as a U.S. director and an adviser to both boards and management teams.

“I am an old white guy,” Libert says, adding that the label also applies to the leadership of the organizations he serves. “These are my clients and the boards I sit on,” Libert says with a wry smile and an air of deliberate provocation.

It is a leadership often out of touch with the unintended consequences of change, such as rampant misogyny and sexist behaviour that can exist in a tech workplace bubble, or the sudden collapse of a tried and true technology platform with the emergence of a disruptive alternative.

Performance Beyond Quarterly Earnings

Too often, the leadership of large corporations measures performance by focusing on one or two quarterly numbers. The classic corporate CEO, Libert said, is interested in profit or revenue, while largely ignoring new metrics, including consumer attitudes, that can shed light on the prospects for the future.

Libert, chairman of the consultancy Open Matters, pointed out that the result of this myopia is that CEOs are largely oblivious, for example, to human resources. They see only what they can measure in tangible ways.

In their view, employees sitting in their chairs are expenses while the chairs themselves are assets. The CEO’s only clear agenda is to cut expenses – thus, human bodies — which means fostering a chair-based, physically-rooted corporate culture.

The traditional 20th century adherence to measurement actually impairs the ability to innovate, he suggested.

The Risk of Change and Innovation

Corporate leadership also needs to be alert to new methodologies to assist employees in decision-making. Johansen said the companies of the future will want to inject the gaming experience – the sense of immersive, first person learning — into their workplaces. Those that do it will have a real competitive advantage, but that too has cultural challenges.

Suzanne Stein, Associate Professor, Strategic Foresight & Innovation at OCAD University in Toronto, said today’s innovation-driven workplaces hold the risk of breeding a bullying culture that actually defies diversity and openness. In other words, the search for innovation can lead to self-defeating homogeneity that in the end impedes innovation.

What’s more, the introduction of gaming techniques carries the danger of fostering individual assertion and aggression ahead of the collective spirit needed to succeed, Stein pointed out.

Ethics, Trust and Foresight

A number of the speakers talked about the obstacles to trust in the digital economy. Bob Johansen said “trust is not going to go away but it will be harder to build trust and easier to lose it.” He added that in this age, “it is easier to tell a lie and harder to correct a lie,” but trust can flow from that communicating clarity of corporate purpose he sees as so critical.

Ethicist John Dalla Costa emphasized that the development of trust is a two-way street: “The fastest way to building trust is to give it.” He emphasized the continuing need for a moral aptitude among corporate leaders to deal with the consequences of new technology – for example, in terms of navigating corporate gender issues at work and the challenge of planetary interconnectedness at a time when the technology is also driving us apart. (Note the bitter social media-fuelled political divide in many countries.) “CEOs cannot escape having moral leadership as part of their job description,” he said.

Numerous speakers emphasized the importance of foresight for navigating the potential futures of the company. Suzanne Stein teaches students to become “foresighters”, practitioners of an emerging discipline that helps organizations learn about “the hostile futures you may find yourself in, what are the preferred futures — and looking for the signals that you may have to change strategy.”

Foresight is all about dealing with the triple threats of crisis, competition and uncertainty, Stein said. From her experience with Nokia, the Finnish technology company, she concluded that for any business, continuing its present course is often the riskiest approach and could mean the downfall of the enterprise.

Yet, at the same time, the idea of divesting the billions of dollars already committed to that assumed future can feel like even higher-risk. In the face of these opposing views, it becomes hard to turn a large organization around, she said, and persuasion becomes a critical skill. Her advice: “If you are going to stick your neck out, hold it there and do not retreat at the first push-back.”

The CEO and Generative Change

Despite the cascading change, some things remain the same: Speakers talked about the need to get the CEO onside with the necessary transformation – whether it be the deployment of blockchain payment methods to the need for more women in management, “If the CEO doesn’t own it, the rest of the organization can’t get it,” Libert said.

That is essential if the changes are to be generative – lasting into future management generations and well beyond the tyranny of the last quarter, said John Dalla Costa, who like Barry Libert is an instructor at the Directors College.

Fears and Insights on the “Big Five”

Looming over every conversation about technology is the “Big Five”, that small band of companies that dominate the digital world and thus have become the highest valued businesses in the world.

They are feared by CEOS in almost every industry because, in Libert’s words, these companies – Amazon, Apple, Facebook, Microsoft and Alphabet (parent of Google) — have been stealing their customers.

Yet the conference learned that even these companies, in their brief histories, have faced ground-shifting moments. Alfredo Tan, a former Facebook executive in Canada and the Philippines, had a front-row seat on much of the company’s stunning 13-year rise to $500 billion US in value and 21,000 employees.

But growth has also brought challenges of recruiting and retaining large numbers of smart, driven people – the average employee spends less than 3.5 years with the company, and his own eight-year tenure was way beyond the norm, Tan said.

The Facebook big-goal culture is epitomized by the company’s famous all-night “hackathons” in which employees from across the organization, in varied departments, come together to focus on solving a single problem. The implication is that culture can be contagious and invigorating _ people do not want to go home — but the potential for burnout is always high.

On the issue of work-life balance, Tan (who still speaks of his Facebook tenure in the present tense) said, “Make no mistake — it is struggle that we have.” The company has become more sensitive to employees’ broader lives, through its response to personal crises or in sabbaticals to reward longer service.

Tan expressed the fear that haunts any company today – someone will eat not only your breakfast but your lunch and dinner. He noted that Facebook’s Silicon Valley headquarters has retained a sign which, on one side, still sports the name of a former occupant – a long-gone tech giant called Sun Microsystems. It is kept as a reminder that someone out there wants to disrupt you, even if you are Facebook.

Uncertainty and Disruption = Optimism!

Yet amidst the talk of disruption, there were also proclamations of optimism. Bob Johansen said that while riding the wave of technological transformation, leaders have to inject hope in their organizations. In this digital universe, if there is not hope, unmoored people can become dangerous. But with realistic hope, it is possible to thrive in an uncertain world.