The New Leadership Playbook for the Digital Age – MIT Sloan


From Competency Models to Collective Leadership: How Mindsets Enable Communities of Leaders

Emerging and enduring leadership behaviors constitute a highly aspirational leadership playbook. Few — if any — leaders are competent across the full set of these attributes.

The primary leadership challenge in the digital economy, however, isn’t simply to adopt a group of behaviors or to achieve a set of competencies. The deeper challenge is to develop a new mindset that anchors, informs, and advances these behaviors. Mindsets are mental operating systems that guide behaviors. Behavior is a function of mindset. Leaders need to change their attitudes and beliefs — their mindsets — about what leadership looks and feels like, if they want to produce behavior change that lasts over time. “Organizations need to completely rethink what they are about and what it means to lead,” McCord says. “It’s not about one person or even those only at the top. In today’s world, everyone has to be a leader — we have to think of ourselves as members of a leadership community. It’s not just something we talk about. It’s who we are.”

The primary leadership challenge in the digital economy isn’t simply to adopt a group of behaviors or to achieve a set of competencies.

We identified four specific mindsets that represent the hallmarks of great leadership in the digital economy. These mindsets reflect the principles, values, and norms of trailblazing leaders. Leaders we interviewed expressed these mindsets in clear, declarative, and descriptive statements of who they are, what they stand for, what they value, and how they will behave.

Trailblazing leadership teams from companies like HubSpot, LinkedIn, and Netflix express these mindsets when discussing their intent to form powerful communities of engaged leaders who are customer obsessed, incurably curious, committed to purpose and planet, and masters of connectivity, networks, and relationships.

Developing and embracing these mindsets requires a complete reimagining of what it means to lead in the digital economy. These mindsets make it possible for communities to be bound together by a shared purpose. We emphasize leadership mindsets not to minimize skills or behaviors, but because we found clear evidence that pathological legacy leadership mindsets undermine leaders’ preparedness and effectiveness. Talking about being innovative or resilient, for example, doesn’t get the job done. Taking action does.

The following sections describe the four key mindsets. (See Figure 5.)

Producer Mindset

“I would insist that anybody who wasn’t numeric on my team develop those skills,” says Ilene Gordon, retired chairman, president, and CEO of global ingredients solutions company Ingredion. “We come together to solve big problems for our customers. If you don’t have the analytical capability to identify the most important problems, then we’ll be of less value to them. With that in mind, I also want to make sure that our people have the perspective to see beyond the numbers — to understand what the numbers mean.”

The producer mindset combines a focus on customers with a focus on analytics, digital savviness, execution, and outcomes. Producers use analytics to accelerate innovation to address shifts in customer preferences and improve customer and user experiences.

“When I was in business school at Sloan, the mantra was that your product needed to be 10 times better than the competition,” says HubSpot’s Halligan. “That made sense then, but today the new mantra is that your customers’ experience needs to be 10 times better. Companies need to be clear on just what it is that makes them special and execute along those dimensions. That means working in teams to get the big things done — not just for the team’s objectives, but for the enterprise’s objective to create a world-class customer experience.”

Fashion’s traditional retail model, for instance, stood unchanged for many years, but disruptions to the industry have put a new premium on speed and customer experience. Roger Young, chief human resources officer of Li & Fung, recalls the old model, in which designers showed their work on the runways of Paris and New York, setting in motion a long supply-chain process that resulted in retailers selling similar, less expensive designs to the consumer market many months later. But now, when a celebrity like Taylor Swift wears something out one night, we can count on photographs of her appearing all over social media. Her young fans want to look like their fashion role model, Young says, and “they want that on the shelves immediately.”

Today, a much different process is set in motion: Designers create a digital, rather than physical, sample inspired by the latest trends that is put through the supply chain within a matter of weeks. As Young observes, “The democratization of information and the advent of social media have brought a real focus around continued innovation to be able to give consumers what they want — and fast.”

Investor Mindset

Leaders with an investor mindset pursue a higher purpose beyond shareholder returns.2 They are dedicated to growth, but in a sustainable fashion. They care about the communities in which they operate and are intent on improving quality of life. They care about the welfare of their employees and invest in safe working conditions. Their investment mentality leads them to deepen their commitments to, and understanding of, their customers; they don’t just look at customers as streams of revenue. They pay close attention to not only what products they are selling or services they are offering, but also why they exist as enterprises. They are in the game for the long run, so they are deliberate about the big bets, even though they move with speed and agility on a daily basis. When it matters to the planet, communities, and the welfare of employees and customers, they take their time to get things right. Cherie Nursalim, vice chairman of GITI Group, a diversified business conglomerate in Asia, offers this description of the investor mindset: “Whether we call it mission-driven, purpose-driven, or even a sense of shared values, to me it’s about believing in ourselves as a business that can partake in and cocreate an ecosystem for solving social, ecological, or spiritual divides. At Kura Kura Bali, an eco-development project we are leading, we encourage our team to apply systems thinking and Theory U [change management principles] to cultivate an open mind, open heart, and open will — and it is inspirational for all of us, but especially for our younger people.”

Former PepsiCo chairman and CEO Steve Reinemund makes a similar point: “The truly great leaders have motivating, purpose-driven visions,” he observes. And Cranfield University School of Management professor emeritus David Grayson adds that it’s critical for leaders to help their organizations define their broad purpose — “something that is an authentic and inspiring explanation of how the business creates value both for itself and for society simultaneously over the long term.”

To Susan Sobbott, former president of American Express Global Commercial Services, having an investor mentality means focusing on the human impact:

When I shared our financial goals with the team, I struggled. Financial goals were pretty much all that mattered. But for me, they felt empty, because I wanted to align purpose, principles, and profits. Yet I found myself talking about achieving a 15% growth rate in revenues or 10% growth in profits or a 20% reduction in costs. I wasn’t motivated by just a set of numbers, and I found it hard to believe the team would be. So, I began framing the financial goals as the outcome. I redirected our attention to how we could change the lives of a million customers through our work as a team to help our customers thrive. All of a sudden, I, myself, was sparked, which was contagious. The team lit up with pride, having a sense of determination through a clear intention. Motivation and creativity grew, which made hitting the numbers easier.

Case Study 3: Reimagining Leadership at RBC

When Dave McKay became CEO of Royal Bank of Canada (RBC) in 2014, things were going very well for the Toronto-based global financial institution. It was the world’s 14th largest bank by market capitalization and held top positions in its home country in consumer lending, business loans, business deposits, and long-term mutual funds. McKay, however, was worried that RBC, which was founded in 1864 and has a rich legacy in Canada, had become complacent and set in its ways, relying on an old method of doing business that would not serve it well going into an uncertain future.

Consumers’ banking behaviors were changing rapidly and radically, and so accordingly were their expectations of their financial institutions. China’s emergence as an economic powerhouse was altering and intensifying the competitive landscape. RBC’s customer base and its employees were becoming increasingly diverse. Not least, digitalization, in addition to redefining how banking got done, was enabling well-capitalized upstarts to enter the marketplace while also helping traditional competitors, aided by emerging technologies, to up their game.

While the CEO knew RBC had to make a shift to prepare for the future, there remained a legacy focused on “running a tight ship,” McKay says. “I had a group of leaders who didn’t want to set bold objectives for fear of failure. That wasn’t the culture.”

To transform that culture, RBC invited its 80,000-plus employees worldwide to participate in an online vision and values jam to discuss and debate the organization’s guiding principles, core values, and overall purpose. With the foundation set, McKay then set out to align the corporate culture with the newly articulated vision and purpose. He enlisted a core team of senior leaders in 2016 and 2017 to establish a new leadership model that focuses on the behaviors critical to the bank’s future success, as well as a performance management and development system that reinforces these behaviors in employees.

McKay was acutely aware that much of the change at RBC had to come from the C-suite, with leaders role-modeling the behaviors they hoped to see throughout the organization. “We want leaders who set bolder aspirations for their teams and are willing to fail publicly and take some personal risk,” McKay says.

RBC’s leadership model encouraged people to be open to new ways of creating value, reduce complexity, and get to decisions faster. It aimed to make the bank less hierarchical in the way people worked, in part by inviting employees to share ideas with their boss’s boss — in effect acknowledging that in an ecosystem world, leaders must recognize they alone don’t have all the answers. “The strong, confident, authoritarian CEO — that worked to a large degree in the last 40 years, but that doesn’t work anymore,” McKay observes. “You’re going to move to a culture of openness, partnership-building, and authenticity.”

The organization became more team-based and agile. Reimagining the hierarchical structure led the company to discover value in places it hadn’t thought to look. The employee makeup became more inclusive and diverse.

Transforming RBC into a purpose-driven company has ignited the passion of its employees. “It’s not just about your product and service and winning and losing,” McKay says. “So many of our employees are engaged by the mission of helping the community. We’re only as strong as our clients, and our clients are only as strong as the communities where they live and work. Therefore, we have a vested interest in the health and success of that community.”

By all measures, RBC’s revamped leadership model has been a success, creating the conditions for the enterprise’s sustainable growth. The company’s strong financial performance has generated above-average shareholder returns. Employee engagement is at an all-time high, and RBC scores high in customer satisfaction and loyalty.

RBC’s transformation holds lessons for today’s corporate leaders who, by their own acknowledgement, do not feel that their companies are prepared to overcome these complex hurdles. McKay’s leadership team exemplifies all four mindsets in our leadership framework. They invested in employees, customers, and communities (investor). They became less rigid, more open, and curious (explorer). They encouraged more collaboration, inviting more participation in strategic decisions by a wide array of workers (connector). And they did this all while improving their digital skill sets and paying careful attention to results (producer).

Investing in a wide range of talent, not just high performers, was also a consistent theme throughout the interviews. Marjorie Yang, chairman of textile and apparel manufacturer Esquel Group in Hong Kong, shares this perspective. “Many of our employees don’t have a formal education,” she says. “Without further training or education, their career potential will be very limited. But we are investing in them, especially in helping them become more digitally savvy. We take every person in the company who wants to be involved through coding education, and we’ve invented a fun way that they can develop apps they can share with their kids to show them they are digital hotshots! It is very motivational for our employees to know we are invested in their futures.”

Connector Mindset

In an increasingly connected world, mastery of relationships, partnerships, and networks is a new currency that drives organizational effectiveness. “If leaders do not master collaborative relationships, both inside and outside the company, it can limit production of the outcomes needed to win our customers’ business,” states JPMorgan Chase’s Beer. Leadership teams with a connector mindset get this. It’s how they operate. This shift — regularly bringing together diverse stakeholders to achieve a shared purpose, often on a short time frame — has tremendous implications for leadership. With more diverse interests, spread across individuals, functions, companies, geography, and industries, the challenge of aligning interests becomes more complex and more urgent. “It is so important to have a diversity of voices at the table,” states John Tyson, chairman of the board of Tyson Foods. “We try to bring a diversity of skill sets, but more important, a diversity of perspectives. That helps us better solve customers’ problems, which in the end is why we are here.”

In the digital world, having a connector mindset takes on a whole new level of importance, says MIT’s Schrage:

Let’s say you are in a business that is rapidly migrating from an emphasis on products to platforms. You are likely doing so in an ecosystem environment — a complex array of partnerships with users, customers, and suppliers. You might even partner periodically with competitors when mutual benefit overshadows the core rivalry. Network effects are key — facilitating a process in which users are creating value for other users. This approach flies in the face of the more traditional view of creating strategic advantage, which overwhelmingly focuses attention on optimizing organizational capabilities to win, rather than optimizing the efficacy of interactions among users to create more valuable communities.

Explorer Mindset

“Leaders have to be extremely open to change and extremely flexible in different situations,” says Erik Gatenholm, cofounder and CEO of Cellink, a public bioprinting company that enables researchers to 3D-print organs and tissues through its offering of disruptive printers and ink. “It’s a matter of survival of the fittest. Your organization is going to go through a lot of different change cycles, and if you’re not open to that, then you are going to be a dinosaur within a year.”

Explorers are curious and creative, and they operate well in ambiguous situations. They engage in continuous experimentation and learn by listening to many, and varied, voices. Organizations whose leaders have an explorer mindset often have cultural norms that tolerate, and indeed encourage, failure, reverse mentoring, and a deep curiosity about how the forces of digitalization are reshaping the competitive environment. David Schmittlein, the John C. Head III Dean and professor of marketing at the MIT Sloan School of Management, says, “Great leadership teams in the new economy have a deep and restless curiosity. They are curious not only about driving customer and user community value, but about clarifying and pursuing their organizations’ social value as well. They ask themselves, ‘What do we offer that the world actually needs?’ This is all about crafting and articulating your leadership narrative as a team — that we will be a community of colleagues that pursues continuous invention, and that we will be intentional about it through our actions.”

Explorers are intent upon building amazing communities. They do so in a variety of ways and over an extended period of time. One of the most effective tools they have in doing so, per Schmittlein’s point, is shaping and articulating powerful narratives of what’s possible. They share stories about what great leadership looks and feels like when individuals come together as teams, and teams come together as communities, with a unifying sense of purpose and collective ambition.


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