Mr. Behringer, according to organizational researchers, the 21st century will be shaped by “Digital Darwinism”. Isn’t that slightly exaggerated? Why should companies that have been successful for decades with efficient hierarchies and well-functioning business models change at all?
Quite simply : to survive and to ensure their success. In this regard, the idea of “Digital Darwinism” is quite appropriate. Just because a business model has worked well so far, does not guarantee its success for the future. The danger of succumbing to this fallacy is great, especially in a period of economic strength, because cash cows still deliver. Sometimes repression also plays a factor: Change is never easy, especially when laboriously optimized structures and processes are challenged and high risks are perceived. The tendency is to block these out, which is easier when success provides a convenient justification. This is a very human reaction.
However, digital technologies are rapidly changing our world, in private as well as in business. This pressure for change requires companies to become more dynamic. This cannot be portrayed in the rigid structures in which, for example, many German industrial companies are set up today. At the same time, new business models are emerging everywhere, driven by small, lean, innovation-driven companies. And the big tech companies in the US and China are investing heavily in technologies like digital platforms or AI to aggressively attack the business models of all sorts of industries. That will hardly bypass any company.
But for most decision makers, this doesn’t seem to be that dramatic yet. The number of digital buzzwords may have increased in mission statements, in management meetings and in annual reports, but in the actual departments there is often a frantic standstill, such as in investment decisions for new technologies. Why is that?
Many executives are not even aware of one important point: in the digital age, their position in the value chain is no longer stable. In the past, intellectual property, i.e. specialized knowledge, patents and their frequent advancement, was reassuring: from time to time, new competitors appeared on the field, but the game itself and everyone’s role in it followed a clear path.
But the disruptive power of digitalization lies in forcing companies to play a completely new game, the rules of which they are just beginning to learn. A game in which the customer or new players question their growing position in the value chain. A good example is the automotive industry, where a lot of digitalization know-how was developed, for example in factory automation, but where it was also underestimated for a long time which potential exist in data-driven business models, for example in the area of connected cars. This enabled other providers such as Google, Apple and Co to intervene. As a result, the OEMs found themselves in the significantly weaker position of providing only the hardware, e.g. the body and drive, for the actual driver data business.
Now of course, every manager would probably like to actively shape that change, rather than just react to it. What is needed for this?
The development capability of the organization is the key. At the moment, corporate structures are geared towards efficiency and evolutionary advancement, in other words improving what has always been done. Now, however, new business models are supposed to be developed, as decentralized as possible, close to the customer and with high agility. This requires something from hierarchical structures that is not at all in their “DNA”.
Managers instead need the courage to defragment their organization: Largely self-sufficient units have everything they need to develop quickly and flexibly. This is a departure from building central, customer-neutral support functions. Flexible network structures supplement or replace the hierarchical structures and silos depending on the industry.
Which starting point do you recommend?
To initiate such a change, the first homework assignment goes to the management: The organization needs a new framework into which it can gradually grow. This process differs significantly from traditional organizational development. Structures and content are dictated with much less granularity; instead the focus is on new roles, especially for executives, and a broader sense of business. Incidentally, it is not possible to rely on the powerful appeal of flagship projects. Such an approach usually fails. The key is to open up the space for initiatives across the enterprise and to actively fuel and support them.
However, this involves considerable complexity – who manages all of it to produce the desired results at the end of the day? Is a “Digital Leader” the right authority for it, in other words a CDO at the board level or department head, who is completely focused on the digital transformation?
The necessary flexibility for new business models is not achieved by “installing” a few additional top managers. It doesn’t matter how brilliant they are, in the end, success always depends on how harmoniously the triad of organization, people and technology is orchestrated. And that only works in a team. The people inside and outside of an organization ultimately want that everyone looks to the future in managing the company, not just the manager. That is why, first and foremost, a new leadership paradigm is necessary, with focus on leadership that makes sense rather than solely efficiency.
Unfortunately, this point is often ignored in the discussion about “Digital Leaders”. These are not just tech gurus and IT geeks, but first and foremost executives who understand how to create completely new structures, work methods and ways in the digital reality so that employees work creatively, networked and at the same time efficiently. This requires strong awareness of the company management about the development direction and the purpose of the organization, as well as their own contribution to it. This is perceived by employees, but also customers and other stakeholders. Everyone wants to be part of it; everyone wants to connect with the enterprise.
Do you not see the risk that executives only pay lip service to the digital transformation, but are ultimately mostly interested in preserving their own power or status quo?
Of course, but this strategy is doomed to fail. This really only happens if I, as a manager, cannot imagine a different future for myself and the company. Managers have to ask themselves: What is my role in the future, what do I contribute? This can be a Herculean task that requires assistance. No company should leave its executives alone in this endeavor.
It takes three ingredients that build on each other: Imagination, confidence and courage. Many executives I’ve talked to fear a loss of significance that goes hand-in-hand with a breakdown in hierarchical structures. But that’s not the case. The influence of new leadership roles is just as big. Managing portfolios instead of areas or pursuing an investment approach instead of managing an investment plan opens up new horizons for experienced executives. This imagination has to be awakened, for example with the help of tools from the field of “Mindful Business”.
Does that mean every manager should act like Elon Musk or Richard Branson?
No, these are special cases, of course. Every company has its own place, its own challenges, and not every CEO has the goal of playing such a leading role in his or her market. Even as a “hidden champion” you can be extremely successful, without any media omnipresence.
But the area that both master perfectly is the ability to think their way into new structures. And both assume a role model function in another aspect: the meaning of their entrepreneurial actions follows the “for what?”, not “why?”. This is a subtle but significant difference, because this question implies an element of serving society. These are exactly the core competences that executives need to lead a team or a company into the future.
Boris Behringer founded his first computer retail company in 1994, which he ran for six years. While studying economics he founded other companies. From 2001 to 2017, he led many projects and areas in the Finance & IT, Marketing & Sales, Development and Production departments at Porsche AG. Transformation has always been the central theme of his actions during this time: For example, Boris Behringer and his global team created digital platforms and built the Porsche Digital Lab in Berlin after a new unit for strategy and process development in supply chain management.
As a transformation advisor, Boris Behringer’s work with executives from large corporations and medium-sized companies focuses on reconciling feeling, thinking, acting and working. To give this approach even more power, he and his partner founded the leadership platform Friends4Leaders, where business, technology and awareness merge into a cocktail of success. More information at https://www.borisbehringer.de and https://friends4leaders.com.