The New Realities of Leadership
Disruptive Innovation
Disruption has and will continue to fundamentally change the way we live and work. Today’s society, including businesses, government, and individuals, is responding to the shifts that would have seemed unimaginable or unthinkable even a few years ago. Artificial intelligence (AI), robotics, Internet-of-Things (IoT), blockchain technology, and cloud computing are reinventing the workforce and will continue to impact the workplace for many years to come (Bawany 2018a). Drones and driverless cars are transforming supply chains and logistics, resulting in enhanced quality of life. The changing consumer behavior, including the preferences and expectations, in particular, of those of the millennials (better known as Gen Y ) and of “digital natives” (also known as Gen Z, those born between 1995 and 2010) who have grown up in a completely digital world, has altered the consumption patterns and demand in every area of life, including transportation, travel, accommodation, education, and lifestyle (Bawany and Bawany 2015).
The way we live and work is about to go through a profound change. In some countries, this has already been happening for quite some time now. Rapid advances in many technologies are expected to continue disrupting many of the industries in the various economies, and the impact will be felt across the globe. Yet, research by the Centre for Executive Education (CEE) and Executive Development Associates (EDA) validated by other consulting and research organizations has found that the majority of businesses and their leaders aren’t prepared for the coming age of disruption—and sadly we believe many of the unprepared won’t survive in this highly disruptive, intensely volatile, uncertain, complex, and ambiguous world.
Technology has long been acknowledged as a disruptive force that has radically changed the nature of work, business, and society in general. In the 19th century, the Industrial Revolution altered the world and how business was being managed profoundly and permanently. Then came electrification, the automobile, and mass production, just to name a few massive technological changes that have reshaped the 20th century. In the 21st century, powerful digital technologies and the rise of Internet connectivity have created a knowledge-driven economy that has revolutionized the world to a larger extent and made a great impact and profound changes in human history toward the way we work, live, and do business every day.
We are witnessing a vast range of ever-advancing technologies that are driving disruptive innovations that will continue to change and redefine our world. Advanced technologies can simply be defined as emerging technologies that may enable new ways of doing business that result in an improved employee productivity and enhanced sustainability of the organization in the longer term. Disruptive innovation,1 a term coined by Harvard Business School (HBS) Professor Clayton Christensen, can be described as “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors” (Christensen 1997).
The root causes of these transformative trends that are driving this current wave of disruption include technological growth, globalization, and demographic changes. We need to understand how the interaction between these forces has defined the present and will continue to shape the future by their impact on businesses, economies, industries, societies, and individual lives (Bawany 2018a).
Demystifying VUCA: What It Means and Why It Matters
Today, we have to acknowledge that no matter where we live, work, or manage our businesses, there are lots of uncertainties around us, and these could be a result of political, economic, societal, and cultural changes. Across many industries, a rising tide of volatility, uncertainty, and business complexity is roiling markets and changing the nature of competition (Doheny, Nagali, and Weig 2012).
VUCA is an acronym that emerged from the U.S. Army (Whiteman 1998). They described the environment as a VUCA world, meaning that it was volatile, uncertain, complex, and ambiguous (see Figure 1.1). It describes the “fog of war”—the chaotic conditions that are encountered on a modern battlefield. Its relevance to leaders in business is clear, as these conditions are highly descriptive of the environment in which business is conducted every day.
Figure 1.1 The four elements of the VUCA business environment
It is a challenging and rapidly changing and evolving business environment where not all the facts or interrelationships can possibly be known or identified. Leaders will often have to operate or make decisions without having all the facts or fully understanding the forces that may be influencing a situation or a business problem. Hence, there is a need for leaders to develop and demonstrate relevant skills and competencies so as to operate in this “new normal” and embrace this ambiguity and lead their organization to success with the right strategy and vision despite the chaotic environment in which they operate (Bawany 2018a).
However, leadership-as-usual, including creating a vision, is not enough in a VUCA world. Leaders need to understand the following implications of the characteristics of VUCA for their organization. Their relevance to today’s workplace is clear, as these conditions are highly descriptive of the environment in which business is conducted today:
- Volatile: Things change unpredictably, suddenly, and extremely, especially for the worse. There is a brutal increase in the four dimensions of changes we face today—type, speed, volume, and impact. An example would be a relatively unstable change where it is unexpected and may be of unknown duration. It is not necessarily hard to understand; knowledge about it is often available as in the case of prices of a raw material fluctuating after a natural disaster, such as when a fire takes out a supplier.
Challenges faced are unexpected and mostly of unknown duration. We can overcome this challenge by gaining knowledge and being well prepared with the information and resources necessary.
- Uncertain: As a result of volatility, we are unable to predict future events, resulting in lack of knowledge of important information; being doubtful and unclear about the present situation and future outcomes; and not being able to be relied upon. An example would be the lack of knowledge in a competitive situation where the basic cause and effect are known such as a competitor’s expected product launch can change the future of the business and the market.
Today’s business environment is constantly changing, especially in this new age of technology. There is a need to keep pace with changing times and stay relevant. We, therefore, need to invest in information, which works best in conjunction with structural changes allowing organizations to reduce uncertainty.
- Complex: Many different yet interconnected parts and multiple key decision factors are at play in the integration of diverse agents, emergence, adaptation, coevolution, and weak signals. An example will be when a company operates in many countries, each of which has its own regulatory environment, tariffs, and cultural values. Restructure, bring in or develop specialists, and increase resources adequate to address the complexity.
Many situations consist of various interconnected parts and variables. Being well informed of all these various parts can be extremely overwhelming and, more often than not, technical too. Organizations should develop specialists who are better capable of dealing with such complex issues. Building upon resources that are adequate enough to address complexity can go far in the success of an organization as well.
- Ambiguous: Open to more than one interpretation—the meaning of an event can be understood in different ways. Causal relationships are completely unclear as no precedent exists, forcing you to face unknown factors. An example will be when a company decides to move into developing markets or to launch new types of products that are outside its previous experience. Companies need to be prepared to take on risk, perhaps initially in trial markets, to evaluate outcomes. Lessons learned can be applied progressively over time to other markets.
In order to tackle the issue of ambiguity, organizations should experiment and take calculated risks. Generating hypotheses and testing them allows the business to be careful in new ventures, ultimately allowing them to learn from these investments.
Leading in a VUCA world provides not only a challenging environment for leaders to operate and for executive development programs to have an impact but also a much-needed range of new competencies. The new reality is a result of the realization that new and different capabilities are needed to succeed (Bawany 2016a).
The Fourth Industrial Revolution (Industry 4.0)
Digitization has an impact on all organizations across various sectors or industries. However, the impact is different in each case, which makes it essential for companies to have a good understanding and perception of what challenges they are facing and how digitization will affect their company, that is, which opportunities can be seized and which threats have to be faced (Bawany 2018a).
The impact of digital disruption has to be managed alongside the more general VUCA operating conditions of recent years (Bawany 2016b). An ability to calculate and manage/mitigate risk will, therefore, be another key requirement of leaders seeking to propel their organizations into the digital age. Navigating a course through these difficult conditions may also force leaders to look at their individual leadership styles and decide whether it needs to be adjusted.
Professor Klaus Schwab, the founder and executive chairman of the World Economic Forum (WEF), has published a book entitled The Fourth Industrial Revolution in which he describes how this fourth revolution is fundamentally different from the previous three, which were characterized mainly by advances in technology (Schwab 2017).
Schwab describes the first three industrial revolutions as the steam-enabled transport and mechanical production revolution of the late 18th century; the electricity-enabled mass production revolution of the late 19th century; and the computer-enabled technology revolution of the 20th century, which began in the 1960s.
The Fourth Industrial Revolution (or Industry 4.0 as it is more commonly known) represents the combination of AI, robotics, cyberphysical systems, the Internet of Things (IoT), and the Systems of Systems. In short, it is the idea of smart factories in which machines are augmented with web connectivity and connected to a system that can visualize the entire production chain and make decisions on its own. In this fourth revolution, a range of new technologies will evolve that combine the physical, digital, and biological worlds (see Figure 1.2). These new technologies will impact all disciplines, economies, and industries and even challenge our ideas about what it means to be human (Bawany 2018d).
Figure 1.2 The evolution of the Industrial Revolution
Technological innovation is on the brink of fueling momentous changes throughout the global economy, generating great benefits and challenges in equal measure. To thrive in this environment, Schwab argues, public–private research collaborations should increase and should be structured toward building knowledge and human capital to the benefit of all.
There will be enormous managerial leadership challenges as the impact of technology and the disruption that follows will result in an exogenous force over which leaders would have little or no control at times. However, it is the role of leaders to guide their teams and to be mindful of these forces when making business decisions that would impact the sustainability of their organizations. They should thus grasp the opportunity and power so as to shape the Fourth Industrial Revolution and direct it toward a future that reflects the organizational values and success.
To do this, however, leaders must develop a comprehensive and collective, shared view of how technology is affecting the lives of their employees and at a macro-level how it is reshaping the economic, social, cultural, and human environments. There has never been a time of greater promise, or one of greater potential peril. Today’s leaders and decision makers, however, are too often trapped in traditional, linear thinking, or too absorbed by the multiple crises demanding their attention, to think strategically about the forces of disruption and innovation shaping their organization’s future.
In the end, it all comes down to people and values. By putting people first and empowering them, leaders need to shape a future that works for all stakeholders. In its most pessimistic, dehumanized form, the Fourth Industrial Revolution may indeed have the potential to “robotize” humanity and, thus, deprive us of our heart and soul. But it can also complement the best aspects of human nature: creativity, empathy, and stewardship; it can also lift humanity into a new collective and moral consciousness based on a shared sense of destiny. It is therefore incumbent on all of us to make sure the latter prevails.
Leading in Industry 4.0 requires the next-generation leaders to be able to adapt themselves to these new technologies, and to be able to do so effectively the relevant leadership skills and competencies would need to be developed and demonstrated effectively (Bawany, 2019).
1Given how extensively the phrase “disruptive innovation” has been invoked in the past 20 years, Christensen revisits that most famous of innovative ideas in the article, “What Is Disruptive Innovation?” published in the December 2015 issue of the Harvard Business Review. He asserts that the concept of disruptive innovation has proven to be a powerful way of thinking about innovation-driven growth. “Many leaders of small, entrepreneurial companies praise it as their guiding star; so do many executives at large, well-established organizations, including Intel, Southern New Hampshire University, and Salesforce.com” (Christensen 2015). Regrettably, Christensen believes that the disruption theory is in danger of becoming a victim of its own success. Despite broad dissemination, the theory’s core concepts have been widely misunderstood and its basic tenets frequently misapplied. Furthermore, essential refinements in the theory over the past 20 years appear to have been overshadowed by the popularity of the initial formulation.