Many leaders are naive about digital transformation within their companies. As a result, they experience preventable leadership fails. So, what does that mean? Well, for one, the knowledge economy isn't about data and information. As everyone knows, we have plenty of data. Real leadership mastery comes from wisdom and perspective in interpreting information. There’s no ambiguity with data, but there is with the decisions we make because circumstances are not always predictable.
Leaders who wrap themselves in the c-suite have a limited view of the marketplace and their competitors. And maybe without realizing it, some leaders silo themselves not only from their teams but also from the tension of the marketplace. Not only does it adversely affect their revenue operations framework, but it limits their view of everything.
As a result, they’re unaware of the impact of market changes on business models and customer experiences. They don't see the potential new markets created by the evolution in the market. And they’re slow to react in ambiguous situations. All you need to do is to look at Netflix. That company was one of the leading-edge technology companies in the world. It was a market darling—until it too had leadership fails.
The Impact of Distance from the Marketplace
Just as every company is different, so too are the reasons why leadership fails happen. For example, some leaders lack the vision and urgency to drive transformational change. They have a limited view because they’re too far up in their ivory towers or tucked away in their corner offices. They see reports, but they’re too far from the tension and feel of their customers and competitors. And that means they don’t meet with customers, suppliers, or partners much. Or maybe they just stop listening when it becomes inconvenient.
In other companies, leaders fail to keep their fingers on the pulse of change. Yes, it’s hard when change happens so rapidly. But it’s not the job of leaders to harness everything. It’s the job of leaders to know precisely what information to use—and what to toss. Unfortunately, some leaders don’t grasp that emerging reality. So they’re unable or unwilling to accept that competitors might be using better technology or business operations that make them more agile.
Some executives still believe that things can't change so fast—or they can control every variable. They think we must learn our lesson from the last round of technology-driven disruptions. Or they believe that this time is different because something will save their division, revenues, or companies.
Why Do Organizations Struggle to Adapt?
In reality, leadership fails happen when companies struggle to adapt. But it’s even more than that. It’s when leaders think they must chase every new ball—or none— and don't systematically update their management for today's marketplace.
As a result, five main reasons exist for why companies struggle to embrace and adapt to change at the rate we experience today.
1. A Culture that Punishes Risk.
It should go without saying that companies must innovate and be willing to take risks. But many leaders create an atmosphere that punishes risk-taking. They create a myopic focus on execution results in a ‘no surprises’ culture. So, they overemphasize risk mitigation and fail to recognize the difference between acceptable and avoidable risk. They can’t separate risks inherent in the business from those resulting from a lack of strategic boldness.
2. Siloed Companies.
Unfortunately, many companies drift into silos. And even in remote environments, there’s zero need for silos. Moreover, leaders silo themselves and slowly drift from having a clear connection to customers and the marketplace. When decision-makers are distant from customers, innovation gets stifled, and technology is applied as a patchwork fix. The lack of collaboration makes change much more complicated.
3. A Short-Term Focus.
Many companies focus on the short term and earnings per share (EPS) quarter after quarter. But that makes investing in the future complicated. The reality is that as far as leadership fails are concerned, many leaders ride out their tenures and leave to their successor a problem. Instead of short-term gains, today's leaders must look into the future and have the courage to balance the short-term with what's good for a company in the long run. They manage the numbers rather than the business.
4. A Lack of Customer Knowledge.
Many leaders focus on their companies' inner workings but forget to stay connected to the outside world. And that means customers, markets, and competitors. For many leaders, there comes the point where they have fewer—if any—discussions with customers. Meaning the only information they get is what gets produced internally. As a result, inside-out decision-making becomes the norm. That's a critical error in the knowledge economy.
5. A Culture of Business Complacency.
It’s common for leaders to get shielded from the reality of their customers and the outside world. Teams don't want to show poor results. As a result, the information gets 'repackaged' for a better interpretation. Leaders surround themselves with ‘yes’ people afraid to offer challenging feedback and insights. That’s another reason for leadership fails. And it's why leaders must keep close to the feel and vibe of the marketplace for themselves. A lack of change often leads to complacency. You can’t know change if you’re trying to control everything in a world that is now, once, and always—uncertain.
Why is it a Problem for Leaders and Companies
If you're a leader and don't know what's truly happening inside your business, let alone outside, it eventually catches up with you. Like countless companies, such as Netflix or Facebook, you end up with problems and, likely, dissatisfied customers. If you're too far from the marketplace as a leader, you can’t seize new opportunities and pivot quickly. Moreover, your data won't make sense without the wisdom and perspective of being at the heart of your business.
As mentioned, data is in many ways absolute. However, our world isn’t. Leaders need to navigate ambiguity. They can’t lean on the idea that data, tech, or whatever new idea is the complete answer. The best way to do it is to know the pulse of the marketplace. If you’re too far from the marketplace, you have a weak grip on decision-making. As a result, leading with strength, conviction, and clarity gets harder and harder. And if you don't lead with strength and clarity, others will do it for you. In other words, teams or managers fill the void. They may steer the organization in a direction you don't want to go.
The Market Has Changed; Your Understanding of the Marketplace Has Not
The marketplace continually changes. It’s a living and breathing organism. And every day, new technologies, industry trends, customer preferences, and business models evolve. As we know, there’s been an explosion in the variety of offerings, changes in how customers buy, and new ways of competing. It’s gotten to become a cliché to speak about change and disruption. If nothing else, we all know that nothing’s certain. Still, some leaders operate with dated ideas.
So, what’s all of the change and disruption brought? Markets are more crowded with new entrants and more fragmented. As a result, the tension has created knowledgeable customers with new expectations. For example, there’s a drive in a data-rich world for customers to control more and more of that data. All you have to do is see what governments and companies like Apple are doing around privacy to know that it’s a public concern. Again, it’s not about data and information. There’s plenty of it. What matters for leaders is the wisdom and perspective related to that data. Companies need leaders who thrive in ambiguity.
Digital Technologies Are Disrupting Businesses and Shifting Power
Technologies such as artificial intelligence and machine learning are allowing companies to drive down costs. In the process, they’re driving new business models that challenge existing players. The impact of these technologies on business models and customer experience is significant and growing. But leaders should realize that digital technologies give customers more power and put more pressure on profit margins. As a result, a power shift is underway toward the customer.
You Don’t Realize Your Own Company Has Become a Gatekeeper
If you’re too far from the marketplace, you may not realize your company has become a gatekeeper. The best example is Meta's all-in move to lead on the metaverse, only to get slapped down. Unfortunately for Zuckerberg, he wants Meta to own the metaverse fully. Yet, despite billions poured into the endeavor, the culture within is no longer innovating. It's simply buying up marketplace competitors. And it's lost its ability to be agile in a constantly shifting environment. Meta's (formerly Facebook) has been busy catching up to new technologies for too long. As a result, Meta’s more a gatekeeper of the past than an innovator of the future.
Three Reasons How Leaders Can Drive Change
If you’re too far from the marketplace, you need to start at the bottom and work your way back up. It’s that simple. So that means you have to unbury yourself from your company's bureaucracy and get out more. To shift from leadership fails, you need to challenge the status quo and upset some people as a leader. Also, you should get closer to the marketplace to drive that change within your company.
1. Uncover Your Blind Spot & Start at the Bottom
Sure, it's cheesy, but to shift back to having your fingers on the pulse of the market, you need to start by pressing the reset button. That means you have to uncover your blind spots. So, you should talk to the people who face the customers daily. Seek to understand customers, the employees in the field, and the partners that work with your organization. And don’t forget to speak to your customers—those who're happy with you and those who aren't.
Conduct focus groups, one-on-one interviews, and surveys. If you lead a large company, start by talking to your c-suite leaders. Get a sense if they know what’s truly happening in the marketplace. Then confirm those assessments by speaking to people down the ladder. You know, those in the best position to understand what’s happening in the market. The chances are that what your c-suite leaders say and what junior people say are two different things.
2. Shift to a Culture of Experimentation
The next step is to shift to a culture of experimentation. So, look to pilot new ideas and fail so you can learn. Start by evaluating your digital technologies, business models, and customer experiences. Does everything make sense? Or is it more like a cut-and-paste job when you look under the hood? Take a portfolio approach to identify where digital transformation makes the most sense for your organization. Lean on data—but try not to control everything absolutely.
Rather than tackle company transformation as one massive project, break it into smaller pieces. Often, businesses struggle because they try to tackle too many things at once. Genuine transformation is a marathon, not a sprint. You need to stay at it for the long haul. It takes endurance to overcome the inevitable setbacks you'll experience along the way. Further, you and your team need the stamina to transform a fixed organizational culture.
3. Rebuilding Organizational Agility
Finally, you need to rebuild organizational agility and, yes, master the pivot. Companies are built on systems, processes, and structures. And in the modern marketplace, they must evolve in a continuously uncertain environment. Therefore, leaders need to change their methods and systems first. For example, you should create an organization where people are empowered to change things quickly. And, they have to do it with data, no continuous micro-management, and the certainty of ambiguity (something humans and not tech do exceptionally well).
In sum, you want to create a culture where people can experiment and learn from their mistakes. So, you want more cross-functional teams that foster collaboration. You don’t want a culture stalling growth. You also need to have processes for making decisions and changing direction. Finally, you want to invest in digital transformation tools on a single spine architecture. Meaning that it's seamless and integrated, and the output is truly what you need for decision-making.
Takeaway: Stay Close to the Tension of the Marketplace.
To avoid leadership fails, stay close to the tension of the marketplace. Remember, you need to experience the world outside your company. It means realizing what’s happening in the market and understanding how your customers change. Further, it means knowing how your competitors evolve and new entrants reshaping the industry. Think of it as paying attention to the market's ambiguities. Apply the right amount of strategic boldness to respond to the marketplace, get out of your office and lead your company through the marketplace fog. In sum, you can only drive change in your company by becoming a transformative leader.
Ben Stroup is Chief Growth Architect and President at Velocity Strategy Solutions where he helps leaders design, develop, and deploy smarter business growth strategies. Ben is a futurist, disruptor, and data champion. He leads a team that takes a structured learning approach to business challenges, which allows them to assist leaders in bridging the gap between ideas, innovation, and revenue—taking ideas from mind to market.
Velocity Strategy Solutions is an on-demand, next-generation business strategy and management consulting firm which provides clients with a relentless focus on data, execution, and results that positively impact the bottom line. Velocity delivers integrated people and revenue strategies combined with a disciplined approach to growth architecture that elevates the capacity of leaders, teams, and organizations to succeed and win more.