Employees and leaders need three skills to deal with structural uncertainty.
by Ram Charan
June 10, 2015
Consider any company's structure like this road in Shatili, Georgia — full of sharp turns that requires certain skills to navigate. (Photo by Vladimer Shioshvili, courtesy Wikimedia Commons)
People are the competitive advantage for any company. But they can be a competitive disadvantage when their skills and mindset are out of sync with the external environment.
Now leaders face structural uncertainty — frequent sharp bends in the road that seem to appear without warning. Leaders who are unprepared for this new reality put their companies — and their own careers — at risk.
Structural uncertainty is not going away, thanks to the growing use of algorithms, sophisticated software and computing power. Apple, Amazon.com and Netflix are just a few companies that use algorithms at the core of their business. These so-called math houses permanently changed the competitive landscape and sent formerly dominant companies into the ditch — recall Barnes & Noble, Blockbuster and Nokia.
This trend is in its infancy and will leave virtually no industry untouched. On top of that, global connectivity and new social media-enabled interactions are exploding, helping drive a permanent shift in consumer power. In this context, chief learning officers have a special contribution to make: ensure employees and company leaders do not become obsolete and stay on the offense but can go on the attack to remain ahead of the curve.
The following skills are crucial and should guide development for leaders:
1. Perceptual acuity: Big shifts seem to come out of the blue, but they really don’t. The seeds are there long before the impact hits a market. Take, for example, the iPod. The technology for online music sharing already existed, and its consumer appeal was known from the short-lived success of Napster, the online music sharing service shut down for legal reasons. With perceptual acuity, leaders scan the external environment for trends, events, new technologies and people who could radically shift the landscape. Leaders can develop their perceptual acuity through routine practice. Some leaders set aside 10 minutes of their regular staff meetings to pool observations. Other simple techniques, such as habitually asking others “What’s new?” and reading the Lex column in the Financial Times, also build perceptual acuity.
2. The ability to find a new path: Along with sensing that the existing business could come under threat, leaders need to be able to find a new path forward. But there’s a catch: The facts might not be clear. Consider the state of mobile payments. It seems like every day a new player is challenging traditional credit card companies. Which players prevail depends on factors that are still unfolding, such as whether hardware-based players or cloud-based players have an edge, and how consumers feel about security. Leaders can’t wait for total clarity to position their companies. They have to make judgments and be willing to changedirection quickly. Exercises that get leaders to respond to various scenarios and changed circumstances will help them become less linear and more flexible in their thinking. Exercises that put leaders in ambiguous situations also build the mental muscle to quickly sort through complexity and decide on a course of action.
3. Steering the organization: Leaders have to take others with them and shift resources at the right pace as they transition to a new path. It takes courage to extract money and people from the existing business, and a test of social skills to keep the organization on the same page. Leaders should understand how to use mechanisms such as the joint practice session, which is a meeting where transparency and intellectual honesty rule, and the leader reinforces a focus on joint problem solving and decisions. The idea is to uncover bottlenecks and problem spots, and get participants to help their peers over the hump for the benefit of entire group. It is a key mechanism CEO Alan Mulally used to turn around Ford Motor Co., and how Jay Galeota, then-president of the Hospital & Specialty Care customer business for Merck Global Human Health, was able to respond quickly when competitors’ products cleared regulatory hurdles sooner than expected.
Helping leaders build these skills will help them see opportunities, not just threats, in the external world and give the entire organization a sense of confidence. That will justify investing people’s time — and company dollars — in learning.
