Ideas Made to Matter
5 insights on digital leadership from MIT Sloan Management Review
Today’s business leaders are adjusting to new ways to communicate and get work done. This means that digital savviness is becoming just as important as business acumen for managers and executives. The latest insights from MIT Sloan Management Review highlight how a diverse range of digital services — from social media to artificial intelligence to crowdsourcing — are influencing leadership styles, data-driven initiatives, and supply chain transparency.
The importance of digitally savvy leadership teams
New research suggests that companies with digitally savvy executive teams outperform their competitors. Revenue growth is 48% higher for firms whose leaders understand how emerging technologies will impact business success, and net margins are 15% higher. Five roles have the strongest link to high performance: CEO, CFO, head of marketing, head of corporate communications, and head of compliance.
and Stephanie Woerner of the MIT Center for Information Systems Research, along with Bentley University doctoral candidate Aman M. Shah, find that digitally savvy leadership teams operate differently in several key ways. Among other things, they adopt evidence-based decision-making, they turn existing products into digital services, and they encourage experimentation. Altogether, these steps help companies better meet customers’ needs, and generate more revenue from new offerings than their peers.
Developing digital savviness is an exercise in upskilling. A common strategy is for one senior executive to coach leaders in the five key roles, then work through other leadership positions. It helps to strike up conversations with the CIO and CTO, who by the nature of their role are more likely to be digitally savvy, and to forge partnerships with external startups or technology accelerators. Finally, firms shouldn’t be afraid to replace leaders who don’t see how technology can and should shape strategy.
4 ways to balance digital and cultural transformation
Nearly 90% of workers believe that digitally savvy leadership is critical to future success, according to a global leadership survey conducted in the summer of 2020. Clearly, leaders must be engaged in digital transformation. What’s more, with an increasingly digital world blurring the lines among families, friends, and colleagues, and with digital platforms making leadership instantly visible, leaders cannot ignore how this transformation impacts power and accountability dynamics within their organizations.
Michael Schrage, a visiting scholar at the MIT Initiative on the Digital Economy, and his co-authors provide several tips for navigating this balance.
- Authentic communication is critical, especially when steering a company through a crisis such as COVID-19. This requires vulnerability from leaders who have often been trained to be authoritative.
- Heightened attention to inequity offers an opportunity for organizations to expand networks to include individuals who aren’t ordinarily connected. Done right, this can encourage creative problem-solving.
- “Reverse mentorship” enables younger, more digitally savvy employees to assist managers or executives. This shows that leadership is willing to learn and to no longer turn to junior staff for all things digital.
- Given the potential for words and images to go viral, transparency and clarity must be the new default. This poses an added challenge of forcing leaders to tell stakeholders where a company stands on issues that impact the business, its customers, its suppliers, and the community.
Why global companies must encourage supply chain transparency
In November 2020, global brands such as Apple, Disney, and Nike testified before Britain’s Parliament amid allegations of exploitation of Uyghur populations in China’s northwest Xinjiang province. (The U.S. Department of State has since declared this genocide.) From 2015 to 2019, environmental and social issues erased roughly $500 billion of the value of public companies in the United States. This scrutiny shows that companies must know what’s happening in all aspects of their supply chains, according to MIT Sloan associate professor
Improved supply chain transparency provides insight into where socially responsible practices are taking place and where improvement is needed. Efforts to gain transparency at a global level face two key obstacles, but emerging strategies show promise for addressing them.
- Limited infrastructure makes it difficult and expensive for independent farms and factories to implement technology such as blockchain or internet-connected sensors. But crowdsourcing platforms can allow workers deep in the supply chain to anonymously report potential issues using mobile phones. In turn, this gives firms a robust data set to analyze potential environmental and social risks.
- Transparency can put some suppliers at a disadvantage if not everyone within the supply chain chooses to discloses information. Firms should position transparency not as a requirement for compliance but as an opportunity to create business value. Incentives such as preferential contracts and joint capacity building initiatives can encourage suppliers to increase transparency.
Big data and AI are no longer experimental — but data leadership roles remain in flux
Data, technology, and analytics executives have mixed feelings about their role, according to the latest annual survey by NewVantage Partners. Half of executives say their role is “nascent and evolving,” compared to one-third who say the role is “successful and established.”
However, the percentage of executives who feel they are succeeding has increased since the previous year’s survey, while the percentage who see high turnover in the role has fallen. There are a few other signs of optimism among data executives:
- 96% have achieved successful outcomes from big data and artificial intelligence initiatives.
- 92% say the pace of investment in big data and AI is accelerating.
- 77% have shifted their use of AI out of the experimental phase and into production.
- 70% indicate that data initiatives focused on offense (generating revenue) are more important for the business than initiatives that are defensive (managing compliance and minimizing risk).
In summarizing the survey results, co-authors Thomas Davenport of the MIT Initiative on the Digital Economy and Randy Bean of NewVantage Partners suggest that more companies are beginning to put AI to work, though data-driven cultures remain rare.
How founders can keep innovation alive after they leave
When a founder leaves a company, there are obviously many questions, and whether the company will continue to innovate is often at the top of the list. Research has shown that S&P 500 companies led by professional CEOs generate fewer patents than companies still led by their founders.
In exploring the road ahead for Amazon now that Jeff Bezos has stepped down from day-to-day operations, MIT Sloan senior lecturersuggests that founders should set a solid foundation for innovation long before they leave. This will ensure that the company’s so-called innovation capital — its ability to not only champion innovative ideas but give them the right resources — isn’t directly linked to a charismatic founder.
Bezos accomplished this at Amazon through two key practices. One is to standardize the way employees present new ideas to management, which makes the process more accessible. The other is to distinguish between one-way risk, where there’s no going back, and two-way risk, where experiments can be called off with little harm done. Both give employees a license to innovate no matter who’s in charge.