What makes someone a great leader in the digital economy?

What will great leadership look like in five years? What about in 10? Douglas Ready, a senior lecturer in organizational effectiveness at MIT Sloan and an expert on executive development, has lately been considering these questions as part of a Big Ideas research initiative with MIT Sloan Management Review and Cognizant. Ready has been thinking, too, about why they matter: we are becoming an ever more digital economy, and leadership must adapt.

Ready asserts that a handful of leadership characteristics will endure no matter what. Integrity comes to mind, as do courage and the ability to execute. But other contextual characteristics, as he describes them, must be responsive to the evolving world of business.

“So, whereas crafting a vision and a strategy is an enduring leadership characteristic, doing so in a transparent, inclusive, and collaborative manner is a contextual characteristic, given the expectations of the new workforce,” Ready writes in a recent article in MIT Sloan Management Review. “Great leaders will need to more artfully merge the ‘what’ with the ‘how’ to thrive in tomorrow’s world.”

“Leading Into the Future” is the first in a yearlong exploration of the future of leadership in the digital economy. The research team is tackling a broad range of subjects related to this issue through a global survey and in-depth executive interviews with those most heavily involved in digital transformation. Below are three insights offered from the series so far.

Mind the mindset gap

In partnership with MIT Sloan Management Review and Cognizant, Ready surveyed more than 4,000 managers and leaders from over 120 countries on their preparedness for the transition to a digital economy. Only 12% of respondents strongly agreed that their organizations’ leaders had the right mindset and 9% strongly agreed that their leaders had the proper skills to lead in the digital economy.

To Ready, this “mindset gap” is more concerning than the skills deficit. “We can train for the digital skills that are important for future success,” he writes. “But developing a digital mindset is a more complex challenge because it is a less tangible one to address.” And as long as the mindset gap exists, so do critical blind spots about how the digital economy is eroding old ways of doing business.

The four digital blind spots that Ready identifies are:

• Strategic: Emphasis today needs to be on platforms, the space in which users create value for other users. This is fundamentally distinct from traditional views of creating strategic advantage. Without a mentality focused on platforms, a company’s leaders risk investing in increasingly obsolete ideas.
• Cultural: Far more than talking about digital leadership, leaders need to live it; they need to lead by example. Absent this, companies will grow out of touch with the cultural currencies of the time.
• Human Capital: Digital leaders need to proactively design talent policies and practices that will attract, motivate, and retain a new wave of workers who seek investment in their professional growth and a sense that their contribution has purpose.
• Personal: As noted above, 12% of respondents feel their leaders are prepared to lead in the digital economy. However, when asked about their own preparedness, 26% of respondents believed themselves up to the task. Generally, 80% of people believe themselves above average. As Ready writes, “We must be mindful of not believing our own press releases.”

For a full discussion of each blind spot, and how to address the mindset gap, read the research highlight: “Dodging Digital Blind Spots.”

Digital leadership will fail without trust

Strong leadership was once about creating standardized processes, five-year strategic plans, and then establishing controls to help achieve these plans. An interview with Arthur Yeung, who sits in the executive committee meeting of the Chinese internet giant Tencent, reveals how out-of-date this approach has become.

Leading in a digital world is instead about creating a culture that encourages — even demands — rapid innovation and experimentation. It is about empowering employees to feel and think like owners so that they remain motivated to create new opportunities. It is also about establishing a kind of radical transparency in which voices across the hierarchy can be heard. But all of this requires, in turn, the cultivation of an open and trusting environment.

“In the digital economy, we realize we need to hire leaders who can create an innovation-minded culture that fosters creative thinking, agility, and speed,” Yeung said. “We can’t do any of those things without building a solid foundation of trust and empowerment.”

Read more about the necessity of trust, along with three other key aspects of digital leadership, in the research highlight: “The Enabling Power of Trust.”

Relearning creativity

In the early 1960s, NASA asked researcher George Land to develop assessments of creativity, resourcefulness, and innovation for the employees of the space program. “After all, if you are pursuing a moon shot, you better have a team with the most creative minds on the planet,” Ready writes. The tool that Land created turned out to be very effective and served a critical role in NASA’s selection process for both astronauts and mission control.

He later modified the tool to study children. He started with five-year-olds and found that, against the test’s criteria, 98% of them performed at “genius level.” Others were skeptical, so Land made the research longitudinal, studying those same five-year-olds in five-year increments until they reached young adulthood. The scores dropped from 98% at five years old, to 30% at 10 years old, to 12% at 15 years old, to 2% as adults. Land summarized the results simply: “Noncreative behavior is learned.”

To Ready, this is an essential insight for leaders in the digital economy, especially those who work in traditionally conservative industries. In speaking with Dave McKay, the president and CEO of Royal Bank of Canada, for instance, Ready found a radical shift underway in how the bank approaches its mission. Once focused on steadiness and conservative goals, the emergence of smaller, more agile competitors in digital markets has forced the bank to reimagine itself. In essence, the rise of the digital economy has forced leaders like McKay to place a premium on employing people with creative solutions to old problems — and sometimes, even, old solutions.

“McKay talked a lot about unlocking the potential that already existed in his organization but had been drummed out of them by working under a mindset that was characterized by a fear of failure,” Ready writes. “As leaders in today’s world, we need to recall the gifts of our inner child.”

Read the research highlight: “Leadership Lessons From Your Inner Child.”