Article written for the Director Journal, the official print publication of the Institute of Corporate Directors. ICD is the definitive ‘go-to’ resource for Canada’s directors and boards. With contributions from corporate directors Kathy Milsom (Greater Toronto Airports Authority), Alan Hutton (Aequitas NEO Exchange), Paul Cantor (QuadReal Properties), Poonam Puri (Arizona Mining) and Merete Heggelund (Standards Council of Canada, Allied Oil and Gas).
Edmond Mellina argues that the board must ensure that management hires “co-disruptive” leaders and also serve as a bridge between the new class of innovators and the organization’s legacy parts.
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Netflix is celebrating its 20th anniversary. The startup began disrupting the movie rental business by offering convenience: with a few clicks, we could rent movies at any time from the comfort of our homes. Compared to visiting a Blockbuster store during a winter storm, that was cool. But we had to wait for the DVD to arrive via mail. Today, there is no more waiting. The video streams instantly.
Organizations started embracing change management as a formal discipline around the time Reed Hastings and Marc Randolph founded Netflix. Since then, change has accelerated as much as their company’s delivery model.
Yet organizations have not adapted to the new nature of change. They continue to rely on methods, mindsets and structures developed when the pace of innovation was relatively controlled. For example: most businesses still adopt a phased approach to managing change. This strategy made sense when the dust had time to settle before the next disruption. But that era is gone forever. In our increasingly digital world, change is fast-paced, constant, overlapping and disruptive.
But that era is gone forever. In our increasingly digital world, change is fast-paced, constant, overlapping and disruptive.
The MIT Sloan Management Review highlighted the mismatch when it recently reported that “companies are unprepared for the [digital] disruptions projected to occur in their industry… largely due to internal obstacles”. Typical signs include stifled innovation, not adapting fast enough, and heighten uberization anxiety.
It is up to the board to ensure that the organization has the culture, people and capabilities to embrace change in the age of digital disruption. “This is both a strategic and risk-related subject. It must be a focus for directors”, says Alan Hutton, a member of the board of Aequitas NEO Exchange, Canada’s newest stock exchange.
Desperately needed: Co-disruptive leaders
Organizations have a stark choice to make: continuously disrupt themselves or risk becoming irrelevant.
Therefore, they need disruptive talents – particularly within their leadership ranks. Researchers have started developing profiling instruments to help the board and management identify disruptive talents. That is a good start.
But if having raw disruptive talents is great for startups, it can dangerously back-fire in established organizations. The latter require leaders who continuously reinvent the business without fully alienating the current organization. These leaders are co-disruptive in the sense they take a highly collaborative approach to disruption.
These leaders are co-disruptive in the sense they take a highly collaborative approach to disruption.
Of course, not every leader should be co-disruptive. But it is essential to have managers with a bias towards shaking up the status quo, particularly in the C-suite, among innovation teams and in business units most at risk of digital disruption.
As part of its oversight responsibility, the board must ensure the organization attracts and deploys a critical mass of co-disruptive leaders in these three key areas.
Paul Cantor, chair of QuadReal Properties Ltd, goes one step further by stressing the importance of co-disruptive thinking within the board itself. “A good board needs more than strategic thinkers, hard questioners, and consensus builders. It needs blue-sky thinkers too. Sometimes it’s the blue-sky thinkers who provide the ideas for disruptive change”, he said. Hutton added: “The make-up of the board requires insightful minds that are sensitive to the forces of change at play.”
Furthermore, “the board should ask itself what its role is in innovation. Is it acting as an enabler or a wet blanket?” said Kathy Milsom, board member of the Greater Toronto Airports Authority and chair of its risk oversight committee. “For example, in oversighting an organization’s enterprise risk management, if directors don’t consider opportunities as much as risk exposures in establishing risk appetites and tolerances, they may inadvertently be stifling innovation.”
Keep the corporate immune system in check
The intrapreneurs — those innovative people who act like entrepreneurs within larger organizations — often refer to the much-maligned “corporate immune system” that kills their brilliant ideas. But the real problem is elsewhere, starting with the lack of co-disruptive leadership in the key areas listed above.
Compounding the problem is the popular practice of embedding innovation teams in tech hubs or innovation districts. It is a great way to boost creativity while shielding the disrupters from the risk-avoidance, control-oriented traits found in most corporate cultures.
Compounding the problem is the popular practice of embedding innovation teams in tech hubs or innovation districts.
“Even large, seasoned public companies that live and die by performance measures need to create space for breeding innovation where teams of employees can take risks with new ideas, new processes, new products, and face failure without repercussions,” explained Poonam Puri, a corporate director of Arizona Mining Inc. “The board should ensure that such spaces exist and thrive.”
While innovation hubs provide the necessary insulation to corporate innovators, the distance and separation can encourage the immune response, making it harder to move from idea to commercialization.
The board, therefore, must ensure that management develops strong partnerships between innovation teams and the legacy organization while making the corporate culture more innovative.
Collaboration starts in the C-suite
McKinsey Quarterly, in a recent article entitled “The Case for Digital Reinvention,” reported on new research to understand what sets apart today’s digital winners, in terms of higher revenue and income growth than their competitors. Not surprisingly, the winners are better at responding strategically to digital change. They also were found to have four times less siloed mindsets and behaviours. By smothering collaboration, silos prevent nimbleness and innovation.
A collaborative culture starts in the C-suite with a CEO who stifles the infighting that can easily consume an executive team. Senior managers have a strong competitive spirit and political savvy. These qualities fuelled their climb up the corporate ladder. When not channeled towards propelling the organization forward, they can wreak havoc in and below the C-suite.
A collaborative culture starts in the C-suite with a CEO who stifles the infighting that can easily consume an executive team.
Microsoft’s well-documented case illustrates the point. Bill Gates could foster collaboration within his top team. The tech giant remained at the forefront of innovation under his leadership. Once Steve Ballmer took over, the culture became highly political. Microsoft lost its foresight and failed to seize on massive strategic opportunities like mobile phones, tablets and search.
However, “collaboration should not equate to a consensus culture” says Merete Heggelund, corporate director of the Standards Council of Canada and Allied Oil and Gas Corp. “The important thing is to ensure that you have [a] leadership team or board with different education, experience and thinking styles, working collaboratively on problem solving in a culture of constructive conflict so all perspectives on an issue can be thoroughly understood before a decision is made.”
Keep it local, keep it real
In the early days, change management was a function under the chief information officer. Given the people side of change, chief human resources officers lobbied successfully to have it under their department. Later, chief transformation officers jumped into the fray.
But all these structures have a fatal flaw. They rely heavily on centralized change capabilities. Yet, change execution is a game of proximity. Distant leaders cannot play the game effectively, whether you measure distance in terms of geography or hierarchical levels. Local leaders represent the true keystone of change because they have significantly more influence on their people than any senior executives.
Change execution is a game of proximity. Distant leaders cannot play the game effectively. Local leaders represent the true keystone of change.
Ubiquitous and nimble change leadership is key to surviving and thriving in the digital age. Organizations must move away from the centralized model by boosting the change leadership of their local managers.
Wear the right shoes, carry the proper tools
Golfers often take a break when the beverage cart is nearby. They have time for it. When Netflix was a DVD-rental service, change management was akin to a round of golf. Like the successive holes on a golf course, projects were organized around well-planned phases – with detailed step-by-step templates for each phase. At the end, we had time to “refreeze” and “anchor the changes”.
Today, change management is like a basketball game: fast-paced and super dynamic. Wearing golf shoes to play basketball doesn’t make sense. Similarly, organizations must rethink the tools they use to execute change.
Today, change management is like a basketball game: fast-paced and super dynamic. Wearing golf shoes to play basketball doesn’t make sense.
The board must challenge the continued use of DVD-era methodologies. Given they are the real keystone of change, the priority must be on equipping local leaders with a nimble and minimalist toolkit. In our experience, today’s leaders need stethoscope-like change tools to tackle two critical tasks and nothing else: monitoring acceptance and resistance on the fly; and influencing through the inevitable politics of change. Like the ER doctor’s go-to instrument, these tools should be readily available, simple yet effective, and a catalyst for action in a dynamic environment.
The board as a co-disruptor
In summary, the time has come to disrupt the process of change management itself. The board must give the necessary impetus so that the organization adapts to the new nature of change.
Edmond Mellina is president and co-founder of ORCHANGO and a board member of the Strategic Capability Network. He was CIO at Delta Hotels when Expedia disrupted the hotel business; and VP corporate development for the technology business of Envoy Communications Group when marketing agencies started to become digital.
Copyright © 2017 by ORCHANGO. All rights reserved. | Photo credit: © ICD Director Journal