Innovation

Leadership Skills in the Digital Transformation Wave

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In an era of unprecedented change, many companies are faced with the challenges of digital transformation. Becoming a digital business means using technology to create new value in business models, customer experiences and the internal capabilities that support core operations and generate efficiencies at the same time. The successful adoption of new technologies and digital ways of working and managing teams is supported by a culture of curiosity, which allows to rethink any process or product within the framework of the respective industry. Under such circumstances, people must be digitally competent. Digital competence is a combination of knowledge, skills and attitudes with regards to the use of technology to perform tasks, solve problems, communicate, manage information, collaborate, as well as to create and share content effectively, appropriately, securely, critically, creatively, independently and ethically[1]. Senior Managers and Leaders must play a key role in the enablement of the people to apply digital competencies and leadership is the key to success to any digital transformation project. 

What leadership skills are required within organizations and teams to transform, adapt, and lead through the digital era?  

Banks have been characterized by hierarchical structures, where teams work according to procedures, standards, and clear instructions. Decision-making is slower due to approval processes, among others. Various scholars have researched and found evidence on the destructiveness and inefficiency of authoritarian and hierarchical leadership. Nevertheless, in the past years, banks are undertaking projects and structural changes to become more agile and flexible, implementing new leadership styles and frameworks to transform fast (for example, ING undertaking to operate more like Tech companies and become more agile). While banks face more stringent requirements and regulations than other industries, they are aware that rigid structures harm their efficiency. Under the new working conditions imposed by CoVid-19, banks have realized that also in flexible environments, teams can be efficient and drive change. 

Professor Heike Bruch, a leading researcher in the leadership field, has published rich research supporting the idea that flexible teams under the correct leadership will have various benefits to companies, ranging from innovation all the way to employee satisfaction. To successfully navigate through digital transformation, these leaders and their styles are required to build the correct teams and keep employee satisfaction and drive high. Research shows that the major differences between hierarchical organizations and organizations at the forefront of innovation are the soft-skills their leaders / management have, namely revolving around 3 factors: how they manage the energy in their teams, how they lead their teams, and how they incentivize teamwork. This does not mean that all teams require solely these leadership soft-skills, but rather an appropriate mix between goal-oriented and inspirational leadership. 

Within Professor’s Bruch research, she has developed the Modern 360° Leadership framework (Bruch et al., 2018)[2]. The first dimension of the framework is vertical inspiration, where leaders focus on the peoples’ emotions, by giving them meaning and inspiration in the tasks they are doing (a clear mission statement). The second dimension is horizontal sharing, where the leaders assign tasks and share responsibility with the team to achieve the goals and mission set in the first dimension. Like in the agile framework, the idea is for the team lead to share her/his responsibility with the team and make them feel “owners” of their topics. This leads to more motivated team members since they are given a sense of belonging, purpose, and the motivation to bring things forward (being part of the change). Through these mechanisms, leaders are giving employees responsibility, but they are also giving them a share of the success. By involving them in the process, digital transformation is engraved in the team spirit as they are all incentivized to push change initiatives forward. This inspirational leadership is more effective than just telling people what to do and giving them an exhaustive list of instructions (for example by telling them to follow specific instructions in a procedure document). See also as reference our finding on the latest CEO study: Outperformers also identify a sense of purpose and mission as critical to engaging employees at a rate 53% higher than Underperformers.[3]

With a clear notion of what leadership style is the most appropriate for digital transformation, it is just as important to find the perfect partner for the journey. Particularly a change partner that will be able to support, encourage and drive the new leadership culture, instead of entrenching ineffective leaders. The ingredients of the digital transformational success are the organizational capabilities, the leader’s capabilities, and the people capabilities. In a Study conducted by the “Institut für Führungskultur im Digitalen Zeitalter (IFIDZ)” only 13% of surveyed employees recognize the creativity and innovation from their managers. 74% of all surveyed people responded that innovation is hindered by the organizational culture. However, innovation is key to succeed in a digital world. 

The IBM Garage Methodology brings together all ingredients for an effective leadership culture and allows organizations to embark on a transformation journey end-to-end, from idea conception, all the way to implementation and execution. The success of the IBM Garage Methodology lies in its close ties with the inspirational leadership traits described above. It focuses on people and their competencies, culture and teamwork, and meaningful technology and tools that support and promoted effective digital transformation. Furthermore, the IBM Garage Methodology uses an iterative approach through Co-Creation, Co-Execution and Co-Operation. Through iteration, teams driving change can validate their assumptions earlier and tailor the requirements and functionalities of whatever product is being developed to the end-user. This Methodology therefore tackles two challenges simultaneously: the ideation and implementation of digital initiatives, and the required culture change for an agile organization.  

In conclusion, with increasing complexity in banks, their business models, and products, it would be contradicting to draft an exhaustive list on what constitutes the ideal leadership culture. Just as organizations need to change and adapt, so do their leaders. Nevertheless, specific leadership traits will foster better teamwork and inspire teams to lead the way for digital innovation and transformation. Instead of thinking in hierarchical structures, senior managers should place leaders that focus on the 3 mentioned factors: team energy, team leadership through inspiration, and teamwork. The mix of goal-oriented management and inspirational leadership will enable banks to transform faster and perform better than their competitors. The key is identifying in what phases which leadership style is more required, and to find the perfect partner to support the change process and help identify improvement potential within the organization and teams.

The key components for successful digital transformation are people and culture, coupled with a clear vision. Leaders who combine trust, resiliency, and vision with excellent innovation and change capabilities, and who are ready to embark on a journey filled with uncertainties.

Authors

Marinela Bilic-Nosic

Partner Risk & Compliance

+49 173 720 6070

Marinela.Bilic-Nosic@ibm.com

Britta Gross

Partner Talent & Transformation

+41 79 307 56 25                  

Britta.Gross1@ibm.com      

Jorge Mejia 

Business Transformation Consultant Risk & Compliance

jorge.mejia@ibm.com


Sources

[1] Defined by a major EU research project https://digital-competence.eu/dc/front/what-is-digital-competence/, derived by the European Parliament’s inclusion of digital competence, as one of the eight core competence for lifelong learning.

[2] https://www.linkedin.com/pulse/leadership-40-360-inspiration-shared-responsibility-heike-bruch/

[3] https://www.ibm.com/thought-leadership/institute-business-value/c-suite-study/2021-ceo

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