2016 has not been kind to those of us who like our comfort zones. We’ve been kept on our toes by mega-acquisitions, exploding smartphones, industrial scale cyber crime and the high drama of Brexit. When the loss of musical legends and downsized chocolate bars are thrown into the mix, it’s understandable that some of us mere mortals have wanted to take to the hills.
Business leaders are, however, made of sterner stuff. At Criticaleye, we’ve pulled out some of the main themes to emerge from our interactions with executive and non-executive directors over the past 12 months.
Here’s what grabbed our attention…
Silos are a problem…
A poll conducted at our CEO Retreat revealed that 39 per cent of respondents intended to implement significant change over a 12-month period, while 45 per cent said there would be some change.
Interestingly, seventy-four per cent said that organisational silos slowed down the execution of business strategy (45 per cent to a great extent; 29 per cent to some extent).
There is concern about the ability of senior executives to deliver significant change successfully. The same research went on to uncover that 11 per cent would be overhauling the executive team, while 42 per cent felt there would be some new faces brought in.
This was backed up by responses to a similar poll at our Human Resources Director Retreat earlier this year, where 40 per cent said a lack of leadership capability is a barrier to growth.
… Cross-team collaboration is extremely hard
Agile and collaborative working practices are of increasing interest to CEOs and HRDs who require a more fluid, adaptable workforce (unsurprisingly given the previous set of stats).
Cross-team collaboration is hard to execute but, with planning and perseverance, there can be significant rewards. Gary Browning, NED and former CEO of Penna, said: “I inherited a company that in 2006 was very siloed and almost set up to be internally competitive.
“It was really difficult to get people to work together across divisions for the benefit of the client. We had people asking why they should allow their top person to go off and work on something that didn’t count towards their own results. It took a couple of years and huge amounts of investment to break down that mindset.”
There has to be clarity around responsibilities, reporting lines and how the individuals on these teams are assessed and rewarded.
Science fiction has become reality
Discussions about the power of data and analytics to understand customer behaviour has moved on dramatically in the past 12 months. While this area remains important for businesses, growing attention is also being paid to the impact of artificial intelligence and robotics on the workplace.
Mark Spelman, Executive Committee Member at The World Economic Forum and Co-Head of its Future of the Internet Initiative, assured us that we are not on the verge of some dystopian reality. “Don’t fall for the lie that it’s all about technology – it’s about technology and human skills coming together," he said.
“The creative skill-set becomes more important in this world. You’ll also need emotional intelligence combined with the social skills of persuasion and teaching.”
Nevertheless, it’s reasonable to expect a painful transition within certain sectors. “A survey by the World Economic Forum found that we could lose five million jobs over the next five years due to technology. Office and admin workers will lose out due to automation and it won’t just be those at the low end. Roles like accounting and legal will also be affected,” Mark added.
Wanted: New business model (must be a fast learner)
At our CEO Retreat, Steve Holliday, Non-executive Director at the Department of Energy, Food and Rural Affairs (Defra) and former CEO of energy company National Grid, neatly summarised the dilemma faced by boards by asking: “How long do you hang on to a business that generates cash and profit, but will be disrupted?”
When National Grid recognised that it must decouple revenue from depleting natural commodities, Steve knew there was no point in shying away from difficult decisions. “Don’t always apply the principles and disciplines of capital investment to a change programme. It is something we have to do and an equation won’t give you the answers. You need to do this with passion,” he said.
From a board perspective, there is greater pressure to take a longer-term view. Stine Bosse, Member of the Supervisory Board of Allianz and Chairman of BankNordik, said: “I would argue that you can’t talk about anything in the future without considering technology. Last year, it took up about 30 per cent of board time. That included educating the board – we have to go into the machine room and understand the technology, then we can think about its impact strategically.
“At Allianz, we have just had a full day looking at where disruption is likely to come from – a full day for the board is a lot of time. We were thinking about driverless cars and the implications for insurance."
For many, it’s inevitable that the composition of boards has to evolve. “The average age will fall because boards will need to have age diversity,” added Stine. “Intuitive knowledge of technology [needs to] enter the boardroom. Of course, [everyone] has to be able to satisfy the regulators’ requirements, but let’s not be too frightened about that; you can educate yourself to that end.”
Mastering the art of innovation
In one guise or another, the recurring theme in 2016 has been how to succeed at innovation. For large-scale organisations, with legacy systems and hefty P&Ls, what steps do you have to take to reinvent delivery channels and/or the actual products and services themselves?
It’s often a journey into uncharted territory, where leaders are uncertain about what environment to create in order to enable ideas to flourish. Charlie Wagstaff, Managing Director at Criticaleye, said: “Scale is no longer a differentiator for businesses, it’s all about speed and leaders need to work out how to drive that in their organisations. They need to provide a framework that supports that.”
Andrew Miller, former CEO of Guardian Media Group (GMG) and Non-executive Director at The Automobile Association (The AA), said that “you should celebrate the heritage of a business but accept that ‘celebrate’ doesn’t mean ‘protect’”.
For Andrew, it’s clear what the board and executive team need to focus on: “It’s not really about technology, it’s about leadership. It’s getting the leadership team, the board and your employees to accept that there is a need for change. Unless there is a real desire to change then there’s no point investing time and money.”
The hard part is knowing when and where to break with the past. “It’s about iterating fast,” Andrew said. “It’s about seeing ideas that work and trying things. The speed at which I see tech companies iterate is phenomenal.”
Don’t miss our next Community Update, where we speak to a number of executive and non-executive directors about what they expect to face in 2017.