Transformation

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What Has Data Got To Do With Leadership and the Survival of Your Business? In short, EVERYTHING.

What Has Data Got To Do With Leadership and the Survival of Your Business? In short, EVERYTHING.

25.01.2016.

By: Vikas Bhatia and Sodan Selvaretnam

It’s a cliché that change in the business landscape is accelerating at a faster pace than it ever has in its history. But consider this: The average lifespan of a company listed in the S&P 500 index has decreased by more than 50 years in the last century, from 67 years in the 1920s to just 15 years today. That means 75% of today’s S&P 500 firms would have turned over by 2027. From major players, they will become minor players, or simply cease to exist. A leader’s role is to propel an organization towards a brighter future. By that definition, several of today’s leaders will fail at their key objective because they will lead their organizations into obsolescence.

The proliferation and use of data is one of the key vectors of change. We all know that. But what is yet not understood well enough is that this factor is totally upending the established leadership model. The industrial world is quickly vanishing from under our very feet. Yet paradigms in education, leadership, management and operational execution still predominantly derive themselves from our industrial past. Businesses that survive and thrive will have done so by learning, leading and executing in ways that are newly emergent, not classically established.

Historically, land, labor, and capital have been the assets needed to grow any business. But now we are in an age where data holds the keys to the kingdom. Creativity, agility and adaptability of its people, informed by data-driven insights, are the most significant assets for a business to thrive. This has unique implications for disciplines that impact the world of business – education, strategy, operational management, work culture, leadership and organization development.

  1. The industrial revolution is vanishing. The education and management system it spawned needs to follow.

The education system that we have in place today is about a century and half old. It originated to serve the industrial revolution. Manufacturing was the new value creating activity then (and we can imagine it was looked upon with as much fondness by the captains of industry then as with which the investors of today look at “big data”). The age of agriculture, the predominant activity employing most of the world’s masses was receding in importance, just as what has been happening to manufacturing lately. The job of workers then was to finish repeatable tasks with efficiency. They only needed basic education. College education was neither widely available, nor required for the work they did. Managers were the only ones that needed problem-solving skills. They defined the objectives and the methods, while workers had to follow orders and mindlessly produce. The education system therefore only focused on rote memorization and reproducing the solutions to problems exactly as taught by the teacher. Mistakes in the workplace were costly as they wasted precious raw material and time. And hence the education system focused on eliminating mistakes.

The result became the tyranny of “doing things the right way” and the affliction of following the orders of the authority figure, which resulted in the hierarchical workplace that still persists. Leaders and managers needed to be superior thinkers than the workers in their employ. They made decisions, chose direction, gave orders, controlled the workers (who they thought of as inherently lazy and looking for an easy way out of working while still demanding their wages) and thought they had to have the answers for all challenges. Henry Ford famously remarked, “Why is it that every time I ask for a pair of hands, it comes with a brain attached?” The worker’s brain didn’t matter in his manufacturing economy. That is the exact antithesis of what the knowledge businesses of today need. Yet, even the companies that were founded in the last 25 years and may have never manufactured a widget, have in place structures, systems and cultures that are a holdover of the production economy.

The aspiration and vision  to thrive today is that anyone sitting anywhere in the organization should be able to dive into the data and come up with insights that can drive the business forward. Such businesses succeed by doing lots of trial and error, so much so that learning through failure is a necessary skill. So the very thing that the business and education world dreaded yesterday – failure – has become a critical skill for rapid learning and growth. Workers add value not by following orders and doing repeatable tasks efficiently, but applying creativity in framing hypothesis, extracting practical insight from a paralyzingly huge amount of data, and trying things rapidly, failing, learning and iterating. This means that how we educate in schools and colleges has been turned on its head. Ken Robinson in his book “The Element” talks about the importance of surfacing a child’s innate talents from the onset and how many schooling systems are still programmed to do exactly the opposite. It is high time we upgraded our educational system to match and serve the information age.

2. The people know and see what leaders don’t.

Everywhere you look, data is radically changing businesses. Old businesses and business models are being killed off. And new ones are being created. Most of the new wealth creating businesses in the Silicon Valley and other technological hotspots in the world are based on soft services (search, digital advertising, social connectivity, platforms connecting producers and consumers, data driven processes, etc.) not hard goods manufacturing. Harnessing previously untamed data (or data that didn’t even exist) is infusing new life into seemingly staid business such as residential thermostats (i.e Nest) or apparel merchandizing or retail (where analysts can know not just the recency, frequency and monetary value of what customers buy but even how they browse in a physical store) or healthcare or wellness (i.e. Fitbit) or insurance (where devices placed in your car – or even apps – know exactly how you drive and can be matched to external conditions like weather and traffic).

It is the people who eat, drink, breathe and live data who can see what product features, policies or customer interactions affected the customer loyalty and engagement  scores (i.e. Net Promoter Score) or what are the frictions in the conversion process. The common frontline worker of today see many things about their rapidly evolving businesses that the leader does not know. The critical success factors of today’s businesses are much less in the leader’s sphere of visibility and control but more in the sphere of knowledge and action of the rank and file. The democratization of knowledge and the universal availability of data are challenging the hierarchical power structure. Hierarchical command and rigid process controls are no longer ways to run a business but in fact can serve to stifle and potentially kill businesses. In that sense, leaders have lost their power, though they have not given it up.

3. A new job description for leaders

This has radical implications for leadership. The greatest leaders for companies that will thrive in the next decade will be ones who create non-hierarchical organizations and make obsolete the paradigm of top-down leadership. Leaders become the voice, vision, guide and inspiration for an organization where every individual operates autonomously yet collectively guided by data to bring creative solutions to evolve with and delight their clients and customers. Strategy and execution will become the job of all at a fully democratized and empowered organization where leaders emerge based on their talents to accomplish the mission at hand and where titles are far less important within the business. It is an organization that learns quickly, morphs elegantly and efficiently using data as a guiding tool and truth as a pillar, and rids itself of the egos, arrogance and hierarchy that can toxify and in today’s environment even rapidly kill businesses.

In closing, this might be the greatest gift of big data to the world of business and possibly even to the human civilization. The agricultural model was one in which landowners exploited the serfs. The industrial model was one in which leaders controlled the workers. But data combined with technology is pressing for the democratizing of companies in order to be sustainable. With education being a soft good, it has the potential to be democratized in ways in which land and capital which are hard goods, could never be universally available, and hence won’t become the basis of yet another class divide – the data savants and the data innocents. Thus, the information age model is one where the talents, gifts and prowess of each human being can be harnessed to create vibrant businesses making an impact on the challenges of our time, and help employees live rich, meaningful and significant lives in the process. That reality has already arrived with companies adhering to this paradigm showcasing themselves as leading edge in the marketplace, but it is the leaders that genuinely understand, embrace and execute this reality who will create organizations and companies that become talent magnets, continuously staying relevant to their customer and employees, developing sustainable growth businesses, delivering maximum value to all shareholders, and in so doing, change the world.

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