If we as leaders remain locked in our old way of thinking and the patterns of behavior that go with it, we start to lose touch with the world around us. There’s nothing moral in this loss — it doesn’t mean we’re bad people or fundamentally flawed — but over time, it means that we fade from relevance.
We become mismatched, maladapted, and eventually, irrelevant. When an organization loses touch with the world, it starts to fade from significance and relevance. Usually, this begins slowly; but it can be rapid, too.
Usually, the warning signs are there for many years. But senior leaders ignore the signs, repress them actively, or, more likely, cannot see them for what they are within their existing mindset. This is understandable. Our biology is geared to have us see the world not as it is, but as we want to see it — until we switch on and awaken from our slumber.
Many think that the warning signals of maladaptation are hard to spot. But to the transformational leader, the signals and symptoms are clear: organizations that focus on boosting accounting profits (bottom-line growth) instead of generating value for emerging customer types (top-line growth). Enterprises create products and services that become quickly commodified as margins race to the bottom rather than seeking sources of value in the future to capture with exponential ideas and innovations. We see little real growth in the value we add to the world even as armies of people work ten-hour days to produce returns.
We become vulnerable to competition from start-ups and up-starts, often from outside our traditional industry. We have to grow through expensive, often misguided and mismatched, mergers and acquisitions rather than drive forward home-grown transformational innovations. And we find ourselves churning out carbon, waste, and pollution, extracting resources without a thought to the costs, accumulating capital as if climate change and rampant inequality were not major risks to Business as Usual.
We might find ourselves in a position where, although our legacy KPIs are being met, we cannot seem to bring about positive change. We find that our customers are unhappy and churn. They’re not served well by our products and services, so they complain, often leaving to go elsewhere. Our employees complain, too, as the “offer” to them starts to fade from relevance. They, too, leave, and it becomes harder and harder to attract and retain the most creative, agile, and inspired talent.
We rely on byzantine processes — that have accreted over time to control people and avoid costly errors — to make business work even as they now create endless friction and drag. We maintain policies that were well-intentioned but now just frustrate and demean our people and suppliers. The hierarchies we’ve built that seem powerful and important within the enterprise aren’t quick enough to make use of new insights that would win us new customers and generate new value. We have a sense of constant overwhelm that paralyzes people. We might discover that, no matter how much we say we want to empower our teams, co-workers find it hard to step up after a lifetime of being told what to do and what not to do.
The enterprise ends up with many managers but few genuine leaders. Managers might be reluctant to move beyond their technical expertise and step up to the transformational plate. Outdated behaviors and beliefs — like thinking we need to know more than our employees or micro-managing them even as we say we are delegating — lose our teams’ trust. Without trust, there can be no genuine transformation, as it’s the lubricant of effective change. We find it harder to motivate people using the old levers of promotion, power, and profit because these assets don’t appeal as much to younger team members.
Perhaps we retreat into micro-detail, creating the ultimate spreadsheets and the best reports, rather than spending time forging the future. We get hung up on having perfect data for decisions about an unknowable future. We constantly focus on forcing through continuous tweaks to existing products—whether it be construction or code—instead of building a culture where people feel empowered to, and passionate about, innovating value-creating products and service at the edges, where our emerging customers are.
All these phenomena, and many like them, are not the problems themselves. If you recognize your organization or yourself in them, each is evidence that you have yet to crack transformational challenges that are inviting you to resolve them through adaptation. They are symptoms of a deeper mismatch between how you think and feel and how the world is becoming. Simply put: there is no guarantee your organization has a right to exist in the future. There is no right to continue to be a senior, powerful leader or awesome entrepreneur.
The constant change in the outside world means that everything we do as leaders is becoming more or less valuable, but it is never the same. Twentieth Century mindsets see stasis where, in fact, there is constant flux. Our processes, procedures, products, and people are either becoming valuable more day by day because they fit the future world better as time goes on or are becoming less valuable with each passing day, but they are never static.
Please reread the last sentence, as it’s so crucial. If we stay the same and continue to do what we’ve always done, the changing world around us will make us obsolete in time. The period in which we can stay complacent is getting shorter and shorter. If we keep our products, services, management style, even our expenses, constant — or tweak them with small improvements to the same basic model — we will find ourselves going backward because the world is moving so fast. The proof is in the pudding.
The average age of a company has gone from 75 years in 1937 to just ten years in 2019. This is predicted to drop to only seven years by the end of the 2020s. In other words, the time in which a company can create a business model and find a way of generating value from it before competitors, or changing customer needs, disrupt it is now under a decade. This is why a Yale Management School professor has predicted that between 50% and 75% of Fortune 500 and FTSE 100 companies will be replaced by the year 2027.
We don’t have to look far to see this happening already. In 2018, over 20 companies left the Fortune 500. Only 60 companies that were in the Fortune 500 in 1955 were still in it in 2017.
What economist Joseph Schumpeter called “creative destruction” — the death of old businesses and business models because of the innovation of new, better-adapted ones — is speeding up. Human beings took three centuries to create and optimize the wheel. Apple releases (often breakthrough) new products every few months to stay in step with its fast-changing customers’ needs, wants, and expectations (like privacy, for example).
We cannot try to stay neutral in the digital, disrupted, and damaged world and hope to get out of the workplace into retirement. We all have to deal with the transformational challenges and global crises at hand. There is nowhere to hide because even in a villa by the sea in Carmel or Provence, sea waters will rise, extreme weather will hit people, pension funds and stocks will dive with every pandemic, and descendants will look to us for answers. Therefore we either play our part in fitting the emerging future, or we fail, whether through underperformance or obsolescence.