The Internet of Things, 3-D printers, virtual reality, automated driving, connectivity and digitisation – the digital transformation appears to be marching inexorably forward, and even a hacker attack on 900,000 routers is not going to slow it down very much.

One thing is clear: if online transmission of data becomes sluggish, very little will move forward in the 4.0 world. But what will happen if organisation and leadership become “sluggish”, if they do not demonstrate the necessary “agility”, if they react only slowly and are stuck in their routines? And what will result if they react to unexpected events too late or not at all, because they have not learnt to adapt in time?

“Big Data” becomes “Smart Data”
I have just returned from an event examining the “Digital Transformation” in Hamburg. I welcomed the fact that right at the beginning the qualitative difference from “former days” was made very clear: more powerful computers can evaluate an ever-increasing quantity of data with ever-cleverer algorithms. It is this that turns “Big Data” into purposeful and useful “Smart Data”. Yes, in former times there were computers, data and programs – yet just as there is a difference between a flooded basement and a tidal wave, there is also a difference between an Excel program on a private PC and the networking of data in real time. Hegel once called this the “converting quantity into quality.”

The lecture covered the ground between technology and economics, between the falling costs of memory capacity and the increasing use of Smartphones. But the real excitement came in the discussion that followed. After all, the participants were managers from a variety of sectors. Digitisation has evidently penetrated these various fields to differing degrees. Although it turned out that my favourite for first place, logistics, only came in second, while first place actually went to agriculture (!).

The corporate divisions must not be allowed to drift apart
Yet even within one and the same company, digitisation progresses at a range of speeds. Accounting, Finance, IT and Controlling tend to be the fastest, with Personnel, Knowledge Management and Legal bringing up the rear. And this is where the management faces its first challenge. It has to ensure that the different divisions within the company remain capable of speaking to one another and doing their jobs. During the process of digitisation the departments must not drift too far apart – without simply doing everything at the pace of the slowest.

It was more interesting for the managers to consider the effects of digitisation on the role and function of leadership. The opinions of the participants differed widely, ranging from “leadership will stay just like it always has been” to “leadership must be totally re-invented”. However clear the technical requirements placed on digitisation are, the requirements placed on leadership are equally vague.

A great many different things are now being called “4.0”. We wanted to know exactly what was behind this and what was just a “passing trend”. We have accordingly pulled together the most important studies on this topic from Germany, Britain, France and the US, and here in the flow team we followed the event in Hamburg with a discussion. I will outline the most important findings very briefly below in the form of four theses:

1. The plan we thought would last for ever has served its purpose
Leadership in the digital world must free itself from “best practices” that promise certainty and legitimation: “It seems that a list of good or best practices … is not sufficient. … We observed a kind of constant probing and sensing and appropriate responses. In other words, the participating organizations do not see these practices as a recipe to follow. They are merely a collection of emergent practices. … The teams create safe to fail experiments and act according to the outcomes.”* So the place of the role-models is taken by “attempts” that reach about as far as arm’s length, whose results form the input for the next trial round. General approaches and a reliable orientation, along with the plan we thought would apply for ever, have reached the end of their useful lives in the 4.0 world.

2. Four learning areas for leadership
If we compare current leadership behaviour with the leadership behaviour appropriate to the challenges of digitisation, we find the greatest discrepancies in the following four fields: (1) learning from errors that is effective in the long term; (2) top management as a role-model for change initiatives; (3) shaping the change by the manager; (4) rapid implementation of decisions.

3. From director to facilitator
Instead of prescribing targets, trying to generate results, or steering through intervention, in future the leadership should create work environments where results are achieved. Instead of “impose & direct”, the tactic should be “facilitate & enable”. The tasks of leadership can be summarised as providing orientation, acting as a coach, formulating expectations, and clearing away obstacles.

4. New leadership competencies in the digital world
Yet even if the new tasks and roles for leadership are clearer, the question remains of which competencies a manager should have in order to satisfy these new requirements. At this point I presented a study from France to the flow team. The study was carried out by the consulting firm ‘Sensing’ – our French partner – together with the networking association of major French companies. The study identified four types of skills that a manager must have:

  • Involve all the players and engage in common activities with them;
  • Initiate a dialogue to continually identify opportunities and risks, options and obstacles in (further) digitisation;
  • Accept the many players’ perceptions of the status and challenges of digitisation;
  • Bring about a common idea of the cultural impacts of digitisation on the company.

These four theses give the catchwords “leadership 4.0” and “agility” a specific form. Digitisation demands not only that we face up to the technical implications – it also requires additional leadership skills. This leadership moves away from detached control to the level of practical experimentation with all the players working together.

Frank Schache-Keil

P.S. Future Skills for Leadership Dynamic

For about the last six months we have been developing a competence model for leadership in the digital world, together with our partner Sensing from France. We will also unveil a feedback instrument next year. Our working title for this procedure is “Future Skills for Leadership Dynamic”. You will be able to read more about this in one of our subsequent blog posts.

* The quote is from: Kropp, M./Meier, A. (2015): Agile Success Factors. A qualitative study about what makes agile projects successful. Publisher: FNHW and ZHAW.