Do you still remember the five drivers of future trends that I shared with you in one of the previous articles in this column? In his 2007 pre-financial-crisis book The Extreme Future, the American futurist James Canton identified five factors — change, speed, complexity, ambiguity and risks, and surprises — as underlying drivers of change in the early 21st century. Now and in the future, businesspeople need to master a world that is getting faster and faster by the day, produces exponential changes and an increasingly complex environment with more, higher and new risks and — positive and negative — surprises.
Three years and one global economic crisis (caused by the near collapse of the global financial system) later, these five drivers of the future have emerged on top of the leadership agenda of the Chief Executive Officers of the world’s largest corporations, according to the results of the IBM Global CEO Study 2010. IBM surveyed more than 1,500 CEOs of the world’s leading corporations in semi-structured face-to-face interviews, whereby roughly three out of ten participants lead corporations originating in the Asia-Pacific region (including Japan). In today’s article, I would like to share with you key findings of the excellent study that IBM fittingly titled “Capitalizing on Complexity” (to get your copy, click here: www.ibm.com/services/us/ceo/ceostudy2010/index.html).
1. Complexity is on the rise — and more than half of the CEOs doubt their ability to manage it
In the IBM study, CEOs confirmed that notwithstanding the recent financial crisis, the trend toward globalization continues, whereby most leaders predict economic power to shift to the rapidly growing developing markets. As a consequence of the recent financial and economic crisis, the economic environment has drastically changed: 60% of the participating top executives describe it as highly challenging, with deeper and faster cycles, more risks, higher uncertainty and a rising complexity of their global, interconnected and multifaceted business operations.
Questions for business leaders: Do you also feel that the general economic environment and your market and industry environment has become more unpredictable, uncertain and risky following the 2008 global dip? If yes, what factors drive this increasingly complex environment in your industry and markets? If no, what makes your business or industry special and different (assuming you’re not an ostrich with your head in the sand)?
2. The ability to capitalize on complexity distinguishes standout performers from others
Eight out of ten CEOs anticipate that complexity will be further on the rise over the next five years. At the same time, only half of the participating business leaders feel that they and their organizations are prepared for the anticipated increase of complexity. Notice that this opens a wide chasm between the CEOs’ complexity expectations and their perceived ability to handle it, which the IBM research team fittingly dubbed the “30% complexity gap.” Most interestingly, among those organizations that IBM classified as standout organizations based on their historically established track record to deliver solid business results, the complexity gap is only 6%, indicating a much higher ability of the top performers to capitalize on an increasingly complex environment. “Really, I am not afraid of complexity at all. On the contrary, this just motivates me,” commented Jacques Pellas, Secrétaire Général of Dassault Aviation, one of the standout CEOs who have embraced complexity as an opportunity to create differentiation.
Questions for business leaders: What is your take on the expected further increase in complexity in the coming years? Do you share this expectation for your business and market? If yes, how confident are you that you and your organization are equipped with the skills and knowledge to succeed in a less predictable, increasingly ambiguous, complex and fast-changing global business world?
3. Defying complexity with creativity
IBM analysts found out that the leaders of standout organizations were able to capitalize on complexity by focusing their attention on three areas: Embodying creative leadership, reinventing customer relationships, and building operating dexterity.
When asked for the most important leadership qualities to master our increasingly complex global economy, 60% of the interviewed CEOs named “Creativity” as the most important characteristic, followed by “Integrity” (52%) and “Global thinking” (35%). Most interestingly, in Asia-Pacific, this number was even higher: Seven out of ten top business leaders in Asia-Pacific realize that creativity trumps other leadership traits.
What does it mean to embody creative leadership? It means that as a business leader, you develop new approaches that are original rather than traditional. You embrace ambiguity and uncertainty as opportunity. You are committed to upsetting and disrupting the status quo. You envision new business fields of profitable future growth. You exemplify breakthrough-thinking and risk-taking in the face of ambiguity and uncertainty, make quick decisions and then courageously act. You spearhead disruptive innovation initiatives, and encourage your leadership team to rapidly prototype and tweak strategies and new business models, value offerings and operational processes. You break down barriers inside and outside the organization to reach beyond silos. And considering the particularities of most Asian markets, we may add: You have a strong IP focus, ensuring that your organization’s members respectfully deal with the Intellectual Property of other creators, lobby governments to strengthen intellectual property protection, and go after parties that violate your firm’s IP, knowing that in most modern firms with high market capitalizations, intangibles constitute more than half of total assets.
Questions for business leaders: How well do you exemplify the characteristics of a creative leader? How do you intend to raise your own creative leadership abilities? How do you plan to build the creative skills and competencies of your leadership team? And how do you intend to equip your entire organization with the skills, tools and mindsets to be a catalyst for creativity?
© Dr. Detlef Reis 2010. This article was published in parallel in the Bangkok Post under the same title on 16 September 2010.