Navigating a World in Flux

“I wouldn’t reveal this to my managers, or the Board,” Mateo confided in us, soon after we began to work with him. “But the truth is, I’m puzzled. I can’t say exactly where I went wrong.” Until a few years ago, his career had been as smooth and reliable as a precision-engineered instrument, with a stellar performance as CEO.

Mateo started his career as a talented science graduate at a prestigious manufacturing firm, where he drew on his analytical skills to streamline processes, run an efficient team, and stave off competitors in a market of tight margins. Rising steadily to CEO, Mateo drove innovation and performance over several business cycles, maintaining a strong position in his dynamic and highly competitive industry. He created a global footprint, drawing on resources and skills at the forefront of multiple technology sectors. His company’s brand came to signify leading products with outstanding functionality and customer value.

“We were a top performer in our industry, even across manufacturing globally, for ten years. But then the problems began,” Mateo reflected in one intense and frank session with us. “Performance dropped slowly, then fast. I thought: This is one of the cycles I’ve managed before. I kept doing what I’d always done. When the tried-and-tested responses didn’t work, the team and I came under massive fire from all sides. As CEO, you’re so attuned to the fortunes of your company, so attentive to quality, costs, sales, that you feel the blows in your body as they come.”

The industry was upended by radically novel product technology, with much higher social acceptance. This called for a new mindset, fresh skills, massive investment, and bold innovations to remodel the entire customer journey. Mateo had seen the approach of the new technology, but rejected it as unreliable and far too investment-heavy; he thought any disruption would come far in the future. By the time he became aware of its true potential, nimble competitors and unexpected new players had begun taking market share. “When I saw our competitors’ products, I had to admire them,” Mateo told us, shaking his head. “But I felt queasy. A voice in me said, This is the future – and you’re not there.”

For Mateo, the second hit came amid a rise in social-justice activism from shareholders, supported by high-profile journalists. Questions mounted about the sustainability of processes and products developed under his leadership, and about the sector as a whole. Activists claimed that Mateo’s company, being a leader in the industry, had ignored its negative environmental impact and missed opportunities to conserve natural resources. External stakeholder groups claimed they should have been allowed to collaborate in building environmentally sound practices. Mateo had always thought it best to continue with his core mission of producing outstanding high-technology products. Now, as the pressures grew overwhelming, Mateo and his team continued to underestimate emerging trends, remaining hesitant to commit to transformation – and the company’s reputation began to lose ground.

Proactive and responsible leadership, not mere compliance

Mateo gradually came to realize that he was facing some of the business challenges of our era. He would need to respond not by shrugging them off as a problem for the distant future, but by engaging immediately, transforming radically in order to survive.

While the past year has felt like a departure from the script, requiring adaptation to a tumultuous “new normal”, it has also been a continuation of our current age, if faster and more demanding: presenting humanity with uncertainty, accelerated change, interconnection and interdependence.

 

Technological innovation is no longer a discrete sector, but a force of ubiquitous change and disruption, challenging not only the products, processes and technologies to which Mateo was accustomed, but the workings of entire business sectors, and the nature of society. Alongside rapidly changing technology, we are presented with a political landscape in which once stable trade networks, political orders, and allegiances are in flux. Widespread social concerns and increasing polarization add to the fractious nature of the landscape.

The responsibilities of companies have never been greater, as corporate leaders and stakeholder groups increasingly acknowledge. Governments, employees, customers, shareholders, and activists are calling for businesses to be a force for good, creating prosperity for the many. This new mandate is evident in the rise of impact investing, consumer demand for ethically mindful goods and services, and new metrics for business success such as the “decency quotient”. In short, there is a growing expectation that business leaders will provide foresight as opposed to mere compliance.

With numerous businesses under pressure from both these forces and the COVID-19 pandemic, many CEOs are feeling the urgent need to forge new ways of leading their institutions. A new leadership archetype is required – someone who can sense the future in an age of uncertainty, perceiving trends and transforming proactively; who is agile and adaptive, empathic and principled, and attuned to the opportunities inherent in chaos and crisis.

How to step up

The past year has been a trial by fire for CEOs: Some have not been ready to meet its challenges, while others have stepped up, demonstrating the kind of leadership that is needed for a period of crisis and uncertainty. Our deep engagements with thousands of leaders globally show that CEOs who are well prepared for this new age commit to staying clear-sighted and self-aware, adaptive, and alert to opportunities for valuable relationships.

One CEO who illustrates the rewards of adaptiveness is Tara, the CEO of a large restaurant chain, who has led her company through a massive and prescient transformation. Over several years, Tara and her management reviewed every aspect of the customer experience, evaluated and enhanced their capabilities, and implemented a constant flow of thoughtful daily adjustments to revitalize the company.

Under her leadership, beginning in 2017, the company made strategic decisions which have delivered growth even during the pandemic. Tara, who stays aware of her need to adapt and is always ready to question her own practices, inspires the same openness among her executives. Listening to customer needs and rigorously observing trends, Tara and her team have measured the pulse of emerging shifts in consumer behavior, as well as changing ways of accessing her restaurants. The company invested significantly in streamlining its drive-through and digital and mobile-app ordering systems, long before COVID-19 forced competitors to do the same. While these changes meant a departure from old service-delivery models, they continued to honor the restaurant chain’s longstanding values of convenience, efficiency, and community presence.

Tracking changes in consumer demand, Tara’s company has radically adjusted its menus; for instance, it has inverted the ratios of certain food and beverage categories to meet new customer tastes, while reinventing popular favorites. Tara also introduced options to blur the restaurant chain’s traditional dayparts in response to customers’ needs for more flexible choices. The chain has expanded into new markets, which allowed it to weather a sales downturn in traditional urban strongholds. To signify these transformations, Tara has rebranded her company to communicate its new direction, while keeping enough of the old brand to retain its iconic regional status.

Tara has also worked to ensure that any benefits permeate her organization and radiate to external and indirect stakeholder communities. The company expanded its CSR initiatives in the pandemic, while reopening and operating branches cautiously to ensure the health of staff and customers.

Today’s CEOs must understand that uncertainty and instability will continue to be the norm, but recognize that change brings opportunity. Great CEOs may, like Mateo, stumble. But, like Tara, they will come to seek out innovative business models and technology to amplify existing organizational strengths and allow new prospects to emerge and flourish. They will recognize that today, transformation is not an optional ingredient for companies striving to perform. Rather, transformation is performance: as CEO, if you aren’t standing at the center of a loud, diverse and diverging set of interests and stakeholders, taking the lead to transform, you aren’t performing.