19 October 2023 • by Faisal Hoque in I by IMD Book Club
In this month’s I by IMD Book Club, best-selling author Faisal Hoque explains how the concepts in his new book, Reinvent: Navigating Business Transformation in a Hyperdigital Era, can help us...
Technology-driven change is not a new phenomenon: we have been juggling with concepts of organizational transformation to respond to the advent of new technology for 25 years and more. But, in just the last five years, we have seen massive technological changes impacting our lives at the same time as a global pandemic, escalating climate change, and an increasingly threatening geopolitical landscape. How do organizations respond to these new forces in a way that enables them not merely to survive but to grow and flourish?
I believe that, just as individuals can reap huge benefits from kicking bad habits, businesses have to subject everything they do to the closest scrutiny and consider scrapping old habits, processes, and ways of thinking – and even their raison d’être – to reinvent themselves and stay relevant.
So, how can an organization change mindsets, attitudes, and assumptions about how it behaves and operates? In Reinvent: Navigating Business Transformation in a Hyperdigital Era, I use the mnemonic LIFTS (learn, investigate, formulate, take-off and study) to identify five things that can guide successful organizational transformation.
Learning starts with a conscious act on the part of leaders to understand themselves. You have to learn who you are as a person and decide what kind of leader you want to be, because every organization is a reflection of its leader. And by leader, I don’t just mean the CEO or the senior managers – it applies to anyone managing a small team or a task. This is a very internal process, but the result is directed outward: you have to be attuned to how you behave in different situations and how you lead yourself to lead others.
Second, you have to educate yourself about what is going on in the outside world, including technological change, social change, and geopolitical shifts, to understand the perspective of others. In other words, you have to understand everything that impacts your organization and the people in it.
The third part of learning is that you have to understand the organization itself. A good leader is completely attuned to the psychology of the organization and how it relates to the world around it: if you want to move your organization with your vision, you need to understand what’s going on around it to identify the opportunities out there. What realm do you want to play in? What are the options that allow you to do the things you want to do, or that might prevent you from doing them? Identifying this also means you have to understand the risk factor. Whatever you’re plotting in your realm of possibilities, you have to evaluate the risk of implementing the various options.
No matter what your organization does, you have to do extensive research before you can dive into development. It’s a management cliché to say, “Luck is what happens when preparation meets opportunity”, but it’s a useful reminder of the critical value of research.
Why? Because, if you’re trying to create a unique value proposition, you have to know where you can play and where you can add value, and this value-driven approach depends on research.
Businesses have to subject everything they do to the closest scrutiny and consider scrapping old habits, processes, and ways of thinking.
You also have to understand your current organization’s capability: there is no point in trying to do something that the organization is not ready to do or is incapable of executing. Again, this is also part of learning and requires a deep understanding of all the elements of the organization.
The concept of formulation is about generating a set of ideas that will make up the organization’s innovation portfolio. Critically, this is also about identifying and distributing risk, so that if one idea doesn’t work you utilize another one.
Here, collaboration is key – any innovation in today’s marketplace is highly cross-disciplinary and therefore requires cross-collaboration. You can conceive of a new product, but if you don’t have a designer, a builder, a marketer, and a deep understanding of human psychology, your product is not going to be successful.
To coin another management cliché, “execution eats strategy for breakfast”, and take-off comes from execution. This is the idea that out of a series of innovations you have formulated, one or two of them will be outliers: you need to focus on those outliers in a way that allows you to create real value. If you’re a business, you have to create two streams of revenue: short-term and long-term (or sustainable) revenue. That is because you’re not going to be around to create long-term revenue if you cannot generate enough in the short term.
Here, you have to perform a fine calibration in terms of execution that allows you to assess both forms of revenue: take-off is about mobilizing your resources for executing ideas that will generate real financial value.
Take-off is not necessarily about financial return. In government services, for example, it could be about creating a different kind of value, such as citizen satisfaction, or creating an environment where the economy can thrive.
In business, 90% of innovations are not going to succeed. That means you have to craft a series of ideas and opportunities and test them to see whether they work or not. In other words, you need a series of options from which to select. Organizational transformation is about the ability to assess, select, plan, execute, and monitor. It starts with studying where your organization currently is in relation to your customer base and the outside world to identify options.
You have to decide what kind of leader you want to be, because every organization is a reflection of its leader.
Take, for example, the concept of the innovation portfolio. You might identify five things you want to do – should you try to do all of them? Or should you focus on two things and see which one works, accepting the possibility of failure? Accepting the possibility of failure is hard for many people because the culture of success is so ingrained in business but, to be truly transformative, you have to accept failure as a part of your culture – and being a one-hit wonder won’t create a sustainable business
Lastly, a note on the role of moral compass in leadership. Transformation is a difficult thing to do, and you have to be very conscious of how you interact with other people to inspire and motivate them. In every meeting, every interaction, and every conversation, you have to be audibly conscious of how you’re making other people feel – because, if they don’t feel good, they’re not going to be inspired by your vision to do anything. Vision is nothing if you cannot influence and inspire others.
Vision begins with having a North Star or moral compass. If you don’t, you won’t be able to lead either yourself or others, because you won’t know where you are. This ties back to our first desiderata, learning. It means trying to develop empathy with others, which will enable you to foster positive change – something all humanity is seeking today.
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