The generally accepted theory of disruption, as formulated by Clay Christensen and Michael Raynor, sees “disruption” as an infrequent (though radical) change in the industry-dominant business model. Consistent with such a view of the environment, the stereotypical profile of a corporate leader envisions a tenacious, inscrutable CEO fixing his/her steely gaze on the environment, while attempting to predict the unpredictable and focusing most of his/her energy on steering the ship through tumultuous and troubled waters.
However, events previously expected to occur infrequently have taken on the drumbeat of a constant parade of complex, turbulent shifts—leaving even some of the most confident leaders wondering how to keep up. In an effort to determine the new balance sheet of success, Deloitte conducted a study involving interviews with the top executives from 24 of the world’s most massive, complex, global companies, and landed on some interesting and unexpected findings.
As a result of this research, a new reality zooms in, one of an adaptive and imaginative CEO who operates in an environment where disruption is still radical and yet continuous, and who is under constant pressure to transform the organization.
Like the Aesop’s fable contrasting the strength of the oak with that of the willow, today’s leaders must maintain strength together with a more flexible, internal locus of power. They need to be looking constantly in all directions, stretching to try familiar and unfamiliar options, even if failure is likely. Failure, as much as success, becomes their guide.
In other words, today’s CEOs need to take a view of leadership and overcoming obstacles that is completely inverted from what the traditional business world is used to—starting with the deeply embedded aversion to change itself.
Continuous Disruption: How Did We Get Here?
The history of modern business has yielded as much change as eons of human development. There have been distinguishable periods, which we’ll refer to as Stability, the Big Boom, and the Big Shift.
The long Stability period (preceding the last 75 years) was characterized by enduring business models and continuous, but slow, evolutionary improvements in productivity. While there were sharp bursts of innovation that heralded technological leaps, such as the telephone and the internal combustion engine, they were followed by relatively long phases of slow and incremental changes.
The following period, the Big Boom, saw the widespread entrance of computing. Dominant, incumbent players were made obsolete, with increasing frequency, by new entrants with different, technologically superior business models. Retail began to move online.
Finally, over the last few years, we have been witnessing the beginning of a third new era (the Big Shift), one in which digital platforms are broadly available, and the business environment is characterized by continuous, frequent, and unrelenting disruptions across ecosystemically connected industries. For example, since the rise of cloud services starting around 2006, the cost of starting a wide range of new businesses has declined by orders of magnitude, making it possible for virtually any industry to be rapidly disrupted by an unforeseen player.
“The CEOs we interviewed tend to focus on the entire experience a customer has with their business. They are not only willing to fight the customer wars on multiple fronts—they are all but obsessed with it.”
How Can CEOs Meet These Challenges?
As we formulated the methodology for our study, our implied construct was Big Boom (i.e., radical but infrequent disruption), which led us to articulate the hypothesis that “CEOs best equipped to interpret/predict disruptions would be inclined to engage in ecosystemic strategies,” meaning they would re-design their value chains as bundles of ecosystemic relationships rather than fully controlled verticals. Such a response would require establishing partnerships with various organizations within the ecosystem: suppliers up and down the supply chain, government entities, and, often, competitors.
To test our hypothesis, we developed an interactive app, the Smart Board, that enabled the CEOs, as part of the interviews, to identify and prioritize from a list the environmental trends that impacted them most. We asked the CEOs to select and rank-order the trends most affecting them and, from a second list, the strategic levers they intended to use to manage such trends.
We specifically created a list of environmental trends that included both traditional business pressures and disruptive patterns, as well as a list of strategic levers for responding to these pressures that incorporated both top-down levers and others characterized as ecosystemic. Our hypothesis predicted that CEOs who focused on traditional business pressures would prefer top-down levers to manage the trends, and those focused on disruptive patterns would be inclined to engage in ecosystemic strategies.
But during the study, we uncovered unanticipated insights. The CEOs seemed unexpectedly eager to directly interact with the Smart Board. They would move, with their own fingers, the small boxes on the large screen as though the tactile activity encouraged the CEOs to talk about their role as leaders in a highly unscripted way. This activity appeared to allow their subconscious and unprotected thoughts and feelings to surface in audible, verbal conversations, seemingly with themselves.
Most surprisingly, we were struck by how the CEOs stubbornly and consistently ignored the traditional disruption construct (Big Boom) and insisted on telling us that “disruption was not a one-and-done phenomenon, but unrelenting.” Disruption, they contended, was not something they thought about rarely while maintaining a single-minded focus on execution. Rather, it was something they worried about daily, expecting the next threat to be constantly around the corner.
In addition, and contrary to our expectations, CEOs appeared empowered and authentically energized (rather than confused) by the challenge of dealing with continuous disruption. Finally, they told us, all their stakeholders, even the most conservative ones, had now internalized the need for CEOs to allocate a significant portion of their time and attention to preparing the organization for disruption and had come to assess CEO effectiveness based on their ability to do so without weakening day-to-day execution.
As researchers, we were mildly disappointed to find not only that our hypothesis was not validated but also that our entire theoretical construct was being cast aside. This, however, was more than compensated for when we realized we now had an enormous trove of additional data we had not originally planned on: the seemingly arbitrary and unconnected low-decibel musings of the CEOs while they were engaged in the Smart Board app activities.
With a small group of trained qualitative data assessors, assisted by a semantic analysis AI platform, we then pivoted to dissect these CEO conversations-with-self to see if a deep and careful assessment of the qualitative data would show any meaningful patterns across our participants. The data certainly did show patterns. Rather than pointing to strategic principles, the CEOs seemed to articulate a novel (and surprisingly provocative) leadership model.
After identifying a number of emerging themes, we distilled them down to the top five aspirational leadership characteristics we heard repeatedly from these CEOs—or, to put a finer point on it, the strengths they surmised they needed to acquire to make themselves and their companies “undisruptable.”
I. Ambidexterity—Balancing Exploitation and Experimentation
Central to all five characteristics is the concept of embracing ambidexterity; that is, feeling equally and simultaneously comfortable focusing on the present and on the riskier future. Harvard and Stanford business school professors Michael Tushman and Charles O’Reilly found the ability to simultaneously find efficiencies in today’s processes and seek risky innovations for the future—to be “ambidextrous”—became the most notable reason for the survival of organizations that have defied disruption over decades of dramatic market shifts.
The CEOs in our study took that idea, now well-known and accepted, but expressed it as a different breed of ambidexterity than one we have seen widely used or pursued to date. They spoke of an urgent, continuous need to relentlessly and simultaneously execute both exploitation and experimentation, commingling them side by side. Rather than attempting to manage tensions and internal conflicts by creating future-focused organizational skunkworks units for exploration and risk-taking while tightly managing other units proficient at squeezing out costs (the practice of ambidexterity most commonly seen in use to date), the CEOs talked about the need for cultivating the tension between exploitation and exploration in a fully integrated organization. They stressed the challenge of embedding these oppositional elements across all processes, structures, and cultures.
This tension is driven in part by important external stakeholders, particularly analysts and shareholders, who want short-term yields, yet expect CEOs to work for the long term, take risks, and innovate. To be sure, the paradoxical ability to excel at both reliable profitability and risky breakthroughs, to seek opportunities that spark radical innovation while simultaneously optimizing existing capabilities, calls for an exquisite sense of balance. In reality, if incumbents want to stay ahead of the curve, they should forever be enhancing current operations and simultaneously exploring the continually emerging new frontier.
Ambidexterity, with this twist of integrating both of these aspects across the entire firm, is the leading characteristic among the five attributes of undisruptability we identified. We found that, while the remaining four factors were critical on their own in some ways, they also reinforced ambidexterity by bringing talent, emotional timbre, focused attitudes, clear thinking, and sources of deep customer insight to bear on the question of how to achieve an organization that is ambidextrous across all areas.
II. Emotional Fortitude
We heard a number of references to the need to cultivate emotional fortitude as one factor increasing undisruptability. In fact, this attribute points to another tension: a need to develop a “grounded audacity” that combines a sober assessment of the risks and roadblocks ahead with the audacity to pursue lofty visions.
CEOs talked about the need to leave cynicism at the door to be successful in their work. They acknowledged real fear of the rapidly changing landscape but talked openly about how important it would be to use that fear as fuel to generate more productive outcomes.
Examples of this grounded audacity were highlighted in a Deloitte Insight that noted Richard Zimmerman, former Chairman and CEO of The Hershey Company, created “The Exalted Order of the Extended Neck” award for employees who took well-considered risks and failed. FedEx’s Fred Smith, for decades, has made heroes of employees who took reasoned risks in pursuit of greater customer service, whether the ideas worked or not.
Ultimately, the CEOs indicated that emotional fortitude had helped them learn to lead in a chaotic world, in part, by allowing them to deal with chaos in their organization and understand that failure, on some level, is inevitable. Obviously, this is not failure for its own sake, but a different way of thinking about failure. When failure is your biggest fear, you are not going to take risks. But in order to optimize, you have to explore, and failure is an inevitable component of exploration.
Some signals that a CEO is acting with emotional fortitude are when they
articulate boldly their organization’s purpose,
are trusted by others,
persevere on a course of action even against the consensus and yet are quick to acknowledge when things go wrong, and move on, while keeping a sense of urgency,
are comfortable with the idea of making mistakes,
have the self-confidence to allow other opinions but do not abdicate the responsibility of making the final decision, and
exude a sense of peace in the face of conflict.
III. Beginner’s Mindset
The Zen Buddhist concept of “beginner’s mind” captures the ways our respondents reflected on needing to see the world from the perspective of someone who does not know much about it. Cultivating a beginner’s mindset represents a marked departure from what has traditionally been expected of CEOs. Rather than trying to be the smartest one in the room, they instead try to attain the most insight into the exogenous forces that could be sources of (or solutions to) disruption. Our CEO participants repeatedly stressed the importance of having the perspective of someone who does not know everything. The CEOs are finding greater comfort in asking questions and being genuinely inquisitive, even about things they do know. And this deep curiosity is offset by keeping a clear focus on their organization’s purpose.
As noted in the New York Times, efforts taken by Salesforce CEO Marc Benioff paint the picture of an avid proponent of the beginner’s mindset. He continually reminds his 26,000 employees to stay nimble and not expect the current state of affairs to remain static. Part of Salesforce’s original vision was to disrupt traditional enterprise software by replacing on-premises solutions with only those residing in the cloud. That same drive to perpetually disrupt itself pervades every corner of the company.
IV. Master Disruptive Jujitsu
Our CEOs told us that becoming “masters of disruptive jujitsu” is indispensable for handling disruption. They discern disruptive trends, internalize them, and then find a way to hijack the threats and turn them into their own competitive advantage.
The first step toward harnessing disruptive threats is to identify them; therefore, there is a need for earlier and more precise pattern recognition of exogenous forces. Undisruptable CEOs develop a relentless focus on gathering and distilling information from the outside, both to model inquisitiveness to others as well as to quench their own thirst for dissonant data that may have important relevance. One CEO told us that he wanted “to feel like the hawk soaring a thousand feet up and spot that rodent running through the field.” To do this, you have to remove yourself from the daily clutter of things within the organization and review the bigger landscape.
But disruptive jujitsu goes beyond just scanning for disruptions. The second half of threat-harnessing is finding ways to turn those threats to your advantage. One example can be seen in how some banks are using their advantage of size and the dominance of regulatory rules to be among the first movers to use blockchain and other disruptive technologies, before someone else does.
V. Become the Ultimate End-User Ethnographer
The fifth major attribute common to the undisruptable CEO was a primary and personal focus on the customer. This extended to not only a desire to better understand customer needs and attitudes, but also a yearning to gain insight into their most subtle habits, desires, and subconscious concerns.
In the last decade, rapidly changing digital technology has empowered customers in entirely new ways. Today’s customer is online, social, hyper-connected, and awash in product knowledge. The CEOs we interviewed tend to focus on the entire experience a customer has with their business. They are not only willing to fight the customer wars on multiple fronts—they are all but obsessed with it. Doing this requires an understanding of customer needs and reactions that go beyond the customer’s consciousness. And, most of all, it requires a beginner’s mindset.
Companies that can attract this new strain of CEOs are setting themselves up for a wild ride, but, ultimately, with continual hard work, they will hold a more successful position in the face of constant disruption.