How open leadership supports digital transformation

Efforts to accelerate digital transformation are being held back by challenges finding the right talent. At a virtual roundtable sponsored by Red Hat and Intel, senior leaders said a more ‘open’ culture is required. Watch the full video here

In 2020, digital transformation leapfrogged seven years of progress in a matter of months. This was the finding of a McKinsey research report released in the autumn of 2020 that went viral enough for most business execs to be able to recite its top finding. Of course, they didn’t need to be told – they were leading it.

For CIOs and other leaders who had long fought to accelerate the momentum of digital transformation in their organisations, the Covid-19 pandemic presented an extraordinary window of opportunity. The window that was initially opened due to a necessity to continue operating through unprecedented lockdowns, however, is yet to close. The necessity lives on, driven by a realisation that digitisation is about far more than just enabling remote work.

In a follow-up survey by McKinsey last year, just 11% of companies said their current business models will be economically viable through 2023. To stay relevant, they must take digital transformation to the next level, in some cases even building new digital businesses.

What Intel refers to as the ‘four superpowers’ – namely cloud, AI, edge and 5G – fuel digital transformation and the digitisation of everything. In this landscape of rapid digital disruption, technology has become more critical than ever before.

Yet while the upper echelons of practically all organisations now recognise the crucial importance of digitisation, and are ready to invest the sums necessary to transform their business, there’s a sting in the tail. Most of the key challenges involved in executing digital transformation successfully are not related to technology per se, but to people – or rather the lack of them with the necessary skills. And few are currently overcoming the talent challenge.

Ready to face the challenge

It is against this backdrop that a roundtable, sponsored by Red Hat and Intel, was convened on 24 February. It brought together business and technology leaders from different sectors to share their experiences and discuss how traditional approaches to leadership must evolve. 

“The last two years have given a significant boost to our digital transformation progress,” said Steven Zuanella, group chief digital officer at Generali. “But by increasing the volume of work in this area, the amount of people required with the right skills has also grown. We were already facing shortages of specialist skills like data scientists and automation engineers, but that has accelerated, and the range of skills we need is broadening too. 

“There are plenty of people out there with an in-demand skill set, but applying that in a business context with business rationale and customer-centricity is not as easy. Attracting people that can do that is a real challenge because there is so much choice for them. There are lots of sexy companies to join and as a more established legacy business we aren’t always top of the list, so we have to find other ways to foster those skills, such as upskilling internal resources.”

Upskill and away

Over the last 12 months, Generali has enrolled more than 7,000 employees, about 10% of its workforce, in internal upskilling programmes. The financial services company, which is one of the largest global insurance and asset management providers globally, has also introduced ‘new role schools’, which are mini university courses built specifically to upskill people in key areas of demand such as CRM, smart automation, analytics and AI.

Organisations must, however, ensure their focus on gaining new skills doesn’t cause them to drop the ball elsewhere. Amidst a widespread uplift in people leaving their jobs in recent months, which the media has labelled the ‘great resignation’, companies must be equally concerned with retaining existing skill sets and ensuring people are happy and engaged.

“You’ve got to be careful that you don’t cultivate an A and B culture, where the A team is the people you’re trying to attract from the outside and the B team is those already in the organisation saying what about me?” said Gavin Laybourne, CIO APMT, IoT, and strategic brands and fleet at Danish shipping company Maersk. “That’s what we’re focused on: not just attraction of new talent but retention of existing talent.”

Laybourne also pointed to the shift in culture needed for successful transformation.“ People say transformation is about the removal of existing systems. But it’s not just about an IT system, it’s about systems of thinking. People will often say when do we finish this transformation programme? But transformation is continuous and open leadership is a way of shifting thinking and behaviours to align with that. We’ve been focusing on fostering an engineering-led culture. Engineers want to be great engineers, so give them the space to develop the best tools and practices. Managers shouldn’t be telling them the tools they should be using, but what we can do is empower people and foster the right open culture.”

Open for business

Whether they label it in this way or not, most organisations are now championing the idea of open leadership. According to the Open Organization, it embodies principles such as transparency, inclusivity, adaptability, collaboration and community, which should be interconnected. Open organisations empower people at all levels to act with accountability. 

Open leaders, meanwhile, commit to transparency about both their goals and constraints, and to creating more inclusive workplaces by bringing together diverse groups of stakeholders in environments they can thrive in. Crucially, open leaders constantly seek to align their teams’ actions and behaviours with the overall mission and goals of the business.

The concepts of open leadership and digital transformation are no longer the domain of technology specialists. They need to be embedded across the organisation

Red Hat, which has been a pioneer of open leadership, dismisses the traditional way of calling somebody a ‘leader’ when they are appointed to a senior position or given a certain title. Instead, Red Hat employees earn their leadership status when they adopt open leadership behaviours and mindsets. Defining these principles enables Red Hat to cultivate a culture in which they are normalised and where passionate teams enable the best in each other.

“Open leadership has been crucial ever since the start of Red Hat,” said Hans Roth, EMEA general manager at Red Hat. “You can’t force people to work efficiently – they need to be passionate about doing it. Open leadership creates a safe environment and allows diversity of opinions so people feel really connected to what they’re doing. We do a lot of diversity and inclusion work across different minority groups within Red Hat, but it’s also important to have diversity in mindset. That means enabling people to speak out without consequences.

“We have built a culture of open leadership partly by actually measuring the performance of managers against open leadership principles. At Red Hat we have four core values: freedom, accountability, commitment and courage. They are the elements we use to benchmark both our business and our people. There’s a formula that says ‘strategy times execution to the power of trust equals results’. The only way to scale is to scale with trustful, integrated leadership positions where you can look in the eyes of colleagues or partners today and tomorrow. Leaders are catalysts that empower your teams to trust each other.”

Colin MacHale, EMEA territory director, distribution, partners and programs at Intel, added: “In addition to open leadership, what we’ve seen Intel focus on is an open ecosystem being equally important. Innovation thrives in an open, democratised environment where people can connect, communicate, and jointly respond to situations. Now more than ever, the world faces many challenges that demand innovation and transparency.”

Sit down, speak up

Roman Beilhack, head of new technologies and internet of things underwriting at Munich Re, one of the world’s leading reinsurers, is a keen advocate of open leadership, and told the roundtable participants it gives every member of his team a seat at the table. He focuses on creating opportunities to ensure people are heard, which means removing the traditional hierarchical management structures that deter them from speaking up.

“Open leadership works by having very flat hierarchies, delegating decision powers and having agile methods which allow teams to arrange themselves as much as possible,” Beilhack said. “Open leaders are transparent and talk openly about what works well and, equally important, what doesn’t work so well. That’s easier said than done because a lot of us have worked in a business culture and environment where we pretend to be the best. 

“If you want to improve, you have to continuously talk also about what isn’t going so well and why. That is very important because the role of the manager changes dramatically. A good manager is no longer the person who apparently knows best. A good manager really needs to become a coach of the team and an arranger of good teams. The manager becomes the servant, but that requires cultural change. Introducing new methodologies and processes is also important but if there is no cultural change, open leadership won’t work.”

Swinging the pendulum

It also won’t work if there is a mismatch between empowerment and alignment with necessary guardrails. It’s crucial to both digital transformation and retaining that leaders give their teams the freedom and agility to solve problems how they want. But swinging too far on the pendulum of flexibility can open up vulnerabilities or cause issues that are counterintuitive to successful transformation. This spectrum can often bring tension.

“The concepts of open leadership and digital transformation are no longer solely the domain of technology specialists. They need to be embedded across the organisation,” said Simon McKinnon, chief digital and information officer at the Department for Work and Pensions. “But for that to happen, we must have balance between empowerment and alignment to ensure we share data and technology across lines of business or product areas. That is another cultural shift we’re having to go through.” 

There are many challenges ahead as organisations continue on their digital journeys. The leadership principles they embrace will differ from company to company. But one thing they must be united on is their conviction to continue the pace of digitisation.

“The tools continually evolve to enable us to do different things, but we as people and leaders also need to collectively evolve to take advantage of them,” said MacHale. “The pandemic has accelerated digital transformation through sheer necessity but, if we’re not careful, returning to a mindset of inertia will set us back. The opportunity is now to lead our organisations forward. That sounds simple but it’s not that easy to do. It’s incumbent on us to continue the momentum from the last couple of years and drive transformation for the good of everyone.”

There is no start and end to transformation – it is a continuous process. With the right leadership, culture and a steady foot on the pedal of innovation, organisations put themselves in the best position to succeed.

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