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The Future of Leadership: New Digital Skills or Old Analog Virtues? A Delphi Study

Executives may be facing a change of role as digitization in the form of optimized processes, new products, or innovative business models becomes more pervasive in companies. Covid19 was the accelerant of digitization in many companies.

[Translate to English:] Zwei Menschen in einem modernen Serverraum

By Prof. Wolfgang H. Güttel (TU Wien)

Internally, working from home became the norm and we assume that forms of hybrid working will prevalent remain in the future. Externally, the interfaces to customers, suppliers, and other network partners were increasingly digitized in order to stay in touch. We are therefore seeing an increase in the penetration rate of digitization in many companies. Accordingly, however, various questions are emerging for the future: Will leadership gain or lose relevance as day-to-day management becomes increasingly technological?  Does leadership even need to be rethought for the digital age?

 

Against this backdrop, Katharina Gilli (Free University of Bolzano), Nicole Lettner (Johannes Kepler University Linz) and Wolfgang H. Güttel (University of Technology Vienna) conducted an explorative Delphi study to investigate what decision-makers in companies expect to see in the next few years in terms of the role of managers in the digital transformation. We examined three sets of topics:

 

1. what skills will executives need in the future?

2. how does increasing digitization affect the leader-leader relationship?

3. how are companies meeting the challenges of digitization?

 

A total of around 50 people were invited to four workshops in Bolzano and Vienna to present their views of the future and discuss them with the other workshop participants. The team around Univ. Prof. Güttel recorded the data and subsequently compiled it to form a coherent picture. The group of participants consisted of representatives from small and medium-sized enterprises as well as large companies, each with a greater or lesser share of digitization. This setting was intended to generate as much diversity as possible for the vision of the future. The results, however, were a striking surprise to us in terms of our basic assumptions. This is because neither company size nor the degree of digitization led to major differences.

 

Leadership Skills: The more digital everyday decisions become, the more important leadership becomes!

The increase in the importance of leadership goes hand in hand with the greater digitization of everyday leadership. The distance that ensues through digital communication means that managers are called upon all the more to influence their employees and teams in order to ensure strategic alignment, to generate and wrap up ideas, or to be able to deal with individual performance differences or conflicts quickly and effectively. The more digitized everyday management becomes, the more important leadership becomes in managing social processes within the team, especially in the case of dispersed teams or teams with a higher proportion of members working remotely. Equally decisive is the shaping of change processes in the course of the introduction of new technologies or the further development of existing ones. This requires effective leadership skills. Leadership in the digital age must also ensure the communication of clear goals. It must enable employees to achieve their goals, either directly or indirectly by shaping the framework conditions, and ensure the rapid flow of knowledge and information within the team.

They also need strong change management skills. After all, managers are expected to actively shape digital change. They are expected to be open to innovations that are also far beyond their own sphere of observation (sensing), to make decisions quickly in response to new trends (seizing) and to implement changes consistently in their teams (reconfiguring). Thus, they are expected to have effective change capabilities, which are referred to in the literature as Dynamic Managerial Capabilities. Finally, managers need definite conceptual digitization skills. Contrary to expectations, managers are only required to have in-depth technological skills to a limited extent. Rather, in the digital transformation, mindset and holistic thinking are decisive in order to understand interrelationships well and to be able to make appropriate decisions. Furthermore, a selective reflection of actions on a meta-level is essential.

 

Leader-Follower Relationship: The more digital everyday leadership becomes, the more important the design of a sustainable working relationship becomes!

The increasing mechanization of everyday leadership adds to the demands on the leader for self-management (personnel dimension), for team design (social dimension) and for the creation of framework conditions (structural dimension). Meaningful & participative leadership is becoming essential. Due to the digitalization challenges, the character of the people becomes more apparent. By means of meaningful and participative leadership, an attempt is made to exert a communicative influence on employees - even at a "digital distance". Active relationship building contributes to overcoming this. Digital technologies require not less, but more active shaping of the relationship between managers and their employees. The "coldness" of the technology must be actively extended by the manager to include the social dimension (e.g., to build trust), because the trust environment no longer arises by itself, especially in the case of "digital distance. Through clear framework conditions - for example, by creating ambidextrous and diverse team structures, transparency and participatory performance appraisal (based on transparent data) - managers can maintain their employees' ability to act in the digital transformation.

 

Challenges of Digitalization: Comprehensive anchoring of digitalization as the key to success!

The results of the Delphi study showcase that companies will anchor digitization comprehensively in strategies, structures/processes/technologies and culture. The further development of a culture that understands digitization and analog business as increasingly integrative is seen as particularly key to this, as the boundaries between the analog and digital worlds are continuously blurring. Comprehensive digitization will be achieved when companies attempt to anchor digitization integratively in strategy (strategic dimension), structures, processes & technologies (hard dimension) as well as in culture and people (soft dimension). With an expected digitization-affine learning culture, decision-makers assume that the further development of digitization is to be regarded as a learning process on a grand scale. At the moment of technological leaps, digitization requires a culture of fault tolerance, reflection and speed, as well as the use of networks to enable rapid and effective learning of new technologies. However, cultures can only be controlled to a very limited extent, if at all. Therefore, digital identity development requires consistent onboarding even in times of "digital distance" and the sharpening of a (often complementary) digital identity. With active knowledge development, the leap into digitization can be accelerated. New digital technologies require rapid learning, which is what the consistent and active development of knowledge - within the company and via open networks (open strategy) - serves.

 

Is Digitization bringing back old virtues of managers?

Digitization requires active managers who drive, communicate and implement technological change. Openness to innovations, decisiveness in enforcement and consistency in implementation are elementary in change. Thus, executive selection and qualification act as levers for the broad integration of digitization ideas into the organization. In this context, the ability to reflect on a meta-level becomes the key strategic capability. Digitization must be supported by establishing suitable leadership systems. This is because leadership and change require time, resources and, above all, attention. Reflective change knowledge through strategically coordinated management training lays the foundation for technological change; especially among technicians.

Finally, the holistic design of digitization in the interplay of strategy-structure/technology-culture promotes the prerequisite for comprehensive change. Managers are the key to strategy development and implementation in the digital transformation. They must therefore create the formal regulatory framework for embedding the technologies and, above all, explain the "why". Leaders can try to embed a "digital mindset" in the culture through their behavior (symbolic management) and their decisions: they are the lever to do so! They are therefore the critical factor in anchoring the digital transformation in companies. Their qualification should therefore be the focus of those companies whose digitization ambitions are high.

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