BY Nick Jankel

Author, Leadership Futurist, Philosopher, Transformation Catalyst

In my 20s I ran a top-flight strategy and innovation consultancy. My business partner and I, with our fast-growing team, worked with C-Suite executives from over one hundred Fortune 500 and FTSE 100 companies to help them grapple with the digital and disrupted world and innovate the business models of the future.

I was convinced that those who could wield the strategic innovation toolkit—a comprehensive suite of powerful tools for metabolizing changes in the environment into exponential billion dollar products, services, and business models—held the keys to the future of every organization and every industry.

I was wrong. Or at least I was thoroughly misguided.

Although running an innovation firm was great for my reputation, pocket, and sense of self-worth—and although we had some notable successes, liking supporting the innovation of the most successful TV show of all time—most of our work failed to deliver systemic impact.

Why?

Quite simple, because the organizations didn’t have people in them who had the skills and qualities needed to lead and land the transformational changes in either products externally (product or service innovation) or internally (process or people innovations like agile) that they briefed us to create.

I still believe that strategic innovation, focused on genuinely transformational ideas, is the most reliable approach for ensuring your organization survives the VUCA (Volatile, Uncertain, Complex, Ambiguous) reality we are all in. It is the only way to avoid fighting with competition over marginal gains and, at worst, becoming obsolescent.

Instead, you ensure you create new forms of value for both new and existing customers who have emerging, future-forward needs. But without something even more important, all the work done to generate exponential value out of constant change using strategic innovation will fail: transformational leadership and cultures.

In other words, it doesn’t matter how smart you executives are, how many MBAs are in the team, how many genii are put on your strategy project by management consultancies, or the brilliance of the strategies and innovations you develop: if the people within an organization don’t have the level of consciousness needed to birth genuinely future-forward projects, products, and processes—then all will fail.

A case in point: McKinsey, the leading management consultancy for strategy development full of the smartest people in the room, was paid $5 million by AT&T to develop a strategy for the future. They predicted, using the existing rules they were paid to shore up, that cell phone adoption by the year 2000 would be less than a million. The actual number was over 100x more at 109 million. AT&T was disrupted and has arguably never recovered. In 2000, the very smart CEO of Kodak said to very smart investors that we have “a great brand, a great balance sheet, cash flow. This is very smart time to be in the picture business”.

What this means is that the greatest secret in 21st Century business is this: whoever holds the People Vision of an organization—whomever “owns” the vitality and agility of the culture, is responsible for fostering psychological safety and genuine empowerment, determines the style and skills of leadership needed and ensures that leadership development is embodied and embedded—holds the keys to the kingdom of 21st Century business success.

This will become ever-more true because the speed of change outside an organization is getting faster so that every business unit, product, and category will need to continuously re-invent itself: i.e. not just one disruptive innovation program or agile process change to last a few years; but continuous transformation at all times to adapt to the changes.

They don’t teach you this in Management School (at least not the ones I have guest lectured at). Few on the board are aware of this abiding truth (which is why there are very few, if any, CEOs who were once HR Directors). Most alpha-dog management consultants, making so much money from process architectures, new IT systems and restructures, think the idea so anathema that they don’t even consider it let alone reject it. And many of those in HR don’t know it; or haven’t the power/empowerment needed to leverage the insight. Sadly I found this out when I did the headline keynote called “HR Holds The Keys to the Future” at a conference for senior HR people and it went down like a lead balloon.

As I have discovered, through the very personal experience of pivoting my entire business and career around this insight, it’s much less glamorous working in leadership development and agile culture-change than innovation strategy consulting and agile process architecture. Budgets are far, far smaller and much harder to get ahold of.

C-Suite airtime is far less and senior leaders pay you less respect (until they go through a program that is). Managers expect culture to change easily (even though all evidence from their own lives and past experience would appear to contradict this assumption) so have little patience for how much time, energy, money and commitment it takes; which can be profoundly challenging when one wants to land a profound impact.

Most business leaders I meet recognize the need for a more agile, adaptable, innovative and collaborative culture and leadership capability; but few want to invest in it or deal with the messy, complex human beings that need to create it. My favorite is the common statement by many a President: I would love a Business Purpose or Disruptive Innovation Roadmap, or Agile Company…. I just don’t want to pay for any people to change.

It’s much easier to measure progress in productivity, process implementation or in strategy development than it in culture-change and leadership development; so that’s where the big bucks go even as the business loses its competitive edge year after year because the culture does not afford change. Context is king. Context and culture is as, if not more, important than content or code (innovations, strategies, processes, plans).

The history of recent spectacular leadership failures—from Kodak to Mubarak—shows us that what make smart executives fail is their assumptions and habits as leaders: that is to say, their consciousness. An organization cannot outperform the consciousness of its leaders, something we finally have tangible evidence for. In the most advanced research into the impact of effective leadership on results covering over 2000 organizations, 38% of business outcomes are dependent on the mastery and creativity of leaders; and that the top 20% of leaders deliver fully 600% better measurable results compared to their mainstream “average” counterparts. This means that currently at least 80% of leaders are out-matched by the “VUCA” world and will lead organizations to fade, and possibly fail. This is why Yale Management School has estimated that 75% of all Fortune 500 businesses will disappear by 2027.

Smartness comes from what we call “Control & Protect Mode”. In this Mode, we repeat best-practice, apply existent rules to solve knowable technical problems, and deliver gradual improvements efficiently. But to solve new customer problems, to create exponential value in the future, we have to be able to generate next-practice, to challenge the old rules and invent new ones, and to deliver breakthroughs change. This is rarely efficient, neat, and predictable and so Control & Protect Mode does everything it can, at the individual and institutional level, to crush such innovative ideas and ways of working.

We need to somehow get out of Control & Protect Mode and into what we call Create & Connect Mode. Invention, innovation, collaboration, and co-creation “boot up” naturally in this Mode. The challenge is always how to lead ourselves and others into Create & Connect Mode at the right time and in the right place (and with the right kinds of problems). We don’t want to be in the wrong Mode for the wrong type of problem.

As they state in The Practice Of Adaptive Leadership, “the most common cause of failure in leadership is produced by treating adaptive challenges as if they were technical problems.” I.e. we use Control & Protect Mode to try to solve transformational problems using old rules, habits, and best-practice rather than use Create & Connect Mode to transform emerging problems with new solutions. This is what Kodak did and it is what every great company does that underperforms given its access to capital, resources, and talent.

Transformational leadership is about knowing what Mode to use to solve what kind of problem. It means be unafraid to go on the long and unpredictable journey of engaging your people’s hearts and minds to change not trying to take the easy and relatively cheap way out by paying consultants to implement an agile process or (yet another) restructure. It means constantly leveraging both science and wisdom to master our biology and the biologies of the people we want to influence (customers, employees, partners, investors). A mastery of our biology leads to a mastery of leadership—which leads to mastery of our VUCA reality. There is no other way to survive and thrive in this disrupted, digital, and stressed world.

So while a brilliant disruptive innovation process, agile development methodology, and set of creative tools are still essential, organizations do not need consultants to be creative for them. In fact, this is where the issues lie. An organization has to discover, nurture, and safeguard its own agility and innovation capacity in order to take inchoate ideas and implement them in the world even as the organization’s immune system tries to destroy them (and the people that have them). If they out-source it to others with little power, it is too easy to ignore.

Organizations do not fail because of lack of intelligence but because they can’t let go of old mindsets and perceptions long enough to be in the right Mode and on the right side of history. The sooner those in charge of our organizations realize this and accept that they will not be able to change business models if they themselves, and their teams, cannot let go of old assumptions easily, stop repeating old habits rapidly, and handle the psychological risks of experimentation and change, then they will carry on repeating what worked in the Industrial Age… but that will not work in the Digital Age.

Calling all C-Suite Leaders: Switch on, step up, and ensure that leadership development, team empowerment, and an agile culture-change is a top 3 priority; up there with strategy and fiduciary excellence. Nothing else will ensure you make it in these crazy, chaotic, and tough times. You must optimize your business for agility and velocity not just cost.

Calling all CHROs, HRDs, and L&D professionals: Look within yourself to discover the keys to the kingdom of future success for your organization. Master those keys and take them to the top table. Show everyone how you can work them to unlock the power of transformation in your people and so lead transformation after transformation in your organization.

Then, and only then, will you thrive your future.