CAM HIL M2U2 Notes PDF

MODULE 2 UNIT 2 Challenges to and enablers of leadership at the organisational level © 2018 University of Cambridge All Rights Reserved cam.ac.uk Table of contents 1. Introduction 3 2. Understanding the external context of an organisation 3 3. Challenges to leadership 3.1 Industry sector 3.2...

MODULE 2 UNIT 2 Challenges to and enablers of leadership at the organisational level © 2018 University of Cambridge All Rights Reserved cam.ac.uk Table of contents 1. Introduction 3 2. Understanding the external context of an organisation 3 3. Challenges to leadership 3.1 Industry sector 3.2 Value chain 3.3 Stakeholders 3.4 Competitors 4 5 5 6 7 4. Enablers of leadership 4.1 Innovation 4.2 Collaboration and stakeholder engagement 4.3 Creativity 8 8 9 9 5. Conclusion 10 6. Bibliography 10 © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 2 of 11 cam.ac.uk Learning outcomes: LO2: Identify potential leadership challenges in the external context of an organisation, including industry sector, value chain, stakeholders and competitors. LO3: Articulate ways to mitigate challenges and enable high impact leadership in the external context. 1. Introduction The world is becoming increasingly complex and interconnected. The VUCA (volatility, uncertainty, complexity and ambiguity) concept was introduced to describe the world becoming more volatile, uncertain, complex and ambiguous. Business leaders are increasingly recognising that this complex and volatile context is posing fundamental challenges to their organisations’ roles and purposes within society, and to the ways businesses operate. This context also requires a new generation of leaders who can operate effectively in a VUCA world. In this set of notes, you will explore some of the key challenges related to the external context of an organisation. These include industry sector, value chain, stakeholders and competitors. You will also learn about the practices, capabilities and mindset that a high impact leader needs to foster to mitigate these challenges. You will also learn about factors that can enable high impact leadership, including innovation, collaboration and stakeholder engagement and creativity. This set of notes serves as an introduction to the VUCA world, which you will explore in more detail in Module 4. 2. Understanding the external context of an organisation The context in which a business operates today has many dimensions. It is crucial for a leader to be aware not only of the internal workings of their organisation, but also of the broader external context in which it operates. External factors that influence an organisation may be political, economic, social or technological. Often, these external factors pose challenges to leadership. However, if you are well informed and able to plan effectively, these challenges can be leveraged to empower your leadership approach. As an example, consider how rapid technological advancement is driving unprecedented changes for business. Societies are in the midst of what has been described as the “Fourth Industrial Revolution”. According to Dobbs, Manyika and Woetzel (2015) from the McKinsey Global Institute: “Compared with the Industrial Revolution…this change is happening ten times faster and at 300 times the scale, or roughly 3,000 times the impact”. © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 3 of 11 cam.ac.uk In society, the global spread of mobile technology and social media has increased the information flow and connectivity of citizens around the world, resulting in more transparency in business. At the same time, there are pressing social and environmental challenges – ranging from climate change and availability of natural resources to wealth inequality – that pose fundamental risks for the stability and well-being of our society. Technological advancements have led to innovations in business models, products and processes. While technological advancement creates massive opportunity for business, such opportunity needs to take into account the potential for disruption and risk. Figure 1 illustrates the key areas of an organisation’s external context. Figure 1: The external context of an organisation. 3. Challenges to leadership As suggested in Figure 1, the external context in which a business operates comprises several complex relationships and challenges to which a leader will need to respond. Such complexity means that organisations will need to proactively anticipate change and prepare for challenges that might arise (CISL, 2017:8). Although external pressures do pose challenges to an organisation, it is important to consider how these challenges can be mitigated or translated into opportunities. For instance, external pressures can highlight the areas in which a business can improve and truly effect high impact change. One such example is the global financial crisis in 2008 which “forced many organisations to prioritise leadership development efforts” (CISL, 2017) as a response. This section covers some of these potential challenges that inform the external context of an organisation. © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 4 of 11 cam.ac.uk 3.1 Industry sector One of the first considerations in the external context of an organisation is the sector in which the business is situated. Some of the challenges and disruptions to consider include: • Financial pressures; • Growing consumer expectations; • Decentralisation and community empowerment; • New technologies; • Environmental factors; and • Global competition. (Tizard, 2012) For example, the insurance sector faces unique challenges because of climate change. As a response to such challenges, the ClimateWise initiative was founded. ClimateWise supports the insurance industry by responding to “the risks and opportunities associated with the climate-risk-protection gap. This is the growing divide between total economic and insured losses attributed to climate change” (CISL, 2017). Businesses also contribute in a broader external context beyond the bounds of their industry sectors in cross-sector groups and membership organisations. For big businesses, this might include organisations such as the World Economic Forum, which “engages the foremost political, business, and other leaders of society to shape global, regional and industry agendas” (World Economic Forum, 2018). For smaller organisations, it might include local versions of organisations such as the Confederation of British Industry (CBI) or the Chamber of Commerce network. 3.2 Value chain A value chain refers to a set of activities that an organisation in a specific industry undertakes for service or product delivery (Walters, 2009). Value chains are systems that organise a business and can comprise several sub-systems. One of the biggest challenges for value chains is climate change, which causes disruptions across entire systems – from sourcing to production, distribution and sales. Similarly, increased urbanisation complicates distribution networks in cities, while the growing global population is a drain on natural resources (Clinton & March, 2015). Although the rapidly evolving context poses challenges in determining how to map a value chain, by mapping external context and processes, a leader can better understand how these processes affect the structure and operations of their organisation. © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 5 of 11 cam.ac.uk The Porter model is a traditional value chain approach developed by Michael Porter. This model divides business operations into primary and secondary activities. Primary activities encompass logistics, operations, marketing and sales; while infrastructure, human resources, technology and procurement are considered secondary activities. There are also newer approaches to mapping value chains, such as the World Economic Forum’s, which is based on the model used by Henry Ford in automobile manufacturing. Here, the use of a value chain enables better use of limited natural resources and attempts to reduce negative environmental effects. 3.3 Stakeholders Contemporary leaders will face challenges from various stakeholders, both internally and externally. To mitigate these challenges, it is necessary for a high impact leader to be aware of the roles that various external stakeholders play in their organisation, and to understand the effects that the actions of these stakeholders have on the organisation’s operations. Figure 2 illustrates the distinction between internal and external stakeholders. Figure 2: Internal vs external stakeholders. © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 6 of 11 cam.ac.uk Table 1 details the gaps that leaders will need to bridge to effectively communicate with external stakeholders. Table 1: Challenges of external stakeholders. (Source: O’Neill, 2016) Challenge Description Language “Different terminology to describe company performance and different indicators to measure this performance” Time frame “Companies are pressured by investors to report on short-term results while often needing to focus on issues that play out over the medium to long term” Expertise “Inadequate levels of mutual comprehension and technical capacity” Relationships “Lack of strong internal relationships impacts relationships with external stakeholders” Resources “Not enough time or other resources are dedicated to communicating with investors” 3.4 Competitors Competitors can often pose a challenge to leadership, but many organisations are finding ways to turn competitors into “co-opetition” (co-operative competition) or collaborators, thereby turning a challenge into an opportunity. The aim of co-opetition is to enable organisations to work together for mutual benefit, rather than having a single organisation dominate the market. For instance, in the technology sector, co-opetition helps mitigate the losses associated with technology, which rapidly becomes outdated. One particularly successful example of co-opetition is the 2004 Sony-Samsung joint venture, which saw two major competitors working together to develop LCD panels for flat-screen TVs. Instead of the typical win-lose situation, such collaborations allow both parties to succeed, which benefits the consumers. Another example of co-opetition linked to technology is the Sustainable Smartphone Working Group. In 2016, as part of its 2030 Initiative for Sustainable Consumption and Production, Transform Together launched its Sustainable Smartphone Working Group. This initiative includes representatives from civil society, organisations, progressive businesses and governments working together to solve a common challenge: improving the environmental and social impact of smartphones. © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 7 of 11 cam.ac.uk Note: If you are interested in learning more about co-opetition, explore the benefits of this approach. Can you think of any examples of co-opetition? Do you think this approach would be feasible in your industry? 4. Enablers of leadership Having learnt about the challenges to leadership in the external organisation, you can now consider the factors that enable high impact leadership. These enablers represent some of the practices, capabilities and mindsets that high impact leaders need to foster to mitigate challenges. The enablers of leadership are illustrated in Figure 3. Figure 3: Enablers of leadership in the external context. 4.1 Innovation Innovation is generally understood as “new ideas being applied” (Fleming, 2018). Innovation might take the shape of improved products or services, or improved organisational practices and strategies. © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 8 of 11 cam.ac.uk As suggested by the context of a VUCA world, leaders will find themselves needing to respond to and predict change. Understanding how to innovate in your context leads to major competitive advantages. Leaders who embrace thinking beyond traditional business practices can increase economic performance and improve the quality of the workplace. As mentioned earlier in these notes, technology will continue to play an increasingly important role in business innovation, and high impact leaders will need to know how to leverage this to their advantage. A number of companies are already seizing this opportunity to develop the digital capabilities of their leaders. You can look forward to learning more about innovation in Module 7. 4.2 Collaboration and stakeholder engagement An effective organisation needs to have positive external relationships with other organisations and institutions. Much like a leader cannot achieve change by working in isolation, an effective organisation needs to understand the importance of collaboration and how to manage relationships strategically. Collaboration in the global context involves building networks that span geographic and industry lines. Having a clear understanding of your external context will enable you to use common goals to bring people together, irrespective of global boundaries. To succeed at this, a high impact leader will first need to assess the strengths and weaknesses of their collaborators (George, 2015). Collaboration in the external context also helps leaders to build a greater awareness of events and experiences beyond their own organisations. In turn, this helps leaders “foster long-term mindsets and a culture of innovation and collaboration” (CISL, 2017). Through engagement with external stakeholder groups, leaders can also enable organisational learning (CISL, 2017). Although it can be challenging to break down the traditional boundaries of an organisation, this can be a useful way to effect high impact change that moves from the external to the internal context. This can be seen in the way that organisations are increasingly engaging with non-traditional groups or stakeholders. Essentially, for a leader to have a high impact, it is necessary for them to understand the world and needs of their stakeholders (CISL, 2017). 4.3 Creativity For creative thinking to flourish, leaders can start by defining their ambitions and then creating space for innovation and creative practices. This further entails encouraging creative mindsets and providing thinking tools. As such, creative leadership requires courage and resilience (CISL, 2017). According to Vernooij and Wolfe (2014): Creative leadership is the ability to create and realise innovative solutions especially in the face of structurally complex or changing situations. It refers to those people who, when all is shifting and new approaches are yet unknown, can still create clarity of purpose for their teams. © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 9 of 11 cam.ac.uk The role of creativity in leadership, then, is in the mindset and thinking that underpin challenge resolution. Most leaders are trained to devise strategies that map organisational processes clearly, but few leaders have developed the thinking that is necessary for a changing global context, where business processes are subject to complexity and ambiguity. A high impact leader, thus, needs to be able to think creatively to make adjustments to their plans along the way (Vernooij & Wolfe, 2014). 5. Conclusion Understanding the external context in which your organisation is located is crucial for a high impact leader. With the rapid speed of change happening globally, the challenges to leadership are also constantly evolving. As a result, a true high impact leader will need to be aware of what these challenges entail and be prepared to respond to change. For this reason, there is true value in understanding which factors can enable you to lead with a higher impact and truly become an agent for change. 6. Bibliography Clinton, L. & March, R. 2015. Model behaviour II: strategies to rewire business. SustainAbility. Available: http://sustainability.com/our-work/reports/modelbehavior-ii/ [2018, July 17]. Dobbs, R., Manyika, J. & Woetzel, J. 2015. The four global forces breaking all the trends. McKinsey & Company. Available: https://www.mckinsey.com/businessfunctions/strategy-and-corporate-finance/our-insights/the-four-global-forcesbreaking-all-the-trends [2018, June 28]. Fleming, N. 2018. Trust, innovation, sustainability: innovation enablers or blockers? Australian Institute of Company Directors. Available: https://aicd.companydirectors.com.au/membership/company-directormagazine/2018-back-editions/february/innovation-enablers-or-blockers [2018, June 28]. George, B. 2015. Discover your true north: becoming an authentic leader. Wiley: Hoboken, New Jersey. Mosher, M. & Smith, L. 2015. Sustainability incorporated: integrating sustainability into business. SustainAbility. Available: http://sustainability.com/ourwork/reports/sustainability-incorporated/ [2018, July 17]. O’Neill, R. 2016. Closing the sustainability-investor relations gap. SustainAbility. Available: http://sustainability.com/our-work/reports/closing-the-sustainabilityinvestor-relations-gap/ [2018, July 17]. Tizard, J. 2012. The challenges and opportunities in contemporary public sector leadership. International Journal of Leadership in Public Services. 8(4):182-190. © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 10 of 11 cam.ac.uk University of Cambridge Institute for Sustainability Leadership (CISL). (2017, December). Building leaders for long-term business performance: Research findings. Cambridge, UK: the Cambridge Institute for Sustainability Leadership. Vernooij, M & Wolfe, R. 2014. The need for creative leadership. Available: https://www.thnk.org/insights/the-need-for-creative-leadership/ [2018, June 29]. Walters, D. 2009. Understand the value chain network, understand the market, understand the industry and understand the customer. Journal of Transport and Supply Chain Management 3(1):96-119. World Economic Forum. 2018. Our mission. Available: https://www.weforum.org/about/world-economic-forum [2018, July 16]. © 2018 University of Cambridge All Rights Reserved Tel: +44 203 457 5774 | Email: [email protected] | Website: getsmarter.com Page 11 of 11