Paul Leinwand, Mahadeva Matt Mani: Beyond Digital

Shape Your Future

Dennis Gabor said that the future cannot be predicted, but futures can be invented.

Creating sustainable advantage requires more than digitization. It requires understanding that the nature of competitive advantage has shifted — and that being digital is not enough. It’s time to move beyond digital.

In the world beyond digital, companies can — and must — do things differently. They enable — and require — companies to rethink the unique value they can offer customers.

Smart companies now focus on building differentiation in what they do and how they operate, not just what they sell.

Technology plays an important role in all of these capabilities — but these capabilities are much more than just technology. They are highly integrated and often complex combinations of knowledge, processes, technologies, data, skills, culture, and organization models that together allow companies to create value in ways that others cannot.

If you use the things that don’t change quickly as an anchor for your organization, you can channel your efforts to the areas that matter most to your customers and the problems you’re solving. Doing so will allow you to get in front of change and to shape your own future.

The major changes we’ve witnessed can be segmented into three clusters: a revolution of demand, a revolution of supply, and a transformation in the larger context in which companies operate.

Customer loyalty and retention have declined as digital marketplaces make it easy for customers to reevaluate their choices with every new purchase and select the provider that offers the best value proposition.

Among other changes, customers are less and less likely to be willing to be the integrators. They want companies to pull everything together to solve a problem, not to have to piece the solution together themselves.

Customers therefore don’t align with simplistic segments anymore — and companies are dealing with a nearly infinite set of expectations.

The future is all about substantive differentiation and creating measurable and meaningful value.

On the supply side:

First is the issue of scale.
Second, a decline in friction has significantly reduced what we might call barriers to cooperation.

While friction is hardly eliminated, reducing costs and hassles has enabled the creation of ecosystems of companies and institutions that together offer value in ways that no player alone could ever aspire to do.

Companies must adapt to a world in which people increasingly want to work for organizations whose purpose connects to their personal values.

What matters for success in today’s world is building scale in a few capabilities that allow you to deliver value to your customers and the world at large in a unique and differentiated way, via new, digitally enabled ecosystems and platforms.

Zara’s success is due to the powerful capabilities it has built and scaled across the company: deep customer insights; accurate fashion-forward designs; efficient response manufacturing and operations; and globally consistent and pervasive branding.

The internet is the macro store, where all the collections are. Customers have changed significantly: they see something they like on the internet, they go into a store, and they may be disappointed if the garment is not there. So, every store now is a picking point for internet orders, and you can order from any store and have it shipped home. But that’s only possible because of how we use RFIDs. RFIDs tell us exactly where the stock is, and thereby allow us to have a centralized stockroom. If there’s an order nearby, we can move it from one point in the stockroom to a store and deliver it from the store to a final client.

No matter how many digital initiatives you implement, you can’t expect to win by being the same as your competitors, which are all doing similar things (even if at different speeds).

Reimagine Your Company’s Place in the World

To succeed in the beyond digital world, you need to take a stand on what position your company is going to occupy. You need to take a leap of imagination to look beyond your current portfolio of businesses and products and beyond what your competitors are doing to imagine who you want to be.
Once you’ve defined your company’s place in the world, you need to reimagine the capabilities needed to deliver on that place. To do this, rethink end-to-end what you need to do to fulfill your value proposition. Be clear about how technology decisions should support your capabilities, rather than playing the game of investing in everything.

Embrace and Create Value via Ecosystems

Many of today’s problems are so massive that no single company can solve them on its own. They can be tackled only by networks of companies and institutions that work together. And the era of asking customers to be the integrator is over.

Build a System of Privileged Insights with Your Customers

Building a system of privileged insights with your customers requires much more than just buying market research. It requires companies to establish a foundation of purpose and trust, because customers share their most useful information only if the value you offer resonates with them and they trust you to make good use of the information.
Gaining privileged insights may become one of your most important capabilities given its importance to value creation and sustainable differentiation.

Make Your Organization Outcome – Oriented

You can’t get away with plucking people out of their functional roles and asking them to work together 10 or 20 percent of their time, or for six weeks or six months. The typical cross-functional teams are no match for the dedication, focus, and energy required to bring your value proposition to life. Instead, you will need to build more durable outcome – oriented teams that deliver your differentiating capabilities by bringing together what they need from across the organization.

Invert the Focus of Your Leadership Team

Our research identified three significant actions that help leadership teams drive the transformation agenda:
- Establish your top team based on the right skills mix, rather than tenure.
- Shift your leadership team’s focus toward driving the transformation, not just responding to today’s demands.
- Take ownership for how your leadership team collaborates and behaves.

Reinvent the Social Contract with Your People

Reinventing the social contract isn’t an exercise meant to make employees feel good (though it will!). It’s about getting employees and the ecosystem to choose to be on board to help you transform the company.

Disrupt Your Own Leadership Approach

Today’s successful leaders need to be both strategists and executors. They need to be tech-savvy and deeply human. They need to be good at forming coalitions and making compromises, all while being guided by their integrity. They need to be deeply humble and know their limitations and at the same time show the way and make big decisions. They need to constantly push for innovation while being grounded in who they are as a company. And they need to be globally minded as well as deeply rooted in their local communities.

Reimagine Your Company’s Place in the World

There is no passion to be found playing small and settling for a life that’s less than the one you’re capable of living.

Reimagination defines the compelling value you will offer and how you create that value in a differentiated way. Both dimensions — the unique value you promise and the differentiating capabilities that allow you to deliver that promise better than anyone else — are what defines your company’s place.

As ESG considerations reshape how value is perceived and measured, all companies must reexamine how the value they offer remains contemporary and relevant.

What does real differentiation look like in today’s environment? Nearly all examples of true advantage in today’s market derive from powerful differentiated capabilities, the few things a company does better than anyone else.

Whereas the sheer size of their business once gave companies an advantage, what matters today is the scale of their differentiating capabilities. Capabilities today typically require significant (often fixed) investment, particularly in data, technology, and people.

Building this capabilities engine requires you to be very clear about the few strengths that deserve your full attention and investment focus.

Hitachi chose five markets to focus on: mobility, smart life, industry, energy, and IT. In each of these markets, Hitachi set out to understand in depth the issues that customers face and to develop solutions.

Hitachi also focused on digitizing the power grid (in energy), automating and electrifying production (in industry), over-the-air software update systems for vehicles (in smart life), and data-driven value creation in government (in IT).

The future requires extreme clarity both in the boldness of the challenges you seek to solve and in the specificity for how you will deliver the promises you make.

We’d strongly encourage you to begin by considering four insights from the companies we researched for this book. Take a Point of View about the Future.

Your job as a leader is not to maintain the status quo or to protect current profitability; your job is to create an organization that will succeed for decades.

It’s not just about understanding the uncertainty that’s hitting you; it’s much more importantly about you helping shape that uncertainty.

Overcoming the Disincentives for Making Bold Decisions. Ask an executive if they would like to build competitive advantage and you’ll most certainly hear strong commitment to that task. Ask them to make bold decisions — to jettison businesses or build whole new capabilities — and you’ll often encounter hesitation and doubt.

In our research, we identified five reasons why these choices are so difficult for most CEOs:

Shareholder versus management incentives.
Long-term versus short-term perspective.
Perceived or real constraints.
Inability to see a path from here to there.
Once burned, twice shy.

Use Your Ecosystem to Widen Your Aperture. Your company is likely a participant in, or enabler of, several ecosystems.

Find Your Hidden Powers. There is likely something incredible your company is able to do that offers value far beyond your current products and services.

Unconstrain Your Team. Reimagining your place is incredibly difficult when you let yourself be constrained by two factors: the decisions that your business has made in the past and the barrage of disruptive forces your team sees as unavoidably affecting the future of your organization.

With those lessons learned in mind, here are three steps for determining your future place in the world and staking out a strong (and adaptable) position.

Step 1: Envision Ideas for Potential Ways to Create Value

Come up with a point of view on the future of your industry (or industries).

Here are some questions to think through:

What are the big problems in the industries and markets we serve that remain unsolved?
How is demand going to evolve?
How will ESG requirements impact the future?
How is technology going to change what’s possible?
How are value pools shifting?
Look at archetypes and potential analogs from other companies and industries.
Look at your own strengths and how they could generate value in ways that others cannot match.

Step 2: Integrate Those Ideas into a Few Relevant Options for Your Place in the World

After you’ve widened the aperture in step 1 to generate ideas about how value can be created in your industry, now is the time to integrate these ideas into a few options for places in the world that are relevant for you.

Relevant options don’t just address a customer problem — they also allow you to tap into sizeable profit pools.

Step 3: Make Your Bold Choice

In the end, you need to find a place that is relevant and unique and for which you are the rightful owner. Your stated place needs to be relevant to a set of customers or users with the potential to buy your products or services; it needs to be clear whose lives or businesses you are improving in some way, large or small. Your place must be unique — if you disappeared, you’d leave a hole in the marketplace. You must be the rightful owner of your stated place; you must have or be able to build the capabilities to excel at it and be able to do so more effectively and efficiently than your competitors.

Reimagining your place in the world today requires you to fundamentally question your company’s reason for being and demands that you make big bets — even amid all the uncertainties about technologies, market structures, and economic and environmental conditions that keep business leaders awake at night.

Embrace and Create Value via Ecosystems

Beginning in 2017, Komatsu launched the open platform Landlog to further extend its efforts across the construction industry and enhance customer service. The Landlog platform, which can use information from other companies’ machinery as well as Komatsu’s smart construction information, has three major functions: visualizing construction processes, translating the data and images into actionable information, and providing application programming interfaces (APIs) that help users build their own applications against the Landlog platform to make construction sites smarter and safer.

Having started off by digitizing individual construction processes one-by-one (what Komatsu calls “vertical digitization”), the company has recently introduced new IoT devices and applications under the name “Smart Construction Digital Transformation” to digitize the entire process (“horizontal digitization”).

Many of today’s unresolved problems, however, are so massive and complex that no single company can solve these issues by itself.

Think about people’s need for mobility
Or about people’s need for better health

These problems can only be tackled by networks of companies and institutions that work together toward a common purpose.

In addition, the era of expecting customers to be the synthesizers across their suppliers is over.

Working with ecosystems is also vital for another reason: there simply isn’t enough time or money to build the scale in capabilities that is required on your own.

The term ecosystem was first applied in a business context in a 1993 Harvard Business Review article by James F. Moore, a business strategist later known for his thought leadership in fields such as open technology, design thinking, and social change.

A distinguishing feature of the new ecosystems is that the partners work together to maximize the total value. Instead of a twentieth-century outsourcing arrangement where an organization buys materials or services to improve its own production, the partners work together to achieve improved end-customer or user-oriented outcomes — creating a greater outcome that will compensate them all.

Four main flavors of ecosystems have developed: those built around a platform provider, an orchestrator, or an integrator, or innovation partnerships.

When done right, partnering grows the pie for everyone — for customers, yes, but also for each of the partners.

A number of factors that have helped make their ecosystem strategies work. These can be grouped into four major themes:

Shape your view on your ecosystem play — what role should you play in the ecosystem?
Focus on the value you are creating for the ecosystem — not just what you’re extracting from it.
Clearly define what capabilities you contribute to, receive from, and deliver together with your ecosystem.
Invest in building trust and deep understanding together with your partners.

Shape Your View on Your Ecosystem Play. In the beyond digital age, your attention needs to shift from what you own to the value you are creating.

To succeed as a platform provider (and more generally as an enabler) over time, you need to continue to invest and improve your value proposition to stay ahead and keep the network loyal.

Focus on the Value You’re Creating for the Ecosystem — Not Just What You’re Extracting from It If the ecosystem thrives, everyone is going to benefit. If individual members are only interested in what they’re getting out of the ecosystem, it is going to fall apart.

Invest in Building Trust and Deep Understanding Together with Your Partners To make your ecosystem play work, you need to really understand what matters to your ecosystem partners, build trust with your ecosystem, and invest in managing the change.

You can’t collaborate effectively with someone you don’t understand.

Ecosystems are not about squeezing suppliers’ margins but about establishing strategic partnerships where you can only win if your partners are well off.

Build a System of Privileged Insights with Your Customers

Few leadership teams can say they have unique data about their customers, and even fewer have unique and relevant insights about what customers need and want.

Privileged insights is the term we use for the kind of customer understanding that is critical in today’s marketplace. Privileged insights are unique to your organization — and often uniquely valuable to you — and are developed from a combination of data, experience, and relationships that your competitors don’t have.

Before the move to cloud – based software and subscription – based sales, Adobe marketers knew very little about their users.

Moving to SaaS, however, gave the company the ability to see how customers were using its applications in real time and to identify both opportunities and pain points continuously by analyzing the millions of data points it was able to capture.

Adobe’s leaders concluded that they could overcome the scaling challenge and create winning customer experiences by using data and digital instrumentation. That’s when the company began to put in place what they now call their data-driven operating model (DDOM, as it’s referred to internally).

DDOM oriented all of Adobe’s data around the five steps of the journey a customer experiences with an Adobe application: Discover, Try, Buy, Use, and Renew. For each of the five steps, the company would define key metrics; for example, organic traffic (in Discover), unqualified to qualified conversion (in Try), conversion (in Buy), week 4 return rate (in Use), or user-initiated cancel rate (in Renew).

Adobe’s success with DDOM led the company to launch the Adobe Experience Platform in early 2019, to sell its insights system to other companies.

Businesses have always needed to know their customers, but in the world beyond digital, the need for insights — privileged insights — is even more acute.

While you will want to protect some of your most privileged data, you can create scale in your data assets by tapping into the information that other companies have built in many other areas. Leading companies now are more willing to source and share data — because sharing information (securely and consistent with your privacy policies) allows them to also receive data in return.

Your data strategy needs to become a key part of your corporate strategy. And your data strategy and corporate strategy cannot stand alone — they have to be supported by your technology strategy and priorities.

We recommend shaping your technology and data priorities, using your place in the world and privileged insights as a guide.

Gaining privileged insights may become one of your most important capabilities. It is a prime example of a complex, multifunctional capability that can let you stand out from your competitors as you continually provide products and services that are better tuned to customers’ wants and needs and that adapt as those wants and needs evolve.

Four Steps to Building a System of Privileged Insights

Establish a foundation of purpose and trust.
Lay out a purposeful customer insights approach and road map.
Build and enhance your mechanisms for gaining customer insights.
Wire your privileged insights into how you work.

Traditional market research can still provide insights, and it will probably be a part of your privileged insights capability, but research can no longer be disconnected from engagement. The rise of digital has given us the ability to observe and analyze much more granular data. We can focus on more specific and detailed customer segments and channels. Rather than asking questions, we can get hints about what consumers may want by looking at what they do or what else they have bought or used.

Purpose and trust are the foundation of your ability to build a privileged insights capability.

Delivering on your promise is an absolutely critical element of building trust.

Leaders must ensure that people across the organization understand that it’s not about extracting data from people — it’s about making your customers an integral part of the value chain.

Don’t forget that not every customer may want to enter into an intimate relationship where they willingly share their desires and motivations. You will need to identify a set of customers who represent your best source of privileged insights — those who resonate most with your purpose and to whom you can offer the greatest value.

“The financial industry is being disrupted because fintech companies like us went to the basic, core principles of banking, which is helping people manage their money.”

As STC Pay shows, even a company without a long history can develop a privileged relationship with customers if they feel valued and see their needs being met uniquely.

Every company gets customer feedback, but not every company builds a privileged insights capability.

Gaining privileged insights alone does not generate a whole lot of value. You need to connect these insights with your strategy and innovation capabilities and ultimately into your day – to – day operations, so you can refine your value proposition and improve your ability to deliver on it.

Make Your Organization Outcome-Oriented

Honeywell’s Connected Aircraft story illustrates many of the leadership imperatives we have mentioned before. The company looked ahead at what its customers’ real challenges were, redefined its place around a much bolder value proposition, integrated the right technology, and then moved customers in that direction.

With the model of value creation changing and your success depending on scaling up these complex capabilities, how you work must change, and your organization must be redesigned to support that new way of working.

Most organizations are not set up for this kind of flexible, collaborative, and outcome-oriented work.

Winning in the beyond digital world requires a new model of organization and teaming.

This new model isn’t about plucking people out of their functional roles and asking them to work together 10 or 20 percent of their time, or for six weeks or six months (which is how most companies use cross-functional teams; see “Transcending the Traditional Functional Model”). It’s about building more durable, outcome-oriented teams tasked with generating the outcome that each of your differentiating capabilities requires for you to be able to deliver on your value proposition. And since your company’s differentiating capabilities aren’t mono-functional, these teams must bring together everything they need from across the organization and your ecosystem.

Despite these developments, the fundamental challenge is that the traditional model, where leaders focus on “functional excellence” and build large functional organizations almost by default results in their losing sight of the end outcome that needs to be achieved. Motivations and incentives can get skewed: while Operations may strive for standard runs, R & D wants exquisite customization; while Sales wants to satisfy customers, Service aims at managing costs.

They all have to become much more outcome-oriented versus functional output – oriented.

End-to-end process models are invariably rigid and of limited help when the traditional functional matrix model remains the superstructure of the organization.

For these outcome-oriented teams to succeed, they will need to:

Be long-lived.
Have team members who are dedicated full-time to building and scaling the differentiating capabilities you have chosen.
Have their own resources — people and budgets — rather than borrowing from functions and business units.
Be led by senior executives typically members of the company’s top team.

We’ve seen a number of companies change their organizational structures and create select outcome-oriented teams that are long-lived and cross-boundary. These have become common in the innovation capability. Hospitals have created patient experience teams. Other examples include: total quality teams, customer experience teams and revenue growth management and in-market execution teams in consumer product goods companies.

In the new, capabilities-based organization, outcome-oriented teams sit alongside functions and focus on delivering the company’s differentiated capabilities.

The old shared services model of transaction centers that consolidate transactional functional activities (for example , accounts payable and accounts receivable) has today evolved in many organizations toward more integrated global providers of cross-functionally integrated end-to-end business outcome services (for example, working capital optimization) enabled by digital and data insights capabilities.

One of the key organizational changes underpinning Microsoft’s refresh was the transformation of the company’s global commercial business.

The transformation was organized around five pillars to bring the right resources to the right customer at the right time, enabling Microsoft to support its customers with their digital transformation and drive consumption:

Industry coverage. The company restructured the sales organization around specific industries.
Technical expertise. It brought technical competency closer to the customers by including engineers in field sales teams.
Customer success. It promoted usage and consumption of cloud services.
Digital selling. It empowered the sales force by using digital infrastructure and AI.
One commercial partner. The company simplified the rules of engagement between ecosystem partners and its own sales organization.

These included realigning specialized account-team units to better support the company’s enterprise accounts (the top accounts) with industry experts.

Microsoft had been a product-centric company, and if it wanted to become a “customer-obsessed company” (as it calls itself) it had to organize differently.

To make the capabilities-based organization work, you will need to rethink how you allocate budgets and investments and how you manage the P&L.

Since outcome-oriented teams are the main driver behind your company’s differentiating capabilities, the bulk of your investment needs to be directed toward those teams.

To free up the resources required for the organization’s differentiating capabilities, you will need to be ruthless in areas that should be “lights on” (which are necessary but which you should spend as little as possible on) and table stakes (where you need to be as good as competitors but not better).

What metrics are appropriate depends on your specific situation. It could be time-to-market for new innovations, carbon footprint and sustainability impact, customer satisfaction, the impact you’re having on the success of the ecosystem as a whole, or (as in Microsoft’s case) customers’ consumption of services (a measure of whether customers are experiencing outcomes).

What any company must do that aims to bring the capabilities-based organization to life — was to measure performance and compensate people based on specific outcomes, not on output.

In these new paths, people progress in a series of lateral moves through a number of different functions and teams. They don’t have to be managers and leaders to grow; playing the role of a contributor on a team also lets people grow. People can also play the role of a “translator” — someone who facilitates the collaboration between outcome-oriented teams, functions, and business units using their influence rather than positional authority.

We expect more companies to send employees to partners as we integrate capabilities and need to ensure trust and seamlessness in service of an ecosystem’s role in society.

When articulating the behaviors you want people to adopt, ensure that they are specific, visible, actionable, emotionally resonant, and, ideally, motivating.

We needed to set ambitious goals and not penalize people when they failed to hit them.

There is no one-size-fits-all answer to the perfect key behaviors.

Critical behaviors can be shaped with a few simple steps:

Inventory and understand the existing cultural traits and behaviors of the organization in a neutral way.
Assess how your existing culture supports and hinders your strategy.
Engage people to understand what specific behaviors are needed to support your new way of working and your new model of value creation.
Get people to identify what’s getting in the way of demonstrating that behavior.
Make it real. Put enablers in place and remove obstacles.

Establishing a capabilities-based organization is a great goal but naturally involves intrusive change in all the areas we’ve highlighted — structure, budgeting and planning, performance management, career paths, and how people behave — all of which are related.

Invert the Focus of Your Leadership Team

Key to the transformation that Lilly was going to undertake was a change in operating model and a drastic repositioning of Lilly’s top leadership team. Lechleiter created five business units — diabetes, oncology, biomedicines, emerging markets, and animal health — instead of relying on the company’s previous functional model.

In line with the new operating model, Lechleiter set up a newly named Executive Committee and added the heads of the five new business units to the team, while reducing the number of leaders with functional responsibilities to five.

“On the old committee, the majority of people believed their job was to be the checks and balances to people who were actually leading the business. The new committee had a majority of people who had P&Ls and operational responsibility, and the discussion in the room became much more business-execution-oriented, and that led to an ability to execute like we had never executed before.”

By 2016, with its revivified R & D operations, refocused organizational structure and leadership team, and leaner footprint, Lilly was firmly back on a path of profitable growth.

Our research identified three significant actions that help leadership teams drive the transformation to a digitally powered, capabilities-driven organization: Establish the top team required to shape your future.

Shift your leadership team’s focus toward driving the transformation, not just responding to today’s demands.

Take ownership for how your leadership team collaborates and behaves.

We like to challenge leadership teams to think through whether they spend their time together really leading the company.

How much of your time is spent on running the day-to-day versus shaping the future?
How often do you ask people to come back with more detailed proposals because your team doesn’t quite have the energy or the clear vision that allows you to be decisive?

Leaders often struggle to remove scope from an existing leader — new capability roles wind up being too weak to drive transformation, or there are simply too many roles to allow for clear accountability.

Given how central technology is to your value creation, every leader needs to embrace digital.

You will need team members with experiences in different fields, who have worked with different ecosystems, and who understand the different capabilities, technologies, channels, and transformational approaches you will be deploying. You will need leaders who have demonstrated that they can build and scale up the capabilities you are seeking to perfect.

You will also need to actively look for leaders on your team who exhibit the behaviors you have defined as critical: people who know how to lead via influence and encouragement rather than relying on their positional authority; people who are not concerned with the power, size, and budget of their areas but are instead focused on delivering outcomes; people who have the courage to acknowledge that they do not have all the answers and instead seek answers from their teams; people who can truly engage others around the purpose of what you’re trying to achieve, and people whose purpose is as much tied to delivering incredible outcomes as it may be to achieving their own personal success.

Time is the top team’s scarcest resource. What is the top team going to focus on, and how is it going to make sure that the urgent does not overtake the important?

Leadership teams will always need to manage two distinct agendas: running the business on a day-to-day, quarter-by-quarter basis and building for the future that you’ve committed to.

Setting the agenda of the team is one of the most important levers for the CEO. That’s why CEOs will not want to delegate agenda setting but rather drive the thinking behind this important task. Make room to think boldly about the future and translate that thinking into the everyday.

What if some people can’t seem to get on board? They either need to get on board quickly, or the ship needs to sail without them.

Addressing how your team behaves is not about leaders liking each other and agreeing. It is about establishing behaviors that allow everyone to be effective — to put issues on the table, solve problems together, come to decisions quickly, and feel committed to each other’s success.

People need a way — even when they don’t agree — to have faith in the process and align around the team’s decisions. This trust also allows you to build a culture of testing boundaries and “failing fast” — acknowledging that it’s okay to fail as long as you learn from it.

A transformation like the one that lies ahead of you can’t be undertaken by the company’s top team alone . You need leadership to happen at any level.

If you ask CEOs who transformed their company about their biggest regret, you often hear them talk about not having been decisive enough about repositioning their leadership team.

Your transformation effort won’t succeed unless you activate your leadership. Failing to do so — and do so quickly — will be a costly mistake.

Reinvent the Social Contract with Your People

Today’s value – creation model inherently relies on integrating people — their experiences, skills, judgment, and values — with technology, assets, and processes to create the differentiated capabilities that are at the heart of companies’ ability to compete.

A way of competing based on differentiated capabilities requires teams to deliver clear outcomes — and needs a workforce that arrives every day motivated to solve the challenges and opportunities ahead.

The scale of this transformation requires a new social contract that supports a fundamentally more engaged and committed team that will shape and secure your place in the world.

Without having the team deeply engaged with you, that vision will likely remain just a dream.

The Strategy & survey found that 63 percent of employees in companies that have clearly defined and communicated how they create value for customers say they’re motivated, versus 31 percent at other companies; and 65 percent say they’re passionate about their work, versus 32 percent in other companies.

To get people fully engaged, you will need to fundamentally rethink the “contract” you have with them, the implicit contract between the company and its people that makes sure that both parties get what they need to thrive. That contract now covers many dimensions in addition to compensation and benefits.

The job market is always constrained when you are looking for specialists and those who are willing to go above and beyond in service of your place in the world.

The successful companies we’ve studied rethink the following six dimensions of their contract with people:

Purpose
Contribution
Community
Development
Means
Rewards

If people feel that change is imposed on them and that they had no voice in the process, they often think the change won’t work and resist it.

Every company, therefore, needs to have some strategy to help people develop the requisite technology skills and agility that your capabilities system will undoubtedly require.

You need to explicitly give people the bandwidth to spend meaningful amounts of time on projects that may not be directly related to their current jobs but that might lead to future innovations or better ways to execute.

Monetary compensation is important, both in recruiting the right talent and in designing an equitable mechanism to share the company’s profits. But regardless of how important a paycheck is to any individual, the point of the social contract is to recognize that nearly all employees value other forms of rewards, too.

Saleh Mosaibah is against having an innovation center. “Innovation is a principle, like collaboration. Innovation and collaboration have to be done by everyone. You don’t create a collaboration team — and in the same spirit, I don’t think you should create an innovation department.”

Trust freedom and support are key. “People need to see that they’re part of the decisions, that they can change directions.”

Disrupt Your Own Leadership Approach

In his recent book Ten Years to Midnight, Blair Sheppard and his team sum up the concerns that people all over the world have in what he calls the ADAPT framework:

Asymmetry of wealth and opportunity
Disruption wrought by the unexpected and often problematic consequences of technology and climate
Age disparities — stresses caused by very young or very old populations
Polarization leading to the breakdown in global and national consensus
Loss of Trust in the institutions that underpin and stabilize society

Now that technology is a key enabler for almost everything a company does — innovation, operations, supply chain management, sales and marketing, finance, HR, or any other area — every leader needs to understand what technology can do for the company.

Transforming the company requires courage, decisiveness, and the stamina to stay true to the chosen direction even if things at first don’t work out as planned.

Bold? Yes. Ego-driven? No. The world beyond digital rewards humility as much as it does heroics — indeed, the two traits need to go hand in hand.

Leaders in the digital age need to balance where the organization comes from and where it must go.

Leaders in this complex environment must determine what they need to drive consistently across their company and where they can be flexible and allow for local tailoring.

We’d like to offer a few principles we’re often using in our work with leaders and that can help you shape your development journey:

Be critically self-aware.
Use your strengths to overcome your weaknesses.
Study those who aren’t you.
Seek the right experiences.

Accelerating Your Path to Success

We borrow an expression from a colleague of ours, Gary Neilson, coauthor of the book Results. He says that, in transformations, it is critical to have “amnesty for the past.” We must allow all of our executives to focus on being clear about what is needed to succeed, rather than why they may not have addressed a gap before. If the list of gaps is long, so be it. You will have time to sequence, prioritize, and adjudicate tradeoffs to fill those gaps.

Here are the key lessons to consider as you take the next steps.

Partner with the board of directors on the imperatives.
Engage key shareholders.
Prioritize around customers.
Focus on capabilities and outcomes, not digital initiatives.
Start with blueprinting the amazing outcomes of each capability — and detail every element that must change, including data, systems, people, and process. When you do digitize, don’t claim victory once a new system or tool is in production — there is a lot more that needs to be done in terms of changing processes and upskilling people.
Invest in your people from the start.
Separate the old from the new. Fixing the legacy business while at the same time standing up the new one may be more than one team can do. So, several companies adopt an operating model that separates the old from the new.

Puretone Ways to Play

We’ve outlined below a set of common strategic archetypes for creating value — we call these puretones.

Companies generally don’t create value according to just one puretone way to play — they typically mix elements of several puretones to create a winning value proposition.