Adaptive

Leadership
This Perspective from The Boston Consulting Groups Strategy In-
stitute is the seventh in a series exploring the future of strategy.
Earlier articles examined the central role of adaptive advantage
in todays turbulent and unpredictable business environment.
This article discusses the importance of becoming an adaptive
leader in such an environment.
W
e commonly think of leaders as strong personali-
ties who imprint their will on compliant organiza-
tions. Increasingly, however, business executives
are finding something lacking in this view of the leader as
hero. As the CEO of IBM wrote in The Globally Integrated
Enterprise, an essay in Foreign Affairs, Hierarchical, com-
mand-and-control approaches simply do not work anymore.
They impede information flows inside companies, hamper-
ing the fluid and collaborative nature of work today.
Our research and experience suggest that the fundamental
shifts in todays business environment compel us to rethink
the nature of strategy, organization, and consequently, lead-
ership. Consider the following trends:
Turbulence and uncertainty have undermined the effec-
tiveness of long-range forecasting and traditional strate-
gic planning in many industries.
How can leaders chart a course when they cannot predict
the outcomes of their choices?
Companies are increasingly organized into interdepen-
dent, multicompany ecosystemsa result of lower trans-
action costs and deconstruction.
When boundaries are blurred, who leads whom?
The pervasiveness and economics of digital communica-
tion and computation have made every business an infor-
mation business.
In such an environment, how can leaders ensure that
their organizations are reading the right signals and act-
ing on them?
How can leaders chart a course
through a turbulent environment when
they cannot predict the outcomes of
their choices?
Adaptive leaders learn through ex-
perimentation and manage the con-
text, not the instruction set.
Adaptive leaders cultivate a diversi-
ty of views to generate a multiplicity of
options.
Adaptive leaders lead with empa-
thy, reward accomplishment with au-
tonomy, and seek winning solutions for
all stakeholders.
Perspectives
Adaptive Leadership 2
Societys increasing interest in the social and eco-
logical impacts of business makes it imperative for
companies to consider the broader value and over-
all cost of their strategies.
How can leaders ensure that social and economic
vectors are aligned?
Trust in big business has steadily eroded.
How can leaders regain societys confidence? How
can they harness the creativity and passion of the
work force in pursuit of advantage?
The nature of competition has become more diverse.
Some environments are mature and predictable,
while others are highly uncertain.
How do leaders ensure that they are taking the right
approachor the right mosaic of approachesfor
the specific challenge at hand?
These shifts in the business environment call for adap-
tive strategies and organizations, which in turn require
adaptive approaches to leadership. Adaptive leaders cre-
ate the conditions that enable dynamic networks of ac-
tors to achieve common goals in an environment of un-
certainty.
Dimensions of Adaptive Leadership
Adaptive leadership can be distinguished from more
traditional models in at least four dimensions, as the
exhibit illustrates. (For more about the four di-
mensions, see New Leadership Rules, BCG White Paper,
May 2010.)
Below we describe a number of actions companies can
take to support each of those dimensions.
Navigating the Business Environment. Adaptive lead-
ers must embrace uncertainty and adopt new approaches
if they are to chart a course amid todays turbulent con-
ditions.
Manage the context in which actors interact, not the in-
struction set. In an uncertain world, rigid rules are coun-
terproductive. The best solution will arise through
learning and adapting to change over time. Netflix
CEO Reed Hastings advises in his firms Reference
Guide on our Freedom & Responsibility Culture:
Avoid chaos as you grow with ever more highly per-
forming people, not with rules.
Cultivate a diversity of perspectives to generate a multi-
plicity of options. Whereas traditional models of leader-
ship may emphasize alignment, some adaptive leaders
make dissenting opinion compulsory. Perhaps the most
famous example of embracing opposing views comes
from Abraham Lincoln, who deliberately named his ri-
vals to his cabinet. Leaders are more likely to find a di-
versity of perspectives at lower levels in the organiza-
tion, where employees confront external realities
directly and are likely to raise critical questions. For
this reason, adaptive leadership de-emphasizes hier-
archy.
Allow leadership to be shared and to emerge from the given
context. In a volatile world, no single person can lead
at all times and in all situations. The role of leader
therefore should be assumed by the person or group
best positioned to guide a specific decision. An execu-
tive at W.L. Gore & Associates, the global technology
manufacturer, was quoted in The Future of Management
as saying: We vote with our feet. If you call a meeting,
and people show up, youre a leader.
1
Constantly question the world around you. Adaptive lead-
ers are always looking outward and realigning their or-
ganizations with a shifting environment. They read be-
tween the lines to intuitively grasp patterns that may
be masked by complexity. They test their own assump-
tions by running thought experiments. An example is
highlighted in the biography of former Intel president
Andy Grove, who asked the then CEO: If we got kicked
out and the board brought in a new CEO, what do you
think he would do?
2
Empathize Win and win
Self-correct
Adaptive leadership dierentiators
Navigate
Adaptive Leaders Must Strengthen Their
Capabilities Across Four New Dimensions
Source: BCG analysis.
Adaptive Leadership 3
Leading with Empathy. Adaptive leaders create a
shared sense of purpose and manage through infuence
rather than command and control.
See the world through the eyes of others. By understand-
ing alternative perspectives, adaptive leaders cultivate
and embrace the cognitive diversity that underpins
adaptive organizations. Their ability to empathize with
colleagues, competitors, and other stakeholders en-
ables them to exert influence across functional and
corporate boundaries. By seeing the world through the
eyes of others, leaders also extend their ability to see
patterns in a complex environment. In an interview at
strategy-business.com, Herb Kelleher, cofounder and
former president and CEO of Southwest Airlines, ad-
vised, Treat your people well and theyll treat you
well.It has to come from the heart, not the head.
Create a shared sense of purpose. In an era that has be-
come infamous for rewarding profit-making above all
else, employees are understandably skeptical when
leaders talk about values. And it seems that the more
that mission statements are circulated, the more skep-
tical they become. Yet because a complex and dynam-
ic environment requires people to act autonomously
and intuitivelyoften without explicit instructions or
rulesa strong sense of shared purpose and values is
more important than ever. Bill George, the former
chairman and CEO of Medtronic, told Charlie Rose on
Roses PBS program, The great leaders today are able
to align people around a sense of purpose and values
and get that consistency all around the globe, and then
empower other people to step up and lead.
Reward accomplishment with autonomy. Adaptive lead-
ers reward people for what they accomplish, rather
than tracking hours or tasks. And instead of relying
solely on financial incentives, they motivate employees
by giving them time to pursue individual passions
from a few hours of slack time a week to year-long fel-
lowships. Adaptive leaders understand that real com-
mitment comes from individual opportunities for
autonomy, mastery, collaboration, and recognition. As
Marissa Mayer, recently appointed to Googles operat-
ing committee, explained in a speech titled Nine Les-
sons Learned about Creativity at Google, it is that
license to do whatever they want that really ultimately
fuels a huge amount of creativity and a huge amount
of innovation.
Learning Through Self-Correction. Adaptive leaders
encourageindeed insist onexperimentation. Of
course some experiments will fail, but that is how adap-
tive organizations learn.
Enable individuals and teams to learn through experimen-
tation. Randy Pond, executive vice president of opera-
tions, processes, and systems at Cisco, tells his organi-
zation on his blog at the companys site, Well
continue to evolve as we learn what works, and as im-
portantly, what doesnt. Adaptive leaders need to de-
velop platforms that enable experimentation and
learning, including opportunities to reflect on suc-
cesses and failures. Leaders should also align rewards
with experimentation in a way that doesnt punish
failure.
Develop your organizations signal advantage. In a
changing environment, organizations have to detect,
filter, and decode signals in order to anticipate and re-
spond to whats coming next. Leaders should ensure
that their organizations are constantly looking out-
ward and staying close to their customers. As Sir Terry
Leahy, the outgoing CEO of Tesco advised, The best
place to find the truth is to listen to your customers.
Theyll tell you whats good about your business and
whats wrong. And if you keep listening, theyll give
you a strategy.
3
Increase the agility with which the organization is able to
correct itself. Adaptive leaders allow decisions to be
made at lower levels in the organization, andto re-
duce the time between stimulus and responsethey
minimize the number of layers between the field and
the CEO. As retired General Stanley McChrystal told
The Atlantic, Any complex task is best approached by
flattening hierarchies. It gets everybody feeling like
theyre in the inner circle, so that they develop a sense
of ownership.
Creating Win-Win Solutions. Adaptive leaders focus on
sustainable success for both the company as well as its
external network of stakeholders.
Build platforms for collaboration. In many industries,
the success of a company depends upon the engage-
ment of its extended ecosystem of suppliers and col-
laborators. Technology now makes it possible for large
groups to collaborate on complex tasks, such as prod-
uct innovation, across functional and corporate bound-
aries. As Cristbal Conde, president and CEO of Sun-
Gard, the global software and services company, told
The New York Times, A CEO needs to focus more on
the platform that enables collaboration, because em-
ployees already have all the data.
Deploy leadership influence beyond the boundaries of the
firm. In the absence of formal authority, leaders look-
ing to mobilize a companys extended ecosystem must
Adaptive Leadership 4
structure the game for win-win outcomes and also use
soft power such as vision, charisma, networking, and
collaboration to exert influence. In an interview posted
on bcgperspectives.com, Red Hat CEO Jim Whitehurst
told BCG that the success of the open-source technol-
ogy company comes from the fact that it was able to
bring a huge ecosystem to bear that has been difficult
for others to duplicate.
Align the business model with its broader social and ecolog-
ical context to create social advantage and strengthen
the businesss sustainability. Leaders must do more than
maximize profitability. They must ensure the sustaina-
bility of their companies business models and look for
opportunities to align economic and social vectors for
sustainable advantage. As John Mackey, CEO of Whole
Foods, recently told Darden School of Business Profes-
sor R. Edward Freeman (in an interview on Whole
Foods site), The leaderships job is to manage the
business in such a way as to create value simultane-
ously for all of these interdependent stakeholders. It is
a better strategy for [maximizing long-term profits].
Modulating the Leadership Model
Unpredictable environments will require leadership
styles characterized by the four dimensions outlined
above. Not all environments or challenges are alike,
however. Just as different organizational models are
necessary for different environments, so too are differ-
ent leadership styles. (For more about different organi-
zational models, see People Advantage, BCG Perspec-
tive, March 2010.) Over time, an organization might
move from one leadership archetype to anotherfor
example, when a stable industry is disrupted, a shift to
a more experimental style might be required. Or when
an industry matures and becomes more stable, then a
more deliberate, analytical style may be optimal. When
an organization is not yet adaptive, but needs to become
more so, strong individual leadership may be required
initially to disrupt the status quobut might later give
way to a more collective style.
T
here is no universal checklist for becoming an adap-
tive leader, but by focusing on the four dimensions
weve described, leaders can better equip themselves
for a turbulent and unpredictable business environ-
ment. To gauge how adaptive your leadership model is,
ask yourself and your leadership teams just three ques-
tions about what you are doing and how you are think-
ing as leaders:
How many of the adaptive leadership practices cited
above do we currently employ?
Do we have the right leadership model for our specific
business environment?
What changes could we make to develop a more adap-
tive leadership model?
We conclude with a quote from John Clarkeson, former
CEO of BCG, who presciently and vividly sketched this
new model of leadership 20 years ago in a BCG Perspec-
tive titled Jazz vs. Symphony:
Leadership will flow to those whose vision can in-
spire the members of the team to put their best abil-
ities at the service of the team. These leaders will
create rather than demand loyalty; the best people
will want to work with them. They will communi-
cate effectively with a variety of people and use the
conflict among diverse points of view to reach new
insights. They will exert influence by the values
they choose to reinforce. They will make leaders of
their team members.
Roselinde Torres
Martin Reeves
Claire Love
Roselinde Torres is a partner and managing director in the New
York office of The Boston Consulting Group. Martin Reeves is a
senior partner and managing director, also in the New York office,
and the director of the BCG Strategy Institute. Both are BCG Fel-
lows. Claire Love is a project leader in the New York office and an
ambassador to the BCG Strategy Institute.
You may contact the authors by e-mail at:
[email protected]
[email protected]
[email protected]
For the earlier Perspectives in the series, see New Bases for
Competitive Advantage: The Adaptive Imperative, October 2009;
Adaptive Advantage, January 2010; Signal Advantage, February
2010; People Advantage, March 2010; Social Advantage, June
2010; and Simulation Advantage, August 2010.
1. Gary Hamel with Bill Breen, Building an Innovation Democracy:
W.L. Gore, excerpted in The Future of Management, Harvard Business
School Press, 2007.
2. Richard Tedlow, Andy Grove: The Life and Times of an American Busi-
ness Icon, Penguin Group, 2007.
3. Taken from How Leadership, Loyalty, and Transparency Fuel
Growth, a speech given at the National Retail Federations 99th An-
nual Convention & Expo, January 2010.