Since the Second World War, organizational leaders have been consumed with growing shareholders’ equity. And, as has been taught in business schools around the world, the way to achieve growth is by minimizing costs and increasing revenues at any expense.
Unfortunately, during the past couple of decades, signs of decay started to appear, and with it the damage from adopting such an approach blindly. Employees started to feel more and more frustrated, overwhelmed, and unappreciated. As a result, these feelings intensified underlying organizational problems, such as employee satisfaction, innovation, creativity, engagement, resilience, adaptability, and lately turnover.
When Leadership Fails
The methods adopted to squeeze costs have had the indirect impact of mechanizing humans, fostering complacency and a reluctance towards major change. That complacency prevented organizational leaders from embarking on major transformations, anticipating market changes, or taking risks.
Below are some examples, both recent and older, showcasing the impact:
- Boeing 737 Max: Leadership at Boeing was pushing for the production and delivery of a new plane for which its own engineers were raising the alarm. Focused on the goal of increasing shareholders’ equity and wanting to fend off competition, Boeing leaders seemed to dismiss the warnings, which led to two fatal accidents resulting in the deaths of 346 people.
- Sears Department Stores: Climbing from just retail catalogs in the 1890s to becoming the largest retailer in the world in the 1960s, then crashing from 3,500 stores to fewer than 20 in 2021, Sears is another cautionary example of how complacency led to a lack of innovation and foresight. Its leadership had multiple misses when it failed to act upon changing market dynamics. They did not invest in responding to consumers’ increased sophistication and instead amplified the status quo. As a result, consumers left Sears for its competitors.
- Blockbuster Video: When faced with market challenges, Blockbuster’s leadership decided to increase their revenue by selling confections and other complementary products. Not that there's anything wrong with that, but this approach was simply a band-aid to address symptoms while ignoring that they were no longer satisfying market needs. One poor decision after another culminated with Blockbuster’s leadership declining to invest in the upstart Netflix.
- Taxi Companies: The same applies to the taxi industry, which was more concerned with maintaining the status quo and hence ignored their customers’ growing dissatisfaction. So two unhappy and technologically savvy customers developed and launched an alternative, Uber, that took the cab market by storm.
Without analyzing each case separately, one can observe the shift in market dynamics and how the maturity of multiple technologies led to the convergence of disciplines. Education, finance, technology, and biopharma now have names, such as EdTech, FinTech, BioTech, and the like.
The Convergence of Disciplines
Consider how Uber, a technology-driven organization, is competing in the transportation industry; Airbnb, another technology-driven organization, is competing in the hospitality industry; Netflix, a lone giant until lately, now finds itself competing in the entertainment industry since its leadership has ventured into content development to further support organizational growth. Another example is Apple, a software company that has converged telecom, finance, health, fitness, and more into one device, the Apple Watch.
And we expect more to come in the near future. We saw a glimpse of the power of BioTech with the two most prominent COVID-19 vaccines, namely Pfizer-BioNTech and Moderna, that were developed using mRNA technology. In the transportation industry, Virgin Hyperloop and Boeing are both leading innovations in ground transportation that will disrupt the whole industry. In healthcare, as wearable devices become more mainstream and accessible, we expect major disruptions in how patients are monitored and treated.
Organizational leaders need to make a drastic shift from managing costs and revenues to leading people. The concepts that we have been learning and adopting—in some cases unconsciously—and which have been mechanizing people are no longer effective. The Master’s in Applied Intelligence and Master’s in Information Technology Management programs at Georgetown focus on real needs—and anticipate future ones—that are vital to staying in business and establishing a conducive environment that fosters creativity, resilience, and innovation. Hence, we need to relearn what leadership is and what differentiates it from managing. Individuals need to start leading by example and shift the focus from doing things right to doing the right things.