- 79% of CEOs expect high or very high complexity over the next 5 years, however only 30% feel prepared, resulting in a 49% complexity gap. Standouts have a much smaller complexity gap of only 6%.
- Standouts capitalize on complexity in three ways: embracing creativity, driving change to stay ahead of markets, and breaking from industry norms through new business models and revenue streams.
- Getting closer to customers is the top priority for Standouts, cited by 88% as an area of focus over the next 5 years. Simplification of operations and products is another strategy Standouts use to better manage complexity.
Peter Korsten, IBM: Creatief Leiderschap 28 april 2011
1. IBM Institute for Business Value IBM Strategy & Change Peter J Korsten
2. 2 Todayâs complexity foreshadows an even more complex future Experiencedandexpected level of complexity Currentlyexperiencinghigh/very high level of complexity 32% 60% more Expect high/very high level of complexity over 5 years 79% âThe complexity our organization will have to master over the next five years is off the charts â a 100 on your scale from 1 to 5.â Edward Lonergan President and CEO, Diversey, Inc., United States Source: Q7 To what extent is the new economic environment more complex? n=1,522; respondents who selected âto a large/very large extentâ; Q10 How much complexity will your organization have to master over the next 5 years? n=1,512; respondents who selected âmore/significantly more complexityâ
3. 3 CEOs are now challenged to close the complexity gap and use complexity to their advantage Expected level of complexity and preparedness to handle Expect high/very high level of complexity over 5 years 30% 79% Complexity gap* 49% Feel preparedforexpectedcomplexity âThe world is non-linear, so the ability to cut through complexity relies on processing a large amount of information quickly and extracting nuggets to make quick decisions. Building advantage will be an outcome of dealing with complexity better than our competitorsâ Julian Segal Director and CEO, Caltex Australia Limited, Australia * Complexity gap = difference between expected complexity and the extent to which CEOs feel prepared to manage complexity Source: Q10 How much complexity will your organization have to master over the next 5 years? n=1,512; respondents who selected âMore/significantly more complexityâ; Q12 How prepared do you feel for the expected complexity ahead? n=1,508; respondents who selected âFully preparedâ
4. 4 We identifiedStandoutorganizationsthatdelivered superior performance duringboth the long term and recent short term Performance Analysis Framework Standouts Top 50 percent Long-term, steady-state performance Top 50 percent Short-term,crisis performance Long-term Performance 4 year operating margin CAGR (2H03/1H04 â 2H07/1H08) Short-term Performance 1 Year operating margin growth (2H07/1H08 - 2H08/1H09)
7. Drive change in the organizationtostayahead of market anduse a wide range of communicationstylesand tools
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9. 8 Creativity is the #1 leadership quality Most important leadership qualities over the next five years Creativity 60% Integrity 52% Global thinking 35% Influence 30% âCreativity is vital in a complex environment.â Government Official, Hong Kong Openness 28% Dedication 26% Focus on sustainability 26% âOnly leaders who act with integrity shall and will survive.â CEO, Electronics Industry, Switzerland Humility 12% Fairness 12% Source: Q19 Which of the following leadership qualities do you think are most important in the next five years? n=1,538
10. 9 Standouts focus on quick decisions despite uncertainty Ways in which to achieve rapid change over next five years: Decision Making Standouts 42% 15% 43% 54% Others more 41% 31% 28% Thoroughdecisions Quick decisions Both âWe need to keep making quick decisions instead of waiting and thinking about it: good decisions that may not be absolutely right because we don't know all the information. We have left competitors behind by making quick decisions â it is a differentiating factor for us.â CEO, Life Sciences, Belgium Source: Q21 How will you realize rapid change over the next 5 years? Quick decision vs thorough decision n=299
11. 10 Standouts leap ahead with new management and leadership styles and balanced communication approaches Standouts realizing rapid change over the next five years: Management Style Continuouschange Ad-hocinitiatives 8% 13% 79% Persuade andinfluence Commandand control 25% 17% 58% (Managed) viralcommunication Top-downcommunication 28% 33% 39% Both âThere isnât the luxury of time. We used to say, âWait until this crisis is over and we get back to normal,â but that never happens. We have to be âchange animals.ââ Michele McKenzie President and CEO, Canadian Tourism Commission, Canada Source: Q21 How will you realize rapid change over the next five years? n=300
12. 11 Seizing the upside of complexity 1 Embody creativeleadership Embraceambiguity Take risks that disrupt legacy business models Leapfrog beyond âtried-and-trueâmanagement styles
13. Your personal reflective question Whatcan YOU do toyou recognize, useandgrow creativeleaders? 12
14. 13 âGetting closer to the customerâ is THE top priority for Standouts Getting closer to customers Dimensions to focus on over the next 5 years 88% 14% Getting closer to the customer 95% more 81% People skills 83% 76% Insight and intelligence 57% Enterprise model changes 55% Risk management 54% Industry model changes 51% Revenue model changes Standouts Others âTo surprise customers requires unexpected ideas through interactions of people with diverse perspectives.â Shukuo Ishikawa President and CEO, Representative Director, NAMCO BANDAI Holdings, Inc. Japan âOur customers want personalization of services and products. It is all about the market of one.â Tony Tyler CEO, Cathay Pacific Airways, Hong Kong Source: Q13 Which of the following dimensions will you focus on more to realize your strategy in the new economic environment over the next 5 years? n=1,523, n=303
15. 14 Standouts simplify operations and products to better manage complexity Changes to operating strategy: Simplify Others 47% 30% Standouts more 61% âSimplification and standardization are key strategies that we have been using for several years to reduce existing and future complexity.â Brenda Barnes, Chairman and CEO, Sara Lee, United States âWhen things look very simple, you need to look for a competitive edge. When things are complex, you simplify to get the competitive advantage.â Graeme Liebelt, Managing Director and CEO, Orica Limited, Australia Source: Q18 How will you change your operating strategy? Manage complexity versus simplify n=294