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Building the Complexity of Mind
The Key to Navigating Escalating Complexity in Business
In 2010, IBM interviewed over 1,500 CEOs worldwide to learn what their challenges are and their strategies for addressing them (Capitalizing complexity: Insights from the Global Chief Executive Officer Study). Two challenges emerged at the top of the list: 1) escalating complexity, and 2) building the creative capacity and leadership to deal with it. These findings were consistent in the 2012 and 2014 CEO studies as well.
First let's look at escalating complexity.
The Boston Consulting Group explains it this way:
Managing complexity and it's related cost is a growing challenge for companies. The increasingly global nature of business gives rise to diverse customers and markets, convoluted supply chains, and vast supplier networks. The trend toward product customization allows customers to have it their way but wreaks havoc on production schedules and inventory management. Parts and components proliferate on warehouse shelves, sophisticated technologies and formulas underlie even the most basic products, and our gadgets have more features and functionality than ever before. The cost of this increasing complexity is often hidden, but they are almost always a significant drain on profitability.
The growth of complexity is reflected in businesses’ goals. Today companies, on average, set themselves six times as many performance requirements as they did in 1955, the year the Fortune 500 list was created. Back then, CEOs committed to four to seven performance imperatives; today they commit to 25 to 40. And many of those requirements appear to be in conflict: Companies want to satisfy their customers, who demand low prices and high quality. They seek to customize their offerings for specific markets and standardize them for the greatest operating return. They want to innovate and be efficient.
At the Boston Consulting Group, they’ve created an “index of complicatedness,” based on surveys of more than 100 U.S. and European listed companies, which measures just how big the problem is. The survey results show that over the past 15 years, the amount of procedures, vertical layers, interface structures, coordination bodies, and decision approvals needed in each of those firms has increased by anywhere from 50% to 350%. According to their analysis over a longer time horizon, complicatedness increased by 6.7% a year, on average, over the past five decades.
The second challenge as identified in the CEO study, is building the creative capacity and the leadership to deal with the escalating complexity.
Bob Anderson in his book, Mastering Leadership, describes what he calls the Leadership Imperative. The Leadership Imperative is simply this:
“The development of leadership effectiveness must, at a minimum, keep pace with the rate of change and the rate of escalating complexity. Not to keep pace with the rate of escalating complexity is to become less relevant and effective. If the challenges we face are more complex than we are, our leadership is inadequate and a competitive disadvantage.”
Bob Anderson goes on to say, “In business, collective leadership effectiveness is underutilized and rarely capitalize upon. Most development focuses on individual leaders, ignoring collective effectiveness and the leadership system.”
Take a moment and think about your direct reports. If I were to ask you about the collective leadership effectiveness of your team what would you say? More than likely you thought about the majority of your team that is effective and convinced your self they covered for the team member(s) that is ineffective. Unfortunately, research does not support your conclusion. Management expert, Peter Senge, notes that the collective intelligence and performance of most groups is well below the average intelligence and performance of the members. We usually dumb down when we come together. We act at the lowest common denominator.
Let me bottom line this for you. Your least effective team member IS your collective leadership effectiveness. Does this concern you? If this is true, do you still have a leadership advantage?
As business continues to escalate in complexity it is imperative that you increase the individual and group collective leadership effectiveness. Your ability to develop leaders capable of navigating in an increasingly complex world is a strategic priority and a competitive advantage.
Collective effectiveness carries the day.
Here are some questions to consider:
Is your leadership developing at the pace to stay relevant? How do you know?
Are you tracking the effectiveness of leadership over time to gauge improvement?
Is your leadership a competitive advantage or disadvantage?
How effective is your personal and collective leadership? How do you know?
Leadership development programs of today are not up to this challenge. Most approaches to developing leaders focus primarily on developing competency and capability. These approaches are insufficient in a world of escalating complexity. We need to develop capability, to be sure, but we need to do much more. We need to develop the complexity of mind of the leader because, if the complexities of the challenges we face are more complex than we are, we are outmatched. But if we can evolve the complexity of the mind of the leader, to be equal to the complexity of the challenge, we can lead.
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