The CEO’s Digital Vision Matters

This article is the first in the series of three articles that are designed to equip board directors with three distinct, meaningful and actionable insights outlined below:

Three distinct insights are:

1. The CEO’s digital vision sets the direction and the future of organization.

2. The success of a digital vision requires deliberate action by the CEO even if the CIO plays an active role

3. Deliberate action by the CEO is required even if the CIO plays an active role.

4. CEO priority considerations for developing a digital vision.

Transition to adaptive challenge ——.

First, it’s important to distinguish between the technical challenge and the adaptive challenge so we can establish common ground and alignment of terms because these two challenges call for very different types of solution strategies.

The CEO’s digital vision sets the direction and the future of organization.

The first step in developing a digital vision is to define a vision for the organization. Having a digital vision without an actual organizational vision will produce mixed results at best.

Defining a shared, clear and compelling vision of the future of an organization is the most important element of the CEO’s job in setting a direction for the organization. A shared vision is one that all relevant stakeholders can relate to and is or can be personalized to their specific role. The vision provides clarity about where the organization is going and this makes the job of getting there easier than if there were no intentional vision. The following statement shared by David Novak (Chairman & former CEO of Yum) in his book drives this point home. “A road to nowhere is hard to build” His vision/passion during his tenure as to put a yum on people’s faces around the world.

By vision, we don’t mean a vision statement. We mean seeing a future state for your organization in your mind’s eye and galvanizing relevant stakeholders around that vision so it becomes a shared vision. We also don’t mean a financial target or goal (e.g. increase net income by 10% in the next 3yrs) when we use the term vision. Another good example comes from Bill George (Medtronics) - restoring people to full life and health.

Once a vision for the organization has been crystallized, then a digital vision can now be developed. A digital vision is seeing how digital capabilities can help accelerate or advance towards the shared organizational vision. In some cases, the digital vision becomes the organization’s vision and in other cases it’s just a critical component of it. In either case, when the CEO plays the leading role in setting the digital vision, there’s a greater chance of success as opposed to when the CEO delegates this leading role/activity to the CIO or other C-suite executive.

CEOs don’t have to be technology experts but do need to know enough about digital capabilities that will help with value creation for their stakeholders.

The four characteristics of a digital vision - modeled after David Novak

The following are four general principles that should be carefully considered when developing a digital vision and some of them should be integrated into the digital vision itself.

1. The digital vision should work for customers and future customers in a way that’ll also work for the organization in service of the shared vision. Working for customers means it must seek to create value for customers, non-customers or future customers, by solving a challenge for them. It should focus on helping them make progress with whatever jobs they’re trying to get done. It should also represent a positive future state and experience for customers. The vision should also work for the organization - example of WHO Information management story - Stephen Denning

2. It should reflect who the future or next generation of employees of the organization aligned with the new digital vision. What skills, digital capabilities will be required and what will the benefit to employees look and feel like. It should think through creating a digital environment and culture that will attract and retain the next-generation of employees

3. It should be informed by market trends, current and emerging digital capabilities and the implications on the future competitive landscape. CEOs should ask who the organization’s future competitors will be and should capture these elements as a compelling story about the future state.

4. The digital vision should also be dynamic and flexible, able to change in accordance with changing customer behaviors, digital innovations and market trends.

Example of digital vision and applying these principles to the Yum organizational vision stated above.

Let’s go back to vision passion of Yum which is to put a yum! on peoples’ faces around the world. How would a digitial vision aligned to this organizational vision look. Well, in simple terms it would envision how current and emerging digital capabilities could help bring this vision to reality on an on-going basis. It would leverage digital technologies and processes to put a yum! on peoples’ faces. Examples of digital capabilities that could applied in different ways include digital twins for restaurants, virtual kitchens, delivery options, and more to enhance the experience for customers. It would also paint the picture of the digital culture for employees and next-generation talent. Although these are some of the details that inform the digital vision, the expression of this digital vision should be simple to communicate. In our example, the digital vision could be as simple as Experience Yum! when, where and how you want. The underlying capabilities that make that digital vision a reality are the elements we described above.

gine you’re the CEO

Although technology and digital capabilities inform the digital vision, they are not explicitly included in it.

Deliberate action by the CEO is required even if the CIO plays an active role.

The three value dimensions of digital mindsets that influence the digital vision of an organization.

A number of CEOs may not see themselves as digital natives and they may not think they have a digital mindset. A digital mindset is a way of thinking about how to leverage digital capabilities to create value for all stakeholders of an organization. This way of thinking naturally influences actions (is informed by values). As a man thinketh, so is he. Combined with values the digital mindset helps executives visualize future possibilities that align with their corporate vision. If you have asked someone that was in the digital technology space a question like this “ Can predictive analytics help with preventive maintenance?”, then you’ve experienced your digital mindset at work. This question is informed by a digital mindset and it’s a crucial element of creating a digital vision. However, all digital mindsets are not created equal. Different digital mindsets generate different value creation potential.

We believe there are three main value dimensions associated with the three most common digital mindsets. These are:

Sustaining Value ( Keep The Lights On Mindset) - This value dimension focuses on doing the bare minimum with existing digital technology capabilities to keep the business running and operational. Digital and Information Technology is viewed as an operational necessity and some CEOs see IT as a cost center and necessary evil. This digital mindset seeks to protect the organization’s existing value. It is typically characterized by a low digital literacy culture and company employees including their executive leaders are somewhat fearful of technology. They may often say something similar to this “I’m technologically challenged”. You may have heard some CEOs say I just need someone to help keep IT running. They abdicate (not delegate) IT responsibility to the CIO or outsourced provider. They value IT not for customer value creation but for operational efficiencies only. There’s nothing inherently wrong with this digital mindset if the vision of the organization is to preserve the status quo. We would argue however that if this is the sustained prevailing mindset then the technical debt of the organization will continue to increase year after year until it becomes too heavy a burden. Climbing out of this type of technical debt or hole is a lot more challenging than adopting a more strategic digital mindset. Infact, we believe that this mindset is an indication that there’s no clear and compelling corporate vision and the strategic direction is to keep doing what we’ve been doing.

Strategic Value - This value dimension is when IT is treated as a strategic asset for value creation within the organization. Execuitves see that IT can help drive new customer experiences and value delivery models. CEOs may delegate (not abdicate) IT responsibilities.

Transformational Value: This is when leaders view digital capabilities as having transformational value in changing current business models or developing new ones. This is not as frequently occuring as the other two value dimensions. A good example is Adobe moving to a subscription based model for its offerings based on consumers digital capabilities. Why do we care? CEOs should develop their digital mindsets with a heavy concentration on strategic and transformational value instead of the operational. This is very difficult to do when leaders don’t have the inherent skills. They don’t have to be experts in digital or technology but understand the value to be derived from the capabilities.

Next Time: Four Things CEOs can do to develop the right digital mindset and digital vision

Prioritize understanding and anticipating market trends and digital capabilities. How? Excerpts from CEO goals.

Be transformed by the renewing of our minds. Innovation pipeline, etc. Focuses on the future.

Collaborate with digital experts. Cultivate relationships with digital experts.

Ideo visits is a good example.

Be transformed by the renewing of our minds

Culture of psychological safety

Learn about digital

This is very difficult to do when leaders don’t have the inherent skills. They don’t have to be experts in digital or technology but understand the value to be derived from the capabilities.

Adaptive Challenge - This is one of the most interesting and significant leadership principles to be mindful of and it’s the source of a multitude of unexplained leadership failures and challenges. The concept of adaptive and technical problems is best illustrated using a simple yet powerful story that shows what can happen when leaders mix up the two.

Imagine you’re the CEO of an organization and have had some less than perfect history with your CIO regarding her performance. One of the critical enterprise projects that she’s leading keeps getting delayed over a couple of years and finally, the board begins to lose confidence in her. You’re strongly encouraged to make a change to ensure the project is no longer delayed and can be “successfully” completed on time.

Given her performance history, you agree with your board and make the difficult leadership change. To be clear, this a difficult thing to do, not exactly easy to tell your senior executive that another senior executive will be replacing her role on the project even though she still has her job as CIO (at least for a while) and is still expected to support her replacement.

After changing the project leadership to one of your top performers that has a proven track record of success with large enterprise projects, something very strange happens. You still have problems with the project, though these are different and sometimes new problems, but you still continue to have repeated problems with the project. Yes, the project is no longer delayed but now after completion, you have customer satisfaction problems and a host of new issues and an ever growing list of problems continue to emerge. You and the board are perplexed and continue to attribute these problems to poor decisions of the CIO, who has now exited your organization. So, what in the world is going on here?

You and the board thought that changing the project leadership would resolve the problems. You and the board thought you were dealing with a technical problem when in fact you were dealing with an adaptive challenge.

You failed to start by asking a fundamental question and instead started with a problem, one that wasn’t well defined. The assumption was, this leader said the project would be complete last year and it’s been two years of repeated extensions. This leader cannot deliver and that’s the problem, change the leader and all the problems go away. It’s important to note that there are definitely situations when and where this is the case. However, without first taking the time to understand what’s really going on, changing the project leader will work for a while until new problems emerge. By then, significant consequences have occurred with external stake holders. Success wasn’t clearly defined - is on-time completion more important than excellent customer satisfaction?

Sometimes you can’t uncover the adaptive challenge until you’ve tried to solve the technical problem and often times, both are blended together and/or the evolve over time. Either way, they require different solution approaches. In this example, what the CEO was really facing was a combination of talent, culture and leadership challenges. An adaptive challenge is non-linear in this very way. Solving one problem doesn’t do much to sustain the solution over time.

There are several other examples that you can come up with but we’ve listed some that we’ve experienced

Examples include

Three Practices That Can Help: So what can leaders do to avoid making the error of treating an adaptive challenge as a technical problem? There are three main practices that can be helpful from our perspective

1. Start with a question and not a problem statement. Start diagnosis of a situation with a question

2. Recognize that a quick fix and a quick win are not the same thing. It sounds obvious after the fact but this mindset is very common in operational get-it-done environments.

3. Seek multiple and alternate perspectives in high impact or magnitude circumstances and situations.

Start with a question and not a problem statement - Problem statements by definition assume that a clear understanding and definition of the problem has already been established. And that the only thing left to do now is to come up with the right solution that addresses the problem. This is not always (indeed rarely) the case for senior leaders and executives operating within complex environments and situations.

What often happens is that one or two people have observed symptoms of a deeper or larger problem and have then assumed or concluded that they understand the problem. In our scenario above, a few leaders (CEO, board and other senior leaders) observed repeated failures to meet project deadlines promised by the CIO and concluded that she must be the problem why the project hasn’t been successfully completed. When infact she was a symptom of a much larger problem. For sure, she was underperforming in her role in leading the project but she herself, her actions, behaviors and poor results were an indication of a larger talent, leadership and culture challenge across the entire organization.

Starting with a question would have been a better approach to really isolate and define the real problem. The leaders could have asked:

Do we really understand why the project delays are occuring?

What do we know about the challenges the leader is facing on this project? Does she have enough resources and/or the right resources?

What does success really look like for this project? Is on-time delivery within the budget the right measure of success?

How can we get a better understanding and clarity about what’s going on with the project?

It’s important to note that candid answers to these questions may be difficult to get, depending on who’s actually asking the questions and the culture and environment of the organization. In a culture that’s absent psychological safety, superficial positive answers to these questions may be provided and that in itself will skew the decisions made based on the responses. The point here is to make every effort to perform the appropriate level of due diligence to get to the right answers as opposed to trying to get a quick fix to the problem.

Recognize that a quick fix and a quick win are not the same thing. It sounds obvious after the fact but this mindset is very common in operational get-it-done environments. - Begin tomorrow

Solving a technical problem instead of the associated adaptive challenge can lead to worse outcomes than you started with

The adaptive challenge may often be buried within a technical problem. Solving only the technical element of a challenge only leads to a false sense of progress or resolution as illustrated by the following example.

Consider the following example. Problem Symptom - As CEO, you observe that the sustained performance of your sales leader over time is mediocre at best. After repeated talks for him to improve his results, you decide to solve the problem

Solution - You replace your sales leader and viola! problem solved. Sales numbers and profits improve and the board of directors is ecstatic with the sales results, for a few years.

Recurrence - Unfortunately, the sales leader decides to exit your organization because he wants to continue to grow professionally. Upon his exit, the sales numbers slump and well, you look to hire a replacement leader from the outside and the cycle repeats.

A similar cycle repeats itself in the operations and finance functions; non-performance by the respective functional leader motivates the need to find replacement leaders from the outside. The new leaders improve the performance results for a while (a few years) until they exit the organization for better opportunities and again new executive leaders are brought in from the outside.

Some readers may say and believe that this is just the normal cycle for executive leaders and that this is normal and organizations just have to live with it. However we believe this is a classic case of an adaptive challenge that’s buried within a technical problem. The technical problem is poor leadership performance at the respective functions and the solution or quick fix to that is to hire a replacement. However, the adaptive challenge, which requires learning and more time is to seek to understand why there’s a lack of leadership competency and capability within the organization. In other words, is a leadership bench required and if so, why doesn’t one exist? A potential solution to this problem could be instituting a leadership or organizational development initiative which requires learning and takes much more time than just going outside to hire replacement leaders in the short term. However, such solution will have both cost and culture-based advantages with compounding benefits over time.

Other examples, Wells Fargo…etc.

So What, Now What - How to solve this problem of technical and adaptive

So how do we deal with situations and circumstances that present the combination of both technical problems and adaptive challenges. We believe the following three actions/practices will help avoid the common error of implementing a technical fix in response to an adaptive challenge.

Redefine & Reframe The Problem: One common reason leaders are unable to uncover adaptive challenges is because some times the problem has been defined for them. You may have heard the statement from a leader that says “if you bring me a problem, then make sure you have a solution with it”. If it’s a pure technical problem, then the subordinate’s solution may work. However if an adaptive challenge is buried within and/or blended with the technical problem then expect temporary results to be followed by more problems. Example problem - our current software features can’t support new critical requests from the business functions. The solution is to upgrade our current software platform. Sounds like a technical problem with a technical solution, right? Get the experts in to upgrade the software so we can start supporting these new critical business requirements. It won’t be easy or a slam donk but we have a clear line of sight. However, the real adaptive challenge here is changing the hearts and minds of the organization to effectively use the new platform as opposed to the old one. It’s infact a transformation project that will undoubtedly take longer than anticipated if viewed as a technical problem.

If the senior executive is able to refine and reframe this problem they’re likely to get a clearer picture of what it takes to make such an initiative successful. How to do this? The leader has to clearly refine the problem by asking the right questions that go beyond the problem definition from the subordinate. Do we need to prepare the organization for this change or is it limited to just parts of the organization? What are the talent needs for this new platform? Who are the critical chain resources for this project and what else will they be involved in at execution time?

The problem also occurs at the board level. One example is when those with authority incorrectly define a problem. Case in point. The board chair of an organization informs the CEO after an executive session that the board believes she should make a leadership change to solve the problem with a specific business function. The tone from the board chair basically signals that if this change isn’t made the CEO may lose her job. If the CEO accepts this recommendation without deeply investigating and reframing the real problem then the leadership change will yield only temporary results.

This may have the unintended consequence of subordinates bringing the leader technical problems (and technical solutions) and excluding the adaptive challenge that often times is surrounding the technical problem

Other times, it’s in fact the leader is the one that incorrectly defines the problem for her subordinates to solve.

Expand Leadership Tools/Capabilities - Often times adaptive challenges require learning new skills and competencies to understand the true nature of the problem and then to analyze potential solution options. You may have heard it said that to a man with a hammer, every problem looks like a nail. This is true when leaders only have a small set of tools (a hammer) in their existing repertoire or toolbox. By working to continually expand the tools in their toolbox, leaders are better positioned to address adaptive challenges. Leaders are learners and should learn as much as they can. Even if you’re not facing a specific situation yet you may have to deal with it in the future.

Refine Your Perspective - Get On The Balcony - When running day to day operations, it’s incredibly difficult to make the distinction between technical and adaptive elements of a challenge. When we’re in it, it’s near impossible to see it. The idea/notion of leaving the dance floor to go up to the balcony and gain a different perspective away from the day to day action is very helpful. Another way to refine perspective is to seek external and independent perspectives outside the organization

Technical Challenge: Compliance with the new SEC cyber rule can be regarded as a technical challenge; meaning, the solution to the challenge is known, direct and within the scope of the current capabilities of the board. Although some changes may be required by the organization, relatively fewer changes are required by the board for compliance. When it comes down to it, the boards of most large organizations will ask management to ensure they’re ready to comply with the new regulations, get a couple of updates on preparedness and move on to “higher priority” items (e.g. M&A, business strategy, etc.) on the board agenda. So yes, compliance in this context, is a technical challenge. And this challenge, for a lot of organizations, may itself be a heavy lift.

When some underlying or structural elements are not being proactively addressed or when they’re not being addressed adequately then repeated incidents may occur. This becomes especially true if industry competitors are not having recurring or repeated incidents.

The Adaptive Challenge

First, it’s important to distinguish between the technical challenge and the adaptive challenge so we can establish common ground and alignment of terms because these two challenges call for very different types of solution strategies.

Technical Challenge: Compliance with the new SEC cyber rule can be regarded as a technical challenge; meaning, the solution to the challenge is known, direct and within the scope of the current capabilities of the board. Although some changes may be required by the organization, relatively fewer changes are required by the board for compliance. When it comes down to it, the boards of most large organizations will ask management to ensure they’re ready to comply with the new regulations, get a couple of updates on preparedness and move on to “higher priority” items (e.g. M&A, business strategy, etc.) on the board agenda. So yes, compliance in this context, is a technical challenge. And this challenge, for a lot of organizations, may itself be a heavy lift.

Adaptive Challenge: However, commitment to the new SEC cyber rule is really an adaptive challenge. An adaptive challenge is one that requires a solution that does NOT exist within the current scope of capabilities and requires a stretch. It requires a deeper perspective that concentrates attention at the root of the challenge to minimize or avoid variations of the same problem from recurring in unexpected ways. The solution to this adaptive challenge reflects a commitment to the spirit behind the regulation and to cyber risk implications for customers and investors and it is a different challenge altogether from the technical challenge. It’s a heavier lift and a higher standard with potentially higher payoffs.

It is different because it can’t simply be solved by asking and validating that management is prepared to comply with the new regulation. The solution requires board directors to step out of their current scope of capabilities and overcome some of the constraints to engaging with the current and emerging cyber risks facing their organizations. This is an adaptive posture for the board that evolves, adapts and changes with the changing and dynamic needs of the business and the cyber threat landscape. It’s a heavier lift and a higher standard with a solution that potentially has a higher payoff.

The adaptive challenge for board directors emerges from the difficulty in providing oversight in the face of of the three fundamental constraints of time, expertise and will. Some questions to help you identify the impact (if any) of these constraints include:

Security strategy allows contractors to work remote with productivity gains

Speed - operational speed

Drive down insurance costs

HR was a cost center but now with TSR is a strategic lever. Supply chain was a cost center and is now strategic, (e.g. UPS using AI DeliveryDefense as a differentiatior, customer service call centers? the same thing

Cyber helps you see IT and profit levers - identifying new (business) strategic opportunities

Generate strateic value from cyber. Build cyber capabilities as a strategic value engine

Can a robust and effective cyber security capability create new value for your business; new value proposition for customers or other competitive advantages resulting from operational velcoity? Most of us are doubtful that this is possible because cyber has traditionally been viewed as a cost center and not a profit lever. We’ve historically viewed cyber and IT in a support role/function (vs a core function) that’s somewhat necessary for doing business. 

However, in the digital economy, cyber and IT are no longer support functions but are core to the business. Some organizations have not made this shift in mindset yet and understandably so. Because it’s not easy to change mindsets unless there’s a compelling event that forces us in the direction of the mindset change that we should have found ourselves (i.e. absent the event). 

Yet there’s a significant benefit if we can make this change from cost-center to profit level without experiencing a compelling event (e.g. data breach, material incident, new regulation, etc.) To implement this change in mindset we’ve outlined some foundational principles and philosophies that are worth considering 

Mindset: Out of a single mindset flows a thousand different behaviors. If you view IT and cyber as something to keep the lights on then its difficult to see the opportunities it has to make material contributions to the bottom line. Recognizing that this shift needs to happen is the first step and it begins with the CEO. The CIO and CISO can help but ultimately the CEO has to sustain this perspective for the long-term benefits to be realized