Report: New Capabilities Leaders Need...

In the spirit of growth and learning - I spend time every week exploring new ideas, reading and learning about agility and leadership.  I came across a report published by McKinsey and Company in October of 2018 entitled Leading agile transformation: The new capabilities leaders need to build 21st-century organizations.  It really resonated with me, so I'm shamelessly copying and pasting an excerpt to our blog.  If you want to read the full report, you can find it here - but I put the part that really stood out as relevant to me below. 

It's absolutely worth a read, and perhaps some reflection time if you're serious about being an agile leader.

Shifting from reactive to creative mind-sets

Changing our mind-set—or adjusting it to the new context—is no easy task, but developing
this “inner agility” is essential in releasing our potential to lead an agile transformation. It is clear from the work of Robert Kegan and many others that leaders of agile organizations must, above all, make a profound personal shift in their mind-sets from reactive to creative.

Reactive, or socialized, mind-sets are an outside-in way of experiencing the world based on reacting to our circumstances and other people’s expectations of us. We typically default to this mode when challenged—in other words, very frequently during a typical business day— which limits our perspective, focuses us on what can go awry, and causes feelings of fear, anxiety, frustration, and stress.

Creative, or self-authoring, mind-sets are an inside-out way of experiencing the world based on creating our reality and way forward through tapping into and expressing our authentic selves, our core passion and purpose. Being “in the creative” expands our perspective and focuses us on the positive, and we experience joy, fun, love, and flow.

Research shows that most adults spend the large majority of their days “in the reactive,” and as a result, traditional organizations are designed to run on the reactive. To build and lead agile organizations, leaders must make a personal shift to run primarily in the creative. Think about your typical day. Do you (and your team) spend most of your time reacting to problems and your boss’ requests, seeking to control others, and working to deliver perfect outcomes? Or do you spend most of your time pursuing your purpose and passion, trusting and empowering others, and exploring new, and sometimes messy, possibilities?

There are three fundamental reactive-to-creative mind-set shifts we have found critical to foster the culture of innovation, collaboration, and value creation at the heart of agile organizations: from certainty to discovery, from authority to partnership, and from scarcity to abundance.

From certainty to discovery: Fostering innovation

A reactive mind-set of certainty is about playing not to lose, being in control, and replicating the past. This mind-set underlies the way traditional organizations operate through detailed linear planning, by using fixed annual budgets, annual individual-performance goals, and the precedence of narrow expertise and known best practices. It can work well in a predictable environment in which leaders can foresee the future with high degrees of precision.

However, the mind-set of certainty also leads to game playing and waste. For example, budgets planned a year or more in advance, at the end of the annual cycle, are spent exactly as planned, almost to the penny. This mind-set will miss the unforeseen emergent opportunity, the chance to seize or create something new and unexpected. Equally, it will encourage an avoidance of making mistakes and inculcate a culture of conformance and copying. In military terms, it is about fighting the latest war, designing equipment for the previous threat, and seeking to put old equipment (and old training) to new (unforeseen) uses.

Today, leaders need to shift to a creative mind-set of discovery, which is about playing to win, seeking diversity of thought, embracing risk, and fostering creative collision. Leaders must encourage innovation—continual experimentation, testing, and learning. This doesn’t mean innovation as one small activity within the business, while the rest focuses on execution. It means building innovation into the core way of working and executing for leaders everywhere.

The following five personal practices, extensions of timeless principles of centered leadership, can meaningfully contribute to this shift to a mind-set of discovery:

1. Pause to move faster. Although counterintuitive, pausing can create space for clear judgment, original thinking, and purposeful action.
2. Embrace your ignorance. Listening—and thinking—from a place of not knowing is essential for original, unexpected, breakthrough ideas.
3. Radically reframe the questions. Change the nature of the questions we ask ourselves to unblock your existing mental model.
4. Set direction, not destination. In unknowable environments, instead of moving to a fixed goal, join your team on a journey with clear direction.
5. Test your solutions—and yourself. Quick, cheap experiments can avert major, costly disasters for your business and for you. Thinking of yourself as a living laboratory constantly testing innovative ways of leading makes it exciting, not terrifying.

A mind-set of discovery is found among leaders at Hilcorp Energy, an oil company operating with many agile practices. Hilcorp Energy formulates strategies and plans with an expectation that their plans will form a distribution around what typically happens. The more unpredictable and fast paced the environment, the wider the distribution, with some spectacular misses that fall short of target and some spectacular wins that seize unexpected opportunities through innovative approaches.

This mind-set is also to be found among leaders at Illinois Tool Works, a leading, diversified maker of specialized industrial equipment. For ITW, a mind-set of discovery has been central to its sustained success over decades. A prolific innovator with over 17,000 granted and pending patents, many of ITW’s product innovations emerge from discussions with customers, each focused on developing an ingenious solution to a specific customer problem.

From authority to partnership: Fostering collaboration

 Traditional organizations are designed as siloed hierarchies based on a reactive mind-set of authority. The relationship between leaders and teams is one of superior to subordinate. People lower down the career ladder defer to and comply with the wishes of those at more senior levels. In return, senior leaders protect and reward their people. The key questions when we operate with a mind-set of authority are, “Who do I report to, and who reports to me?”

Designed for collaboration, agile organizations employ networks of autonomous teams. This requires an underlying creative mind-set of partnership, of managing by agreement. Such organizations strive to tap into ideas, skills, and strengths through freedom, trust, and accountability, which requires peer-to-peer relationships based on mutual acceptance and respect. Leaders must develop relational expertise, create conditions for effective teamwork, build networks, and burst silos. The key questions when we operate with a mind-set of partnership are, “Who can I help, and who can help me?”

Partnership requires not only trusting, listening, and collaborating more but also being prepared to own and influence less. It also depends on being prepared to challenge the group consensus, welcoming dissent (such as the “obligation to dissent” taught to every new colleague at McKinsey), fostering inclusion, seeking diverse opinion or data, and entertaining plural views. Seniority and advancement—reasonable motivators in all organizations—need not depend on budget size or population in a department but more on depth of knowledge and relationships. A more senior leader might have fewer reports than his or her junior.

Leaders in agile organizations focus on guiding and supporting rather than directing and micromanaging. The well-known research of Google suggested that creating a sense of psychologic safety, where people feel comfortable speaking openly, suggesting ideas, and admitting they don’t know, was one of the pervasive characteristics of high-performing teams. Agile leaders focus on creating this environment by encouraging everyone to contribute, facilitating joint problem solving, and encouraging all team members to take accountability for individual and team outcomes.

Applying this mind-set of partnership is central to the success of Morning Star, the world’s largest tomato processor. The company empowers autonomous teams to operate without formal leaders, reflecting its deep commitment to freedom and collaboration within and across teams. Every year, colleagues negotiate with their stakeholders a “colleague letter of understanding” that formally commits to partnership, accountability, and reciprocity.

From scarcity to abundance: Fostering value creation

In stable, slowly evolving markets, companies seek to maximize their shares at the expense of others to boost shareholder value. The underlying premise signifies a reactive mind-set of scarcity that focuses on limited opportunities and resources and a win–lose approach. This mind-set is about maximizing the share of an existing pie.

Today’s markets, however, evolve continually and rapidly, offering unprecedented challenges and opportunities. To deliver results now, leaders must view their markets and businesses with a creative mind-set of abundance that recognizes the unlimited resources and potential available to their organizations. A mind-set of abundance includes customer-centricity, entrepreneurship, inclusion, and cocreation. Leaders must learn to grow a larger pie by continually seeking win–win options that deliver value simultaneously to all stakeholders.

What Apple did after Steve Jobs’ return demonstrates this shift to abundance. Instead of continuing to do everything in house, Apple launched iTunes and then the App Store, inviting what became tens of thousands of partners to co-create an unprecedented ecosystem. By sharing and massively expanding the supply pool in this way, Apple unlocked enormous demand and value potential, enabling it to become one of the most valuable companies in the world.

The reactive mind-sets of scarcity, authority, and certainty no longer fit the ever-changing world. They cause us to focus inward and backward, and they lose sight of amazing opportunities. Making the three fundamental shifts to creative mind-sets of abundance, partnership, and discovery lets us look outward and forward, unleashing the full potential of our people and organizations.

A disciplined approach

While these mind-set shifts might be new and require a significant “letting go” of old beliefs and paradigms, collectively they form a very disciplined approach to leadership. And because of inherent autonomy and freedom, leadership in agile organizations comes from a self-disciplined approach - leading not in fear of punishment or sanction but in service of your purpose and passion.

This approach means, among other things, leading with certain characteristics:

leading with discovery by applying the following actions:

• leading more with asking questions versus advocating your opinion
• listening deeply, with a focus on what you might be missing
• creating space to pause and reflect

leading with partnership by applying the following actions:

• taking responsibility for what is yours
• reviewing your role and clarifying expectations with others
• surrounding yourself with people who think differently from you

leading with abundance by applying the following actions:

• identifying new opportunities and unmet needs
• exploring how to provide more value to attract the resources you need
• seeking win–win outcomes based on contribution and cocreation

On transforming yourself: Takeaways

Change yourself first, then the organization.

When do you show up with a reactive mind-set? When do you show up with a creative mind-set?

How might you choose mind-sets of discovery, partnership, and abundance more frequently? What would be the impact on you and those around you?

What disciplined practices might you adopt to be in a creative mind-set?

We all win together.