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Why Leadership Fails in the Digital Economy

Trailblazing leaders see the potential of a new path, and they combine that vision with the courage to take a stand to bring about change.


Consider this. Mohan Paul, a senior manager at a real estate firm was a hardworking performer until his promotion to the next level of a Partner was denied. While he closed several deals in the past that made him successful, he did not believe in communicating with his digitally dispersed team, and even opposed the idea of a digital platform. He also did not encourage gig workers. While hard work and past records are important factor for promotion, the message was loud and clear – those weren’t the only factors that mattered to the organization’s success.

The digital economy demands a very different approach to leadership, with constant changes in technology, market and business models as well as changing demands from customers and partners. Unfortunately, like Mohan, most leaders are out of touch with reality and fail in the digital economy, shows a new research. The study released by MIT Sloan Management Review and Cognizant reveals, a sobering majority of executives lack the skills and mindsets necessary to lead in the digital economy.

The study done through a survey of nearly 4500 global leaders from more than 120 countries, shows that the need for change is urgent, and time is running out for leaders who are holding on to old ways of working and leading.

A change in the mindset

The study makes some interesting revelations about leadership mindset. It shows, only 12% of respondents strongly agree that their leaders have the right mindsets to lead them forward. This means, the primary leadership challenge in the digital economy is to develop a new mindset that anchors, informs, and advances these behaviors – which a majority of today’s leaders lack.

The study defines mindsets as mental operating systems that guide behaviors. Leaders need to change their attitudes and beliefs — their mindsets — about what leadership looks and feels like, if they want to produce behavior change that lasts over time. In this context, the study identifies four accepted and desirable mindsets leaders should adopt to be successful in the digital economy.

Producer Mindset: The producer mindset combines a focus on customers with a focus on analytics, digital savviness, execution, and outcomes. Producers use analytics to accelerate innovation to address shifts in customer preferences and improve customer and user experiences. The traditional retail model, for instance, stood unchanged for many years, but disruptions to the industry – thanks to the ecommerce and now the mobile commerce boom – have put a new premium on speed and customer experience.

Investor Mindset: Leaders with an investor mindset pursue a higher purpose beyond shareholder returns. They are dedicated to growth, but in a sustainable fashion. They care about the welfare of their employees and invest in safe working conditions. They pay close attention to not only what products they are selling or service they are offering, but also why they exist as enterprises. As former PepsiCo chairman and CEO Steve Reinemund mentioned in the study: “The truly great leaders have motivating, purpose-driven visions.”

Connector Mindset: In an increasingly connected world, mastery of relationships, partnerships, and networks is a new currency that drives organizational effectiveness. “If leaders do not master collaborative relationships, both inside and outside the company, it can limit production of the outcomes needed to win our customers’ business,” as Lori Beer, global CIO of JPMorgan Chase puts it, according to the study.

Explorer mindset: Explorers are curious, creative, and operate well in ambiguous situations. They engage in continuous experimentation, encourage failure, reverse mentoring, and a deep curiosity about how the forces of digitalization are reshaping the competitive environment. They share stories about what great leadership looks and feels like when individuals come together as teams, and teams come together as communities, with a unifying sense of purpose and collective ambition.

Are Leaders Really Prepared?

Few managers and leaders strongly agree that their organizations are ready to take on the challenges brought by digitalization. While 71% of survey respondents agree or strongly agree that they feel prepared to lead in the digital economy, fewer report that they are effective at activities that demonstrate digital savviness. Even more disconcerting, whereas 82% of respondents say their companies need digitally savvy leaders, only 40% believe that their organizations are building robust leadership pipelines. There is a measurable disconnect between awareness, ability, and urgency.

It is clear, however, that digitalization is creating unprecedented demands on leaders and will increasingly compel companies to change the way they operate from the ground up. Like, experts in the study noted that data will no longer be the job of the CIO or an analytics division. It will be the job of every single person in the company, whether they are in marketing, sales, customer service, or human resource.

Urgent need for change

Toward this end, the authors have created a short list of recommendations for leaders and their organization to get started.

  • Articulate a powerful leadership narrative that courageously lays out what you believe is important for leading in the digital economy. A forceful, clear leadership narrative will send a message that it is high time to bring about change.
  • Promote a culture that identifies future leaders early in their careers: Signal which people with which behaviors and mindsets best reflect the values expressed in your leadership narrative.
  • Build communities of leaders by empowering employees at all levels. Shed the baggage of dense hierarchies. Understand that your employees value and respect your ability to connect with them far more than your title.
  • Make transparency and trust the cornerstone of your culture to unleash the energy that exists at every level and in every corner of your organization.
  • Align your talent, leadership, and business strategies. Identify the emerging and enduring behaviors that are most critical for your leadership teams. Hire and promote people who embrace the skills and mindsets you value most. Ensure that your talent and business strategies are closely aligned. This will be a key differentiator in your ability to attract, engage, develop, and retain talent.
  • Don’t just embrace inclusion and diversity — demand it. The research is clear that diverse teams perform better, so stop talking about diversity and make it happen. Use data and insights to identify where diversity is lost and how to preserve it. Bake diversity metrics into your scorecards. Reward inclusion and diversity champions. Do it by role-modeling your support for diversity and inclusion.

Trailblazing leaders see the potential of a new path, and they combine that vision with the courage to take a stand to bring about change. They understand that people don’t want to be just employees; they want to be active citizens in amazing workplace communities that are doing their best to change the world for the better. Hence, the success lies in being an authentic role model for the new leadership.

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Sohini Bagchi
Sohini Bagchi is Editor at CXOToday, a published author and a storyteller. She can be reached at