The contemporary business environment has become highly competitive, and leadership is under pressure to adapt. But what does this actually mean for business leaders? In order to identify the challenges for leaders, it is important to first understand the drivers of change in the business environment.
Technological advancements have democratised the markets. New technology allows the entry of new players into a market in a matter of days or even hours, essentially bypassing traditional barriers to entry that previously existed. As new companies enter the global marketplace, shifting the focus away from the traditional markets of the West and shaking up the existing corporate status quo, companies and business leaders face more competition, less certainty and shorter product and industry life cycles.
Additionally, the emergence of new business hubs in BRIC and MENA countries and in Southeast Asia applies increasing competitive pressure on traditional Western multinational corporations. Local businesses in these emerging hubs have easier access to production resources — namely human talent — and major customer pools because 80 per cent of the world’s population resides in these regions. The result is that they are able to offer competitively priced products with unique features, something which often has been referred to — inaccurately ¬— as “cheap differentiation.”
At the same time, from the customer perspective, technology allows us to shop literally across the world’s marketplace in a matter of a few clicks. Endless options, instant price comparisons and the ability to personalise products are some of the basic characteristics of the new shopping regime, thanks to the implementation of new technology, including smart devices. With technology right at their fingertips, naturally customers are becoming more aware of and sensitive to both price and quality.
Customers demand quality at a low price, and their definition of quality often means product features that exceed customer expectations. As a result, organisations have to face increasing customer demands to continually improve their return on investment — better quality for each dollar spent per product. This places huge pressure on organisations to seek ways to manage costs but at the same time maintain innovation at all levels.
Research shows that traditional competitive strategies are now becoming less effective and more difficult to sustain. Selling cheaper or different products is no longer enough to assure a competitive advantage. Instead, the new norm is a set of hybrid strategies that combine competitive product pricing with exceptional characteristics.
Challenges for modern leaders
So, what does this mean for the modern business leader?
First, it means companies and leaders must innovate or die. Contemporary leadership should be able to encourage, reinforce and manage innovation. Now and in the future, the challenge is for leaders to be able to conceive the “other direction” rather than the “right direction.” This requires the ability to consider and reflect on a wide array of issues that are often not part of the traditional leadership decision-making process.
Second, change is now a fact in all stages of the organisational life cycle. In a fast-moving business environment, success is a function of the ability to embrace change at all levels of the organisation. Modern leaders should be able to see change as an ongoing and never-ending process. Courage is required to face change as a necessary process as well as to lead an organisation and its people within this uncertain process.
Third, leadership should be everywhere. Today and in the future, leadership should be integrated into several roles within the organisation, far from the traditional model of leadership as a top-down process. In order to respond to the need for continuous innovation and change, organisations must shift away from traditional hierarchical structures to form a network of teams and decision centres that integrate leadership and management actions. The leadership of the future will be situated and integrated not only at the top but also at the middle- to lower-management and operational levels as a critical element in achieving quality and encouraging innovation.
The big question is whether existing leadership development, both within and outside organisations, is preparing leaders to meet these challenges.
Leaders, not simply MBAs
The traditional flagship of leadership development in business is the Master of Business Administration (MBA). The MBA was introduced in the United States in the 20th century as a response to the need for appropriately trained top executives, because most executives had an engineering or non-management background. Since then, the MBA has grown to become an iconic management qualification, of which possession alone could guarantee significant differentiation in the employment market. Business executives often pursue an MBA to enter an elite group of people who are qualified to enter top leadership positions.
But many MBA programmes have become too technical and remain focused on preparing managers to make the direct transition from undergraduate education to being members of the executive board. It is indicative of this problematic nature of the MBA that the renowned professor Henry Mintzberg published a book in the early 2000s titled Managers Not MBAs, criticising the highly technical nature of MBA programmes and the lack of focus on essential skills like creativity, ability to deal with uncertainty and ability to develop innovation.
The response of several universities around the world has been to review their MBA curriculum in light of the changing business environment and, particularly, the challenges for future leaders.
Today’s business leaders also crowdsource their ideas, and social media helps give today’s big idea a future tomorrow.
Now more than ever, a right MBA programme can create leaders prepared to meet today’s global business challenges confidently. Those are the leaders who will also be able to address tomorrow’s challenges while building the new and future norm.
Dr Vangelis Tsiligiris currently teaches courses in leadership in the online MBA programme of the University of Roehampton, London.