'Gut feel' leadership is dead

This highly successful executive has lived through recessions, wars, the technology revolution, bubbles and booms. Sure, he says, everything feels faster. Radio took 38 years to reach 50 million users. Twitter took 9 months.

"The mix of gut and experience we used to make sense of change and draw a new future is broken."
Amanda Gome, Former head of digital and social media, ANZ

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But this executive has kept up with the digital and social revolution. What he is struggling with is his old reference points aren't working anymore. That mix of gut and experience which he used to make sense of change and draw a new future is broken. In essence, he no longer understands the operating system of the world's economy.

Who can? A trio of directors at McKinsey Global institute, Richard Dobbs, James Manyika and Jonathan Woetzel are warning there are good reasons executives are feeling disrupted and uncertain: the familiar business world we have known for decades – even centuries - is no more.

The world is in the middle of a dramatic transition due to four great disruptive forces. Any one of these, the executives say in a new book No Ordinary Disruption, would rank among the largest economic forces the global economy has ever seen including the industrial revolutions in advanced economies.

But what's throwing us off course is the world got all four at once, in some kind of quadruple whammy. As these trends grow in strength they are colliding and feeding on each other to produce monumental change.

The trends themselves as revealed in the book are no surprise but what is interesting is the challenge to executives to stop applying their old world lens to new problems and opportunities and instead reset their internal navigation system.

The first trend is the shift of economic activity and dynamism to emerging markets like China and to cities in those markets with the balance of power shifting east and south at a speed never witnessed.

By 2025 they predict nearly half of the world's largest companies (revenue of more than $A1 billion) will come from emerging markets.

Then consider nearly half of global GDP growth between 2010 and 2025 will come from 440 cities in emerging markets – 95 per cent of them cities our executive hasn't ever heard of, such as Foshan, China's seventh-largest city by GDP. It's a city that will contribute more to global growth between now and 2025 than Madrid, Milan or Zurich.

Reset: Our executive in the old world has a quick look at Foshan and thinks hmmm, not missing much by not being there. It's far easier to chase the markets he knows.

Instead of thinking a snapshot in time, our exec needs to think about the dynamism underneath, highlight the opportunities, tone down the risk but most of all project forward motion.

The second major force is the acceleration in the scope, scale and economic impact of technology.

Processing power and connectivity is just part of the story. Throw in the data revolution giving unprecedented information to consumers and businesses and the proliferation of tech-enabled businesses such as Alibaba and Uber.

Reset: Our executive, who grew up in hard asset age of bricks and mortar, not only has to come to grips with the rising value of intangible assets but also that they can be used as the seeds for entirely new products and services.

Digital capital – the marriage of data, analytical models and decision support tools - can create immense economic value, improve customer experience and difficult to replicate capabilities.

He also has to come to grips with the speed at which technology fuelled start-ups can now destroy his business. It used to take years for a company to steal enough of an incumbent's revenue to be a threat. But social media ecommerce, the sharing economy and the low costs of digital infrastructure have allowed some upstarts to build business models with enormous scale very quickly.

Our executive also has to reset the part of his brain that wants the dust to settle before placing a bet on new technology. So maybe he needs to establish symbiotic relationships with vibrant tech start-ups with potential for ownership or access to products reduces risk. Or go the aquire approach and buy a start-up.

The third major force is the aging population. The planet's population will plateau in most countries for the first time in history.

Our executive, who has always factored in economic growth when working on forecasts, will be challenged. Meanwhile, caring for large numbers of elderly people will put severe pressure on government finances which in turn will create societal challenges.

Reset: Despite being grey himself, our executive needs to reset the image of a typical employee. Grey employees must be viewed as an asset and resource, given employers will need to fish in the deepest and most populated parts of the talent pool.

Companies will need to introduce a range of arrangements to tether older employees to work but on terms that will appeal to them – including training to help keep skills updated.

As people work longer they will have more income and marketers will need to focus on grey consumption habits: food at home, medical services, electronics, online platforms and digital connectivity to address isolation.

The design of cities and social care will also need to be rethought as will age friendly customisation of products.

The fourth mega trend is “flows" – which is what the authors call the disruptive force in which the world is much more connected through trade and capital.

The old series of lines that used to connect the major trading hubs in Europe and US are now a sprawling web with Asia becoming the world's largest trading region. Light the technology fuse under the 'flow' and you have unexpected volatility and opportunity.

Reset: The diversification and power of global flows means the better connected you are the better off you will be.

While our executive has thought in global terms for years, he must shift his focus from cost effectiveness in global supply chains to consider how value chains may evolve, who the participants are, regions that can play a role and how value can shift along the chain.

He must think digital platforms that can weave together networks, reach potential partners, connect with customers, suppliers, financiers and can crowd source ideas.

And he has to plan to respond nimbly because a connected world means feedback loops are intense when things go wrong.

For the struggling executive, the extraordinary case studies of companies and business transformation in the book are compelling illustrations of the mega trends and the success of companies that “reset."

And if our executive thinks a nap might be better than a reset? Well, according to the authors, this new world will be richer, more urbanised more skilled and healthier than the one it replaces.

It will be one of recurring miracles and for the socially and digitally savvy, there is a new set of tools at his fingertips to help stay on top of new trends, develop new approaches and drive change.

Amanda Gome is head of digital and social media at ANZ