In today's dynamic markets, leaders need very different mindsets from those used to manage traditional organizations in less-demanding times.
The divisional general manager looked at me quizzically as we discussed characteristics of agile organizations. I could see the manager, who had led several thousand people over two decades, was struggling to process such notions as autonomous teams, rapid experimentation with unknown risks, and inviting customers into “backroom” design discussions.
In today's dynamic markets, leaders need very different mindsets from those used to manage traditional organizations in less-demanding times. We find that three primary mindset shifts are required to lead agile organizations designed for innovation, collaboration and value creation.
Innovation: from certainty to discovery
Traditional organizations operate through detailed linear planning and control. This works well in a known environment where leaders can foresee the future. This mindset of certainty is about playing not to lose, being in control, and replicating the past.
But today when the future largely is unknowable, detailed planning can be a hindrance. The focus must shift to innovation, continually experimenting, testing, and learning. This mindset of discovery is about playing to win, exploring unknown territory, and creating a new future.
At Illinois Tool Works, a leading diversified maker of specialized industrial equipment, a mindset 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 engineer-to-engineer discussions with customers, each focused on developing an ingenious solution to a specific customer problem.
Collaboration: from authority to partnership
Traditional organizations are designed as siloed hierarchies based on a mindset 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 people at more senior levels. In return, leaders protect and reward their people.
Designed for collaboration, agile organizations employ networks of autonomous teams. This requires an underlying mindset 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.
This partnership mindset is central to the success of Morning Star, the world's largest tomato processor. It empowers autonomous teams to operate without formal leaders, reflecting a deep commitment to freedom and collaboration within and across teams. Every year, colleagues negotiate a “colleague letter of understanding” with their stakeholders that formally commits to partnership, accountability, and reciprocity.
Value creation: from scarcity to abundance
In stable, slowly evolving markets, companies seek to maximize their share at the expense of others to boost shareholder value. The underlying premise signifies scarcity; limited opportunities and resources, and a win-lose approach. This mindset is about maximizing share of an existing pie.
Today's markets, however, evolve continually and rapidly, offering unprecedented challenges and opportunities. To deliver results today, leaders must view their markets and businesses with a mindset of abundance that recognizes the unlimited resources and potential available to their organizations. They must 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 become one of the most valuable companies in the world.
The traditional mindsets of scarcity, authority and certainty no longer fit today's ever-changing world. They cause us to focus inward and backward, and lose sight of amazing opportunities. Making the three fundamental shifts to mindsets of abundance, partnership and discovery lets us look outward and forward, unleashing the full potential of our people and organizations.
By Carolyn Dewar, Sherina Ebrahim and Michael Lurie
Michael has helped hundreds of companies in all sectors on the transformational journey from the industrial economy to the digital age. He has helped many top-leadership teams undergo the personal transformations needed to design new strategies and business models, build new organizational capabilities, and lead in new and powerful ways.
Since rejoining McKinsey, Michael has advised top public and private enterprises in Africa, the Americas, Asia–Pacific, Europe, and the Middle East. He leads the firm’s global community of senior practitioners who work with top teams and senior leaders to design, build, and lead agile transformations that accelerate and sustain organizational performance. Michael’s focus is helping executives develop new mind-sets and capabilities that enable them to reimagine their leadership, organizations, and ecosystems for the 21st century.