Systems Leadership Versus Traditional Leadership - BusinessBlog : McGraw-Hill
Featured Leadership Operations

Systems Leadership Versus Traditional Leadership

Traditionally, executives rose to senior management through expertise in one particular function, usually operations, engineering, sales, marketing, or finance. When put in charge of a business unit or a whole company, their backgrounds naturally biased them toward seeing the landscape through one primary perspective. To cover everything else, they tended to rely heavily on colleagues who were experts in other functions, including groups like R&D, human resources, legal, and government relations. Leaders could set broad goals, delegate the details, and assume that things would work out, as long as they had a competent team. There was no need to be immersed in every department’s details.

But the complexity of modern business makes that dynamic outdated. Every internal function is more interdependent than ever, and every player in a company’s external ecosystem of partners, competitors, and customers can shake up carefully laid plans at any moment. As a result, today’s leaders need a much broader range of expertise and skills, compared to their predecessors. They need to be good at fitting all these pieces together to deliver optimal value to customers and shareholders.

This type of leadership is called Systems Leadership, which I define as the ability to master processes and strategies from different perspectives at the same time: physical and digital, breadth of market and depth of market, short term and long term, what’s good for the company and what’s good for its ecosystem. Systems Leaders combine the IQ to understand their company’s technology and business model with the EQ to build effective teams and inspire them to new heights. They use short- term execution skills to hit their financial targets this year, while also driving changes that may not pay off for five years. They grasp the big picture and essential details simultaneously. They understand how all the elements of an organization affect both internal and external stakeholders, and how interactions internally and externally shape a company’s outcomes.

And there are five specific things they do well.

1. Operating at Intersections

Operating at intersections means pursuing two or more goals at the same time, because you know that succeeding at each of them will deliver powerful synergies that you couldn’t get from them separately.

There can be multiple types of intersections: an innovative technology meets an innovative business model; short-term results meet long-term change; or global strength meets local expertise.

Sometimes operating at intersections means spotting connections between disparate businesses that aren’t obvious between seemingly disparate businesses. Systems Leaders constantly scan the horizon for potential intersections between “what we’re already good at” and “what else we might be able to do with these skills.” 

2. Predicting the Future and Preparing for It

You don’t need to be a professional futurist to know which technologies are going to continue to impact business and society for at least the next decade. The challenge is figuring out how those and other innovations will affect various aspects of your organization, including core functions like administration, R&D, sales, and manufacturing. Like it or not, certain jobs in all of those areas will become obsolete, while new jobs will be created in areas as yet undreamed of.

These unavoidable trends force Systems Leaders to make tough decisions, the sooner the better. Their inner ears help them figure out what a company should produce itself and what should it buy from suppliers. Their muscles help them build scale intelligently, staffing up or retraining employees to replace the ones whose old jobs are going away. Their prefrontal cortexes help them weigh the risk of making too many changes too quickly against the risk of being left behind in the industry in 5 or 10 years.

3. Managing Context

Context is defined as “the circumstances that form the setting for an event, statement, or idea, in terms of which it can be fully understood and assessed.” Facts in isolation are not truth; they can lead you badly astray if you misunderstand their context.

Here’s an example of what happens when context changes. During the 1980s, most American business leaders saw globalization as a virtually unambiguous good, a way to sell more stuff around the world while reducing supply costs and (via offshoring) labor costs. But over the last decade, while the fundamentals of global free trade have remained basically the same, the context is now different. China has become a rising global superpower, not just a place to make sneakers or cell phones cheaply. Offshoring has devastated large parts of the industrial Midwest in the United States, leading to the opioid crisis and extreme populist politics, among other consequences. Rather than rushing into new avenues for globalization that seem beneficial on the surface, Systems Leaders take time to consider the wider context.

4. The Product Manager Mindset

The combination of learning, listening, and showing empathy to experts adds up to what I call the product manager mindset. In many companies, the product manager is at the hub of a wheel-shaped org chart, constantly interacting with engineering, customers, manufacturing, sales, finance, research, and other departments. The key skills are interpersonal: learning how to get along with different personality types in all those functions. With a production manager mindset, Systems Leaders dive deeply into the technologies that underpin your products and your company’s ecosystem. Listen closely to experts and show empathy for their concerns. When you have to make a decision that upsets certain factions, your strong relationships — “she’s one of us” — will soften the blow.

5. Going “Risk on” During Uncertainty and Disruption

Financial theory says that in times of exceptional volatility, you should become extra cautious and adopt a “risk off” mindset. But Systems Leaders generally have the opposite impulse. The more disruptive their situation, the more they go “risk on” and confront the source of the challenge, rather than passively waiting to see how things play out in their company or industry. They learn how to manage their own anxiety and that of their teams. Systems Leaders run towards the disruption because they know disruption is inevitable, and it is better to drive the disruption than to be driven by it.

Robert Siegel is a lecturer at Stanford Graduate School of Business. His work includes teaching graduate and Executive Education classes, and doing extensive research on such companies as Google, Schwab, AB Inbev, Stripe, and SurveyMonkey®. He’s also a partner at Silicon Valley venture capital firms XSeed Capital and Piva, and he sits on the boards of several startups.