Leadership in a digital context

Leadership in a digital context

Master Thesis Name Student number Submission date Version Qualification Institution Supervisor Rik Tiggelman 10978232 31th _{of August 2017} Final Thesis

Executive Programme in Management
Studies – Strategic Marketing Track

ABS, UvA Ed Peelen

Statement of Originality

This document is written by Student Rik Tiggelman who declares to take full responsibility for the contents of this document.

I declare that the text and the work presented in this document is original and that no sources other than those mentioned in the text and its references have been used in creating it.

The Faculty of Economics and Business is responsible solely for the supervision of completion of the work, not for the contents.

1. Table of contents

5.1 The digital age ... 10

5.2 Contemporary leadership approaches ... 17

6. Data and method ... 27

6.1 Data... 27

6.2 Sampling ... 28

6.3 Data analysis ... 29

6.4 Data interpretation... 30

7. Results... 31

7.1 Understanding of the digital age and its challenges & issues ... 31

7.2 Leadership behaviours in the digital age ... 43

8. Discussion ... 52

8.1 Discussion ... 52

8.2 Theoretical implications ... 59

8.3 Implications for practice... 59

8.4 Limitations and future research ... 60

9. Conclusion ... 62

10. References ... 64

Appendix A Overview interviewees ... 73

Appendix B Interview questions ... 74

Appendix C Coding List Digitalisation Challenges & Issues ... 75

Appendix D coding list digitalisation leadership behaviours ... 76

List of tables

Figure 1 Disruption caused by new technology (Libert, 2015)... 7 Figure 2 Digital challenges & issues research model ... 54 Figure 3 Leadership behaviours framework ... 58

List of tables

Table 1 Leadership theories overview (Maslanka, 2004) ... 18 Table 2 Overview differences in challenges and issues in the digital age ... 54 Table 3 Overview effects and nature of business of the different leaders ... 55

2. Abstract

A research by Digitizer (Huber, 2015) among 250 CEOs / CIOs showed that digitalisation influences 72,8 percent of company success, which will even increase to almost 80 percent in the coming 5 years. Organisations like Uber, Amazon and Airbnb seem to have changed the businesses they operate in completely, while incumbents question their relevance or even disappear from the mainstage they acted on. Leaders of organisations need to deal with a totally new digital environment and new digital tools, which leads to the question what these leaders actually do to successfully cope with the challenges and issues this digital age brings. The aim for this thesis is to create insights in these digitalisation challenges and issues to create a framework of leadership behaviours for successfully coping with these challenges and issues. This framework is conducted after interviewing 12 leaders in different sectors, analysing their experiences with new digital challenges and related leadership behaviours. The findings of this thesis contribute knowledge for practice and for theoretical implications, next to the creation of various opportunities for further researching the impact of the digital age on organisations and leadership.

3. Preface

This master thesis is the result of half a year research at the Department of Management Studies at the Amsterdam University. It is made as a completion of the master education in Business Administration.

This study researches the leadership behaviours for coping with the challenges and issues the digital age brings. It has been a great challenge and opportunity to study this subject, while experiencing subject related themes in my day to day working environment.

During the process of writing, there were some people that made a contribution to complete this thesis. First of all, I would like to thank my supervisor Ed Peelen for giving advice, support and keeping a strong eye on the final contribution. His contribution has boosted my research process and helped me finish my study on time. A second word of thanks goes to all 12 interviewed executives, who took the time to thoroughly discuss the subject to give clear insights into the studied subject. Furthermore, I would like to thank my current employer for the use of their network, the much-appreciated flexibility & support and the inspiration for researching this topic. Last but not least, I would like to thank my family and friends for their support during the challenging months of combining work with the writing of a thesis.

I have learned a lot during this Master Thesis research and I hope you will find my work as interesting and knowledge earning as I have.

4. Introduction

“Digitalisation is the main reason just over half of the Fortune 500 have disappeared since the year 2000” is what Pierre Nantermee (2016), CEO of Accenture, addressed during the World Economic Forum’s annual meeting in Davos. This new digital era makes consumers use mobile, social media and other interactive tools to decide who to trust, where to buy and what to buy. Next to that, organisations are also challenged by their own digital transformation, having to rethink what customers value most, while taking advantage of new operating models to create a competitive advantage (Berman, 2012). During this transformation, organisations face challenges dealing with new and unknown technologies, new organisation forms, new business models, a complex stakeholder field and changing market conditions.

The MIT Sloan review (3500 surveyed managers) reported that 85% of organisations agree that digital maturity / transformation is key to success, but only 25% would rate themselves digital mature or digitally transformed (Kane, Palmer, Phillips, Kiron, & Buckley, 2017). Examples of organisations and their leaders struggling to cope with the challenges digitalisation brings are for instance to be found at Nokia and Yahoo. Nokia lacked a burning platform and an innovative culture, while it had the technology and people being the market leader for many years. Yahoo on

the other hand focussed on being a media giant instead of focussing on the booming search engine market (Vocoli, 2014). Reshaping your business to use the issues and challenges of the digital age in your advantage requires companies to understand the factors that influence these issues and challenges in order to have a concrete vision for digital transformation. An external environmental analysis, as discussed in the VUCA model (Hinssen, 2015), can help organisations to generally frame the challenges and issues confronting them to eventually be able to create this vision for digital transformation. Concrete digitalisation related challenges and issues like for instance disruption or the use of big data seem to be missing in the model and therefor it becomes of great interest to further indulge into more concrete digitalisation challenges and issues. Next to that, the model seems to make no distinction between the possible impact the four elements (volatile, uncertain, complex and ambiguous) of this new digital context, could have in different organisations or sectors, with different digitalisation characteristics. Therefor the first section of this master thesis aims to provide insights into the challenges and issues different organisations face in the digital era.

Next to framing the digitalisation challenges and issues on organisational level, leadership is seen as one of the key factors to meet these new challenges in this transitioning world (Uhl-Bien, 2007). There are many leadership models as for example situational theories, contingency theories, authentic theories, transactional and transformational theories that are mostly based on traditional contexts (Bass, 1990; Northouse P. , 2004). Next to these more traditional grand theories, there are also new models such as E-leadership, which describes leadership in virtual teams that face a whole new set of challenges such as distance and cultural related challenges (Avolio, Kahai, & Dodge, E-lead- ership: implications for theory, research, and practice, 2001). Next to that, there is also the VACINE model of Hinssen (2015), linking the VUCA model to leadership elements for coping

with these challenges. Looking at the concept of digitalisation from the perspective of leadership models, it becomes of great interest to understand what leaders actually do to cope with these challenges and issues, but concrete leadership behaviours for coping with digitalisation challenges and issues are missing (Davenport, 2001). The second section of this thesis therefor aims to provide insights in current leadership challenges and the concrete leadership behaviours for coping with these challenges, which eventually will answer the research question for this thesis;

Research question

What leadership behaviours could help leaders cope with the challenges and issues in the context of digitalisation?

To research this topic, this thesis is organised as follows: First the digital age will be under investigation, framing its origin, characteristics and the challenges and issues it brings. The relation with the VUCA model will be explained and other related themes will be presented. Second, leadership in the digital age will be researched by presenting the grand leadership theories, of which transactional, transformational and authentic leadership are discussed more thoroughly because of their current interest by researchers. Next to that, some of the new leadership theories will be described, including E-leadership and VACINE to create an overview of current leadership theories. In the third part, the interviews held with executives will be used to create a framework of the challenges and issues in a digital age for both organisations and leadership to give insights in the context leaders currently have to deal with. Secondly, this context will be linked to the leadership behaviours that could help leaders to cope with these challenges to create a framework that clearly describes these different leadership behaviours.

5. Literature review

5.1 The digital age

Business models, which describe how a business creates value, are constantly threatened by the digital revolution. But what is this digital revolution? Digitalisation and digital transformation are often familiarized with the use of ICT to drive business performance, using them in the same context as mechanization, automatization, industrialisation, robotisation or digitization. Digitalisation is a “global megatrend that is fundamentally changing existing value chains across industries and public sectors” (Collin, et al., 2015). Digital transformations are undertaken by businesses themselves, giving new meaning to what customers value most and developing operating models to take advantage of new possibilities in competitive differentiation (Berman, 2012). This effect has been researched mostly in retailing, since this sector changed completely by the ability to search and buy online, but also affects media, finance, and upcoming: the health sector. At the moment, all sectors are integrating digital tools into existing business models and adopt already existing business models to new and disruptive technologies (Leeflang, Verhoef, Dahlström, & Freundt, 2014). An example of these new technologies is the influence of deep customer insights, for instance big data, to monitor the consumer journey in order to optimize advertising campaigns and budgets. Bowen, Rostami, & Steel (2010) found a positive correlation between overall company innovation and organisational performance. Next to that, one of the most significant failures of currently leading companies is to keep their position at the top of the industry, while technologies and markets change (Bower & Christensen, 1995). Successful firms in the digital age are consistently ahead of their competitors in developing and commercializing new technologies and addressing next generation performance needs of their customers (Bower & Christensen, 1995).

The digital age is characterized by 4 structural changes (Bell, 1973) (Castels, 1998) (Masuda, 1981); the digitalisation of information and communication technology (ICT), an expedited globalization, knowledge being the central factor of production and less hierarchical organisational forms who are able to adjust to market and environment conditions rapidly. Digital transformation strategies have four dimensions linked to these structural changes; use of technologies, changes in value creation, structural changes, and financial aspects (Matt, Hess, & Benlian, 2015). The ability of companies to evolve in the digital age and to be successful in today’s economic environment is determent by their reaction to these fundamental changes and their knowledge of the transformation process, including the elements that influence this process.

5.1.1 The VUCA model

Digitalisation or digital transformation with all its characteristics is strongly influenced by the external environment organisations operate in (Friedman, 2005). Companies who want to succeed in the digital era need to be aware of their rapidly changing environment and need to be able to map its fundamental characteristics. In 1998 the US army shaped the VUCA principle for mapping the challenges they face in a world that is Volatile, Uncertain, Complex and Ambiguous. Business researchers e.g. Friedman (2005) took over this principle to identify external conditions affecting organisations today.

Volatility describes the non-predictable nature, speed, volume and magnitude of the unstable change (Sullivan, 2012). This volatility results in decisions and objectives being based more on emotions than principles and more on desires than securities (Bauman, 2008). Uncertainty stands for the lack of predictability in issues and events (Kingsinger & Walch, 2012). Forecasting and

and events as a predictor for future outcomes. The third element complexity describes the confusion in perceiving the past, present and future, while they are vastly interconnected (Johansen B. , 2012). This interconnection makes problems often have multiple and difficult to understand causes involved, which in many cases leads to confusion (Lawrence, 2013). Finally, ambiguity describes the lack of clarity about the meaning of an event (Caron, 2009). Sullivan (2012) writes that it is unclear what the “who, what, where, how and why” are behind the things that are happening. Recognizing and furthermore addressing these factors that influence organisational performance, can help leaders cope with the speed of change and develop the necessary leadership capabilities. Leading in a VUCA world can be done by the skills and abilities of VUCA Prime (Johansen, 2007), that consists of the following elements;

Internal & external conditions Volatile Uncertain Complex Ambiguous Leadership development Vision Understanding Clarity Agility

Next to the VUCA Prime model, Kotter (1996) describes 8 steps required to transform your organisation and Keller & Price (2011) identify 4 important roles an executive should improve to improve the odds of success. The VUCA Prime principle of Friedman (2005) seems to bring back all these different leadership characteristics of different researchers to four leadership development challenges, that are easy to match to external conditions affecting the organisation and can easily be loaded with content to help making sense of leading in a VUCA world (Lawrence, 2013).

VACINE

Hinssen (2015) described in his VUCA model the changing environment organisations have to cope with. The VUCA prima model of Friedman (2005) was developed as a leadership development reaction to the VUCA model, but Hinssen (2015) also developed his own framework for coping with these challenges named the VACINE model, consisting of 6 elements leaders should develop (Hinssen, 2015):

Velocity Velocity describes the speed in which organisations have to react to changing circumstances and market & consumer conditions.

Agility Agility is the ability of organisations to change and transform the organisation, they need to be dextrous and able to quickly recover.

Creativity Creativity is the trump for concurring the turbulent and vast changing economy.

Innovation Innovation has become of vital importance for organisational success. Innovation is the constant process of developing new solutions to current and future challenges.

Networks Markets will change in networks of information, with consumers in the centre of these networks. Organisations and leaders need to be able to influence these networks inside and outside the organisation.

Experimentation Organisations will have to learn to experiment and to be open to failure. Employees should be able to try many things, eliminate the element that don’t work and focus on the successful elements.

Key in these elements is that people are the central factor, not the (disrupting) technology. Networks, projects, assignments, relevance and passion are perceived leading and organisational charts and contracts disappear to the background. An architect (leader) should be able to (Hinssen, 2015):

1 Understand and evaluate new technologies

2 Know the business and organisation from the inside out 3 Should be able to verify value propositions in detail 4 Coordinate experimentation and ensure quality

The VACINE leadership model was already highlighted in this chapter where the digitalization context was framed, as it is clearly related to the VUCA model (Hinssen, 2015). Further leadership models will be discussed in the next chapter discussing contemporary leadership approaches.

5.1.2 Disruption

VUCA is perceived as both an outcome and a driver of disruptive innovation, or digital disruption (Millar, Groth, & Roos, 2017). In a broad sense, disruptive innovation is described as “any situation in which an industry is shaken up and previously successful incumbents stumble” (Christensen, Raynor, & McDonald, 2015). Disruption describes a process in which a small organisation with limited recourses is able to successfully challenge established incumbent businesses. It transforms or creates new markets by introducing new technologies and business models. Christensen (1997) wrote one of the early highly praised and intensely discussed articles on disruptive technology, taking the disruption of the hard drive industry as example, where the impact of technology was not caused by its pace or difficulty, but by incumbents’ ignorance of the technology in favour of

listening to current customer needs. The vast majority of costumers of incumbents generally do not want or initially cannot use disruptive technologies and therefor the investment in the technology is not financially attractive, until it meets the standards of dominant technologies and incumbents already stumble to follow. Telis (2006) on the other hand suggests that disruption of incumbents “is due not to technology innovation per see but rather to a lack of vision of the mass market and an unwillingness to cannibalize assets to serve the market” (Telis, 2006). In their perspective (Golder & Tellis, 1993) (Tellis & Golder, 2001), successful long-term market leaders intently focus on future emerging markets, want to beat competitors in achieving that first and are willing to cannibalize current assets to make future potential available.

Bower & Christensen (1995) describe a method to spot and cultivate disruptive technologies by: • Determining if the technology is disruptive or sustaining

• Defining the significance of the disruptive technology • Locating the initial market for the disruptive technology

• Placing the disruptive technology business in an independent organisation • Keeping the disruptive organisation independent

Both perspectives on the essence of disruption and the disruption strategy by Bower & Christensen (1995) also contain a form of leadership view on the topic, differing in uncertainty approach and visionary leadership importance.

In sum, organisations face challenges in the digital age that have other characteristics than the challenges they were used facing. New and unknown technologies, new organisation forms, new

related to the digital era and strongly influenced by environmental conditions as described in the VUCA model. Next to that, does digital disruption make organisation even more aware of the possible impact digitalisation could have on their relevance. All the discussed themes will be used to analyse the concrete issues and challenges leaders mention in the conducted interviews to create an overview of the impact of digitalisation on challenges and issues different organisations face. In the next literature review element, previous and current strategic leadership theories will be addressed, to create a basis for determining what leadership behaviours could help leaders cope with the digitalisation context described in this paragraph.

5.2 Contemporary leadership approaches

Leadership is described by many different definitions, giving various meanings to the subject (Karmel, 1978). One on the definitions by Kouzes & Postner (2006) describes leadership as the process of influencing others to create agreement and understanding on the actions to be taken, how to do it and how to inspire people to succeed in shared goals. After the Trait leadership theory (table 1), research started to focus on leadership behaviours, rather than underlying leader characteristics (Bolden, 2004). Before taking a closer look at different leadership models and related leadership behaviours, an important difference between “leadership in the digital age” and “digital Leadership” has to be clarified. Digital leadership refers to leadership in the core sectors of the knowledge society, mainly ICT driven. On the other hand, there is leadership in the digital age, which refers to leadership in any institution or sector embedded in the broader transitions toward a more knowledge intensive society (Goethals, Sorenson, & MacGregor Burns, 2004). This thesis focusses on leadership in the digital age, as the aim is to research digitalisation in its most broad sense. There are two leadership theories that currently clearly dominate the literature on strategic leadership, top executives and leadership effectiveness, which are transactional and transformational leadership theories. These two leadership views are part of 8 grand theories on leadership effectiveness, as briefly described in the table below, using the evolution of leadership theories research of Maslanka (2004). Next to these theories, new theories evolve as environments change and ask for different leadership capabilities. Two of these leadership theories, authentic leadership and e-leadership will also be discussed, because of their relevance in current leadership discussions.

Theory Theory "Great Man" Theories

(1840’s)

Great leaders are born to become a leader and will take opportunities as they emerge.

Trait Theory (1930’s-1940’s)

People are either born or are made with certain qualities that will make them excel in leadership roles.

Contingency Theories (1960’s)

To a certain extent contingency leadership theories are extensions of the trait theory, in the sense that human traits are related to the situation in which the leaders exercise their leadership.

Situational Theories (1970-1980)

As the name implies, leadership depends on individual situations and no single leadership style can be considered the best.

Behavioural Theories (1940’s-1950’s)

Behavioural theories of leadership are based upon the belief that great leaders are made not born. This leadership theory focuses on the actions of leaders not on mental qualities or internal states.

Participative Theories (1960-1970)

Suggests that the ideal leadership style is one that takes the input of others into account.

Management Theories/ Transactional Theories (1980-now)

Focusses on the role of supervision, organisation and group performance. These theories base leadership on a system of rewards and punishments.

Relationship Theories/ Transformational Theories

(1990’s-now)

The Transformational Leadership theory states that a person interacts with others and is able to create a solid relationship that results in a high percentage of trust, that will later result in an increase of motivation, both intrinsic and extrinsic, for both leaders and followers.

5.2.1 Transactional VS transformational leadership

Burns (1978) first introduced the difference between transactional and transformational leadership, which currently still holds. Transactional leadership, which some assume as a presentation of previous leadership theories, focusses on the contractual agreement between the leader and its subordinate, which is seen as a cost-benefit exchange. The leader is responsible for the establishment of specific goals, he or she monitors the progress and identifies rewards that can be expected when goals are achieved. Characteristic for this leadership approach are risk avoidance, the focus on time & efficiency and a control orientation (Bass, 1985). Bass (1990) identified three dimensions for leadership behaviours in this model:

Contingent Reward

This dimension describes leadership behaviours to stimulate this cost-benefit trade-off. Efforts are rewarded as contractually assigned, undesired behaviour is punished and feedback and extra promotions are given (Bass, 1985). This will possibly result in loyalty, involvement, commitment and performance.

Management by exception

Management by exception describes the correction of the follower when necessary. This will happen when followers don’t meet expectations and they therefor receive negative feedback. There is a difference between active and passive management by exception, which is the difference between passively waiting for errors or actively searching for them (Bass, 1990).

Laissez-Faire

Laissez-faire describes the avoidance of leadership behaviours and therefor an avoidance of making decisions. These leaders hesitate in taking actions and are absent when needed (Judge & Picollo, 2004).

Transformational leadership on the other hand, focusses on the engagement between leaders and followers to reach a higher level of motivation and morality (Kuhnert & Lewis, 1987). Where transactional leaders focus more on performance and compensation, do transformational leaders emphasis on motiving employees by inspiring them and being charismatic (Den Hartog, 2001). Characteristics of transformational leaders are; they show integrity, know how to develop a vision, motivate people to achieve this vision and they build strong and successful teams. Bass & Avolio (1994) complement this study by mentioning that today’s fast changing environment demands for an extensive performance only deliverable by transformational leadership. Their “full range of leadership model” identifies the differences between transactional and transformational leadership, provides a well-tested measurement instrument and produces impressive findings in different organisation, levels and cultures. Worldwide studies on this model found a positive relationship between organisation effectiveness and transformational leadership behaviours, in contrast to the inferior effect with transactional leadership behaviours. Avolio, Waldman & Yammarino (1991) identified four primary behaviours as the essence of transformational leadership:

1. Idealized influence (charismatic influence)

Leaders who become role models who followers admire, respect and emulate (Bass & Avolio, 1994). They develop a shared vision, which helps others to imagine the future state, they lead by example and show strong commitment to goals and they represent organisational goals, missions and culture.

2. Inspirational motivation

Leaders who inspire and motivate others, by providing meaning and creating challenges (Avolio & Bass, 2002). “Idealized influence and inspirational motivation are usually combined to form charismatic-inspirational leadership” (Bass, 1998). These leadership behaviours make the vision understandable, precise, powerful and engaging.

3. Intellectual stimulation

Leaders stimulate followers to be innovative and creative, with the use of questioning assumptions, reframing problems and approaching old situations again (Avolio & Bass, 2002). Experimentation and sharing ideas are key leadership behaviours within this element to aim for a consistent innovation.

4. Individualized consideration

Leaders act like mentors or coaches to disburse personal attention and create a supportive climate (Bass, 1998). These behaviours empower followers and show acceptance of differences in needs and desires of followers. They also include the creation of interpersonal connections with employees, showing compassion and encouraging professional development.

Transformational leadership contains many basic similarities with the currently also widely discussed theory of servant leadership, with both theories emphasizing on leaders being visionaries, generating trust, being role models and empowering, teaching, and influencing followers (Stone, Russel, & Patterson, 2004). The main difference between these two leadership theories is that the transformational leader seems to focus more on organisational objectives, while the servant leader focusses more on its followers. Transformational leadership was discussed more thoroughly, as it currently receives high interest of researchers and can easily be related to transactional leadership.

5.2.2 Authentic leadership

The second leadership theory chosen because of its current high interest is the theory of authentic leadership. The concept of authentic leadership has been around for many years, but Luthans & Avolio (2003) popularized it in the academic community. They defined authentic leadership as “a process that draws form both positive psychological capacities and a highly developed organisational context, which results in both greater self-awareness and self-regulated positive behaviours on the part of leaders and associates, fostering positive self-development.” (Luthans & Avolio, 2003) In sum, authentic leaders show to others that they genuinely desire to understand their own leadership, to make them serve others more effectively (George, 2003). These leaders build credibility, trust and respect by showing deep personal values and by encouraging divers points of view in network building with followers. These characteristics of authentic leadership make followers perceive a leader with such characteristics as “authentic” (Avolio, Gardner, Walumbwa, Luthans, & May, 2004). There are four key elements or leadership behaviours that characterize this leadership theory (Walumbwa, Avolio, Gardner, Wernsing, & Peterson, 2008):

Balanced processing

Objectively analysing relevant data and making a decision based on this data. Or in other words the ability to analyse data objectively and explore other people’s opinion, before making a decision.

Internalized moral perspective

Self-regulate one’s behaviour by using internal moral standards as guidance. It results in expressed decision making and consistent behaviour to internalized values.

Relational transparency

Openly sharing information and feelings useful for certain situations to present one’s authentic self. It promotes trust, while minimalizing the display of inappropriate emotions (Kernis, 2003).

Self-awareness

Knowing your own strengths, weaknesses, and the way of making sense in the world. This exposure to others will gain insights into the leader and the impact the leader has on other people (Kernis, 2003).

Walumbwa et al (2008) provided initial evidence for the theory and showed that the four components represented unique and reliable scales. According to them these components were “a significant and positive predictor of organisational citizenship behaviour, organisational commitment and satisfaction with supervisor and performance.”

5.2.3 E-Leadership

The third leadership model currently receiving high interest linked to digitalisation is E-leadership. E-leadership dives into a specific part of digitalisation, which is the ability to lead people from different departments, organisations and countries virtually (Avolio, Kahai, & Dodge, E-lead- ership: implications for theory, research, and practice, 2001). Difficulties within E-Leadership can be; different time zones, failure of local communication and human infrastructures, new digital technologies that differ in local impact or direct demand of local employees. The interesting aspect of this theory is that it questions traditional leadership models, because their fundaments are based on face-to-face interactions (Zigurs, 2003). Research on E-Leadership has found four main leadership behaviours for coping with these challenges (Snellman, 2014):

Trust creation and maintenance

Mutual trust is highly important in virtual teams and in the success of international alliances (Child, 2001). This trust can be build be repeatedly delivering to the promise and by meeting or exceeding the expectations (Cascio & Shurygailo, 2003). High levels of trust can be gained by beginning the interaction with social messages, setting clear roles for individual team members and by showing positive attitudes, eagerness, enthusiasm and intense action orientation in all messages (Cascio & Shurygailo, 2003).

Communication

Communication is the process of transferring information, meaning and understanding to get work done, provide basic building blocks to collaborate and to make decisions (Berry, 2012). Effective communication is hallmarked by the quantity, frequency and accuracy of information exchange (Gallenkamp, Korsgaard, Assmann, Welpe, & Picot, 2011). E-leaders face fundamental challenges

because of their reliance to information technology for communication in terms of expression, social context, information loss and physically and cognitively taxation (Purvanova & Bono, 2009). To overcome these challenges, E-Leaders have to inspire globally dispersed teams by active, mutual and continuous communication to create cohesion and a feeling of togetherness (Snellman, 2014).

Distance and time-related issues

Distance in working relationships can be caused geographically, by time zone or by organisational size, but also appears due to differences in culture, values, prior familiarities or status (Cummings, 2011). This distance can be overcome by active and diversified use of ICT and by supporting and motivation desired behaviours (Snellman, 2014). Time-related issues rise when working in different time zones which hamper simultaneous work (Cummings, 2011). Coordinating tasks and managing projects is also reliant on electronic communication and should therefore be quickly addressed and effectively coordinated (Zaccaro & Bader, 2003).

Diversity

National culture, geographic location and communication values and practices do all influence the diversity in teams which affects the behaviour and working practices of its members (Burnelle, 2012). E-Leaders may face wide diversity in their teams and should manage that by promoting team building, responding to diversified competing demands, establishing relationships with the members and addressing ambiguity of remote communication (Nunamaker, Reinig, & Brigg, 2009). The most important skill to manage diversity in virtual teams is the ability of E-leaders to convert diversity-related challenges into opportunities to improve success and value creation.

The leadership challenges addressed by the E-leadership theory seem to have emerged from the vast improvement of information and communication technologies. To convert these challenges into opportunities E-leaders should adapt their behaviour to virtual settings, develop new skills and aim for a supportive IT environment.

5.3 Conclusion

Digitalisation brings new challenges to organisations, which also reflects in required leadership behaviours for coping with in these challenges. In this chapter, an overview of research on digitalisation challenges and leadership theories has been given to create a framework for framing the digitalisation context and researching leadership behaviour that could help coping with these challenges.

6. Data and method

The goal of this thesis is to answer, “What leadership behaviours could help leaders cope with the challenges and issues in the context of digitalisation? through identifying the characteristics of digitalisation and framing the leadership behaviours that could help coping with this digital context. The literature study identified the main characteristics of digitalisation and the main leadership behaviours related to leadership models currently of high interest by researchers. In this chapter, the research will be clarified that will eventually be compared to the theoretical framework, to create insights and knowledge on the researched subject.

6.1 Data

The research in this thesis is done with a qualitative approach using case studies for 3 main reasons; they answer the “how” and “why” questions in unexplored research areas (Edmondson, 2007), they explore a phenomenon within its context (Saunders, 2012) and they deal with practical management situations and are able to create relevant managerial knowledge for practice (Leonard-Barton, 1990). There are 4 different kind of case study designs by Yin (2009), distinguished by single or multiple case design and by a holistic case and an embedded case. This study considers multiple cases and researches one unit of analysis (holistic), therefor a multiple holistic case study design is chosen. 12 in-depth interviews will be conducted for greater exploration and deeper insights (Bryman & Bell, 2013) on the perspectives of leaders on digitalisation and leadership behaviour. These top managers and executives, further on called “leaders”, will be interviewed for 60 - 90 minutes in three different parts. The first section discusses current challenges and issues of organisations and frames them within the digital context. The second part reviews leadership

further strengthen both frameworks. 2 pilot interviews were conducted to test the open interview questions and the time schedule. Further interviews were not conducted after interviewing 12 executives, because of saturation of the data received from the interviews in order to give insights on the researched topic. The interviews consist of open-ended questions which gives participants the opportunity to respond in their own words, but it nevertheless offers sufficient structure for coding and analysis afterwards. All interviewees were asked via a form to give permission to audio record the interview and to use their quotes anonymously in the thesis.

6.2 Sampling

The chosen sampling method is purposive sampling, identifying 12 executives in the Netherlands working in different business areas (Saunders, 2012) with ‘sufficiently diverse organisational characteristics to provide the maximum variation possible in the data collected’, forming a ‘heterogeneous’ sample of interviewees. One could have chosen to select a specific industry to make the results more generalizable, but the purpose of this study is to gather different and deviating perspectives on digitalisation and related leadership behaviours in different industries (Flick, 2014). The 12 executives were selected because of their seniority level within a large and complex organisation, widely varying in responsibility area from general management to human resources and operations. Concrete guidelines for determining sample sizes in qualitative research are lacking (Marshall, 2013), so the sample size can be determined by time allocated, resources available, and study objectives (Patton, 1990). Saturation was chosen to determine the amount of interviews necessary and after 12 interviews repetition was found in the answers and no new insights emerged. Enough information was gathered to comprehensively answer the research question and draw conclusions.

Working for an executive search organisation makes it possible to more easily approach c-level managers for cooperating on this study. As also detailed in the working plan will the process of approaching the possible interviewees start at an early stage, because of their difficulty to approach and limited availability. Meetings were arranged via LinkedIn, emails and phone calls and the interview were conducted at a place and time most suitable for the interviewee. All 12 interviews were recorded and transcribed to further analyse obtained data and help structuring the findings coherently. In the further use of the data, all leaders, companies and company specific information was anonymized, as these leaders were also informed of (Flick, 2014).

6.3 Data analysis

The next step in the research process was to prepare the collected field notes from the interview or the audio recordings for data analysis (Miles & Huberman, 1984). To find patterns in the data collected during the interview, first themes were identified to create an overview. While writing down the interviews, themes already emerged in the form of specific topics interviewees touched and information that emerged repeatedly. Categories (codes) were formed in this theme analysis to critically reduce the data and conduct a meaning condensation (Lee, 1999).

After composing these “obvious” themes, the rest of the data was grouped to these themes via cutting and sorting. Next, Nvivo was prepared for further analysis of the obtained data. Underlying themes can be identified and codes can be linked to these themes. This phase resulted in a more detailed overview of the data in order to look for similarities, differences and theory-related material (Ryan & Bernard, 2003). Relating the theory to the findings in the interviews was done as one of the last phases, to prevent missing themes that were originally not in the theoretical

After underlying themes were identified and codes were linked, the themes were reviewed and merged if assumed possible. Themes that do not have enough support could eventually be on a side track to create a list of final themes and subthemes. These final themes including sources and references were used as the guiding line for writing the results of this thesis. All these steps were undertaken using the guidelines of the five phases described by Braun & Clarke (2006).

6.4 Data interpretation

In the data interpretation, findings are compared to the literature to question the meaning of the findings and create a general summery of the findings. To complete the data interpretation, potential limitations of the study were raised, suggestion for future research were done and practical implications were discussed.

7. Results

In this thesis, concrete dilemmas and challenges of the digital age are explored, next to the way leaders cope with this variety of challenges. In the following sub paragraphs, all relevant themes related to the research question will be discussed to give insights in the context of the digital age and leadership behaviours that could help coping with this context.

7.1 Understanding of the digital age and its challenges & issues

To explore interviewees’ understanding of the digital age and its issues, the following open questions were asked to the leaders: “What is in your understanding digitalisation and what are the fundamental characteristics of it?”, “At what stage of digitalisation is your organisation now and is there a concrete vision for the future?” and “Which steps should be taken to succeed in establishing this vision?” The theoretical chapter already described the theoretical content of digitalisation and its related issues and therefor these characteristics and challenges were used as an initial coding list. During the coding, new themes derived, with themes varying from being mentioned a couple of times, to being mentioned by almost all interviewees. Framing the context of digitalisation will be done by displaying different views of leaders on digitalisation and by looking for a general sense among the interviewees. To describe the issues in the digital age, the most important and commonly mentioned themes were selected and subsequently structured using the umbrella categories of Figure 1: “Disruption caused by new technology” (Libert, 2015) and will linked to the environmental challenges described by the VUCA theory. These categories are; new digital technologies, new sources of value, new business models, new types of customers / employees and new leadership styles.

7.1.1 The concept of digitalisation

Digitalisation is clearly an issue or challenge that effects all organisations, as all interviewees motioned it as being a big influencer of organisation and leadership success. The concept of digitalisation seems to have various different interpretations among the different leaders. When inviting them via email for the interview, I already received two comments on them possibly not being the desired interview candidate as they are not actively involved in digitalisation. During the interview, it became clear that these two leaders also described an influence of digitalisation towards organisational and leadership challenges and were therefor just as involved in digitalisation as the other interviewees.

Leader G: “If you do nothing you die, if you adapt you survive and if you innovate you win”

The concept of digitalisation seems to be divided in two main ways of explaining the concept. A minority of the leaders describes digitalisation as the advance of information and communication technologies (ICT), which helps organisations to optimize their processes and client contact. This description matches the theory of Stanworth (1998) as discussed in the literature review.

Leader B: “(…) Everybody talks about it and it is changing businesses and will change business even more. 95% of our turnover reaches our organisation digitally and I think we have one of the best websites of the Netherlands in our sector. (…) I don’t see digitalisation as a major issue that changed our core capacities or qualities.”

Next to this concept, a majority of leaders defines digitalisation as a much broader influence on businesses, being an environment in which organisations constantly consider their relevance and

aim for new (digital) opportunities. This relevance consideration and the aim for new opportunities is not only influenced by new technology, but also by vastly changing complex environments (VUCA) and a change in working methods.

Leader C: “(…) Digitalisation includes questioning; can we stay leading, attractive and relevant? Off course that has our constant focus. (…) The world used to be more predictable and reliable a couple of years ago, where today you have to react prompt to the quickly changing circumstances”

Leaders who described digitalisation in this broad sense also used in almost all interviews the four principles of the VUCA model as further explored below. The VUCA model will be further discussed related to the concrete framework of challenges mentioned by the different interviewed leaders.

7.1.2 New digital technologies

Every interviewee characterised digitalisation as at least an advance of information and communication technologies, so it is no wonder new digital technologies is a highly referenced theme. There is a significant difference within the theme between new digital technology affecting the core business of an organisation or it only affecting the operating model behind the core business. 7 of the 12 interviewees addressed the impact of new technology as the biggest challenge for their organisation, having a large impact on their core business. Three of these organisations sell a product or service that is fully reliant on new technology, while the other four being active in a market with products and services being more “digital conservative”, but with a high pace of

Leader G: “(…) I think we are already past the phase of digitalisation. (…) This organisation is 100% digital, that is why digitalisation is no specific topic for us, we are digital “

The other 5 interviewees addressed new digital technologies as a big influence on company processes and its operating model, but the core products or services remain almost the same. These organisations are present in three sectors, food and beverages (including wholesalers), public administration and financial services. The products or services these organisations sell (beer, food, union services, pension services) don’t seem to be rigorously impacted by digitalisation. The way they sell these products and services and the way these organisations operate is nevertheless extremely changed by the digital age.

Leader I: “(…) You have to look at the kind of company you are. In 2000, we tried to transform the entire organisation to ecommerce, that didn’t work out. It is helpful to digitalize your client contact, but there will be no digital chicken for sale.”

Disruption

All interviewees mentioned the term disruption, when the impact of new technologies was discussed. In the literature review, 2 main ways of thinking about disruption are displayed, the ignorance of new technology (Christensen, Raynor, & McDonald, 2015) and a lack of vision (Telis, 2006). The large majority of the interviewed executives explained disruption as the fast introduction of a new technology, where incumbents fail to anticipate quickly to this new technology and therefor their relevance is questioned. This explanation matches the theory of Christensen, Rayner, & McDonald (2015), although the aspect of the financial consideration of

benefiting from current customer needs versus investing in future possible consumer needs was never mentioned.

Leader K: “(…) Disruption is that in your industry, entrants arrive that use new technologies to create a totally different operating model or approach the customer in a completely different way. For example, Uber in the taxi industry and Apple in dealing with the record labels.”

The 3 interviewees that described disruption as the result of a lack of vision of the company and its management, did also describe digitalisation as only of impact on secondary processes. Combining these two, one could say that digitalisation hasn’t reached these organisations in the same way as it reached other organisations and that influences the perceptions they have of the concept.

Leader I: “(…) Disruption is when you have been sleeping and didn’t pay attention to what is happening in the world. If you are still trying to move your goods within the Netherlands with a horse and carriage, you undoubtedly lack behind.”

Volatility, a high rate of change, was highlighted by almost all interviewees in the context of disruption. Business models don’t have the life expectancy they used to have, due to fast changing environments and technologies.

Leader G: “(…) 20 years ago a multinational could easily maintain a layered organisation form, because the environment was easy to predict. (…) Leaders in that period were very

complexity, scale and speed due to digitalisation change in this environment in a jungle in which collaboration essential is”

7.1.3 New sources of value

Digitalisation or the digital age brings along new sources of value due to the introduction of new technologies and new business models that emerge. Leaders mention that just being digital or using digital tools is not enough to stay relevant. New sources of value within your business model can address new consumer or other stakeholder needs and therefor anchor the organisation’s relevance. The interviewed leaders mentioned (big) data and networks as the most significant new sources of value for their organisation.

Data

All interviewees, intensively affected by digitalisation or not, mentioned data as a giant new source of value for organisations. They often relate to the uncertainty of the environment (VUCA), which makes it hard to forecast and make decisions based on this forecast (Kingsinger & Walch, 2012). Collecting and analysing data could help organisations to predict certain shifts in consumer behaviour or needs and could help them improve the efficiency in their operating model. Next to uncertainty, was complexity also mentioned in relation to data, as data can help to discover and develop patterns that can help organisations improve their scalability in a complex environment.

Leader F: “(…) Big data and analyses have become very important, that’s why I want to further draw on these topics including technology. We do so much projects that are in the basis the same, that if you put a good data matrix on top of these projects, one can create total new sources of value. I think that could help us stay ahead of competitors.”

Many leaders mentioned the importance of data as new source of value, but did also mention that without the proper way of structuring and analysing this data, it is worthless. Businesses use many recourses to collect big data and try to make it valuable for their business model, but interviewees stated that companies should first try to use “small data” to purposefully aim for a smaller amount of easier to use data. This relevant data can be shared in the networks companies operate in and can add to their relevance in this network.

Networks

The value of networks seems to be growing rapidly in recent years, as almost all leaders described a change in the way they approach networks. Organisations were used to rely on their own strengths and capabilities and keep their organisation closed for possible threats coming from their environment, including competitors and the influence of new technology. Since the environment has changed, as described by the VUCA model, organisation became aware of the need of partnering with other organisations and even competitors. The volatility and complexity of environments make organisations look for partners to concur these elements together, while there is no direct impact one another’s business model.

7.1.4 New business models

The introduction of new (digital) technologies influences not only the creation of new business models, but also impacts the relevance of current business models. The two most mentioned challenges within the new business models’ element of digitalisation were the creation of a vision & strategy and new operating models.

Leader A: “(…) Our core business is that the products that other organisations generate, are moved from A to B. In the past 2 years there has been an enormous paradigm shift that involves us not only bringing it from A to B, but also from A to E and from E back to B. We started thinking about the impact on our business model and became aware that this shift together with some other shifts totally changes our way of doing business.”

Vision and strategy

The VUCA environment makes creating a vision and strategy more complex and insecure, while organisations mention the importance of having a (digital) vision and strategy. The way leaders described the process of creating a vision and strategy is almost uniform; there has to be a dot on the horizon to create focus and determination, but the further addressing of each element of this strategy is only done by putting a view pickets to give a brief guidance, while further meaning will be given in small steps.

Leader G: “(…) The new vision has yet been presented to the top 50 and will be rolled out to the rest of the organisation next week. Next to the dot on the horizon it contains pickets for; what is our strategy, what are the related targets, which markets do we focus on, what do we need to succeed and what are our strategic priorities? Eventually, business planning will make sure these elements become concrete enough to make them successful.”

Almost half of the interviewed leaders were convinced that creating a (digital) strategy and vision asks for a totally different set of leadership capabilities than establishing that vision. The difference between these profiles, often referred as the difference between a manager and a leader, will be

further discussed in the leadership behaviours element, but was already briefly displayed in a translation of a Dutch expression by leader D.

Leader D: “(…) A manager makes sure you see the wood for the trees and a leader is the one that guides you to the right wood.

A large majority of the leaders expressed a concern on their company being able to create such a vision or attracting leaders capable of constructing it. That is obviously reflected in leadership behaviours organisations mention mostly, as discussed in the next chapter.

New operating models

New operating models or the innovation in operating models was mentioned many times as serious challenge in a digital environment. This element has been discussed in the disruption element and new digital technologies element, but was also mentioned frequently when new business models were discussed. There is also a strong relation to the important challenge networks bring along, since operating models are also influenced by this emerging importance of partnering.

Leader I: “(…) Companies are now working together, because together they are able to afford and develop something they would never achieve solely. Why shouldn’t you be able to buy a beer crate on Alibaba?”

The operating model supports the success of the business model and most of the leaders use the term to describe the impact of digitalisation on their internal organisation. They mentioned it

7.1.5 New types of customers and employees

New business models, new sources of value, new digital technologies, all impact the types of customers organisations serve and the way they interfere with them. Customers or clients are viewed in the broadest sense, from people that buy your product to organisations that make use of the data you collect and share next to your core business. Market communication is perceived as the most challenging part of reaching these (new) customers and keeping them involved in your business. The impact of digitalisation on new types of customers and employees seems to be reliant on the digitalisation impact perceived by organisation, which also determines the way organisations look at digitalisation, as discussed earlier. New types of employees will be intensively discussed in the following chapter on leadership behaviours.

Leader L: “(…) You are relevant if what you do is relevant for your primary customers”

Communication

Client focus is not a new element of organisational challenges and issues, as companies started with customer service and loyalty programs since 1983. What changed within this client focus is that new technologies and the changing environment (VUCA) also changed the content of client focus. Organisation seems to have challenges in reaching their (potential) customers or in keeping customers interested in their organisation. These challenges emerge in every organisation of the leaders interviewed, highly digital or not, as communication as such has also evolved rapidly.

Leader I: “(…) The biggest challenge for our organisation is on the commercial marketing element of digitalisation and then especially on the consumer side. How do we get in contact with them in a digital way?”

Leader J: “(…) Market communication is one of the biggest challenges for us in this digital era. Which means we have to continuously be top of mind of our potential customers and that doesn’t happen by itself. People are not instantly thinking of our product, so that brings along enormous challenges to get them constantly involved.

The impact of digitalisation on customers and employees was perceived very differently by the different leaders interviewed. These seems to be the same distinction as within the perception of digitalisation and disruption as some leaders didn’t assume digitalisation as of a big influence on their core processes.

Leader B: “(…) We are active on a B2B market, a market of food and drinks. If you look closely you will see it is also a market of art, conviviality and experiences. That are things that will not easily be changed by digitalisation.”

Leaders of organisations that did experience a large influence of digitalisation on their organisation assumed that eventually the organisations that didn’t would have to catch up if their market was also confronted by the VUCA environment. Surprisingly, digital communication challenges seem to be affecting all organisations. During the interviews, it became apparent that leaders who didn’t experience a large influence of digitalisation, did describe a lot of elements of digitalisation challenging their organisation, but these elements were perceived as non-influential on their core business or product.

7.1.6 New leadership styles

All the challenges and issues described above influence the leadership style capable of dealing with these elements. Concrete leadership behaviours, which also display a form of leadership style, will be discussed in the next section. Almost all leaders were convinced that digitalisation has a substantial influence on leadership styles and behaviour, dependable on the perceived influence digitalisation has on that particular organisation. The “old way” of leading an organisation was unanimously seen as outdated and replaced by new leadership styles and behaviours.

Leader A: “(…) Leadership is no function anymore, it is a choice.”

7.1.7 Conclusion

The first part of this thesis aimed to frame the digitalisation challenges and issues organisations face, to describe the new digital environment leaders have to cope with. The five digitalisation elements in the model of Libert (2015) (Figure 1) have been used as a starting point to group the challenges and issues mentioned by the interviewed leaders. Six challenges and issues were mentioned most frequently and were described in their relevance to digitalisation and its characteristics.

7.2 Leadership behaviours in the digital age

The second part of this research explores what leadership behaviours could help organisations cope with digitalisation issues and challenges described in the section above. This was explored by asking the following questions to the leaders: “What fundamental characteristics of digitalisation are reflected in leadership needs?”, “What are in your understanding the leadership behaviours that could help a leader cope with the digital age?” and “how are these key leadership characteristics challenged and evaluated during the hiring process of a new executive?” The 4 highlighted leadership theories and their related leadership behaviour will be used as initial coding list. The 8 most mentioned themes will be discussed thoroughly to create a framework of leadership behaviours mentioned for coping with the new digital context.

7.2.1 Agility

Agility and flexibility are by far the most mentioned leadership behaviours by the interviewees. Companies have to deal with a VUCA environment, as described in the previous section, that reflects in the key leadership behaviours of being agile and flexible.

Leader C: “(…) Then the leadership aspect. Leaders should be able to realize objectives fast within the given boundaries, speed is key. Everything we do has to be done quickly. (…) In this era, it is key to be able to quickly respond to the rapidly changing environment.”

Discussing the concept of agility made it clear it has two main areas of interest and usage. On one side as a description of leadership behaviours to create corporate agility for coping with the fast changing environment and the increased uncertainty (VUCA). On the other side as a project

avoided. It focusses on quickly delivering working parts of the project, to create early value and reduce the risk of waste (Karlesky & Vander Voord, 2008). Agile project management (or sometimes mentioned as scrum) was half of the time not perceived as a positive working method, but that should be clearly separated from leaders being agile and flexible.

Being agile and flexible was described by leaders as leadership behaviour of quickly reacting, smart decision making and keeping a high pace. Speed is one of the most important things in a digital context and therefor the most mentioned leadership behaviour for leaders in a digital age is to make sure that the organisation stays on top of their game. Agility was mentioned often in relation to the challenge of disruption, as organisation facing disruption seem to be lacking agility and flexibility.

7.2.2 Inspirational Motivation

The second leadership behaviour mentioned by almost all interviewees is inspirational motivation, as also discussed in the transformational leadership theory. Inspirational motivation describes leadership behaviour to inspire and motivate other people by giving meaning and creating challenges (Bass, 1998). The traditional way of thinking about leadership, as grand leadership theories describe until behavioural theories were introduced (Table 1), is that leaders are born destined to become a leader. Inspirational motivation was often used by interviewees to describe the shift in this thinking towards leaders who can be developed to effectively lead an organisation.

Leader G: “(…) You have to be able to cooperate with functional specialists and that doesn’t work on the basis of; I am the boss and therefor I decide what happens. Influential leadership and natural influencing have become much more relevant.”

Leader A: “(…) Research shows that even people suffering from cancer or obesity fail to quit smoking in 90% of the cases. This shows that it is hard to get people involved in a transformation. A clear description, persuasion and an exemplary role are all skills one has to develop, next to structures and systems to create space for developing these skills.”

This leadership behaviour is strongly connected with the ability of a leader to create a vision or strategy, as meaning and challenges need to be created. The importance of inspirational leadership was mainly contributed to the flexibility of employees, with the increase of flexible employment contracts and the shorter working period for a specific organisation. This asks for leadership behaviour that inspires employees to work for an organisation by giving meaning and challenges that justify them committing to your organisation.

Leader J: (…) A leader has more than ever have to be able to commit people to join him for a certain adventure and shouldn’t cry when that adventure and commitment ends.”

The leadership behaviours related to inspirational behaviour did also match some of the characteristics of idealized influence, where leaders act as a role model to create admiration and respect (Bass & Avolio, 1994). This matches the charismatic-inspirational leadership model of Bass (1998), which combines the two elements. Inspirational motivation was valued more than idealized influence, because leaders assumed that inspiring people could create a bigger impact than acting as a role model. Inspirational motivation was mainly mentioned when the challenges of vision & strategy, networks and communication were discussed. Concrete leadership behaviours related to inspirational motivation are the ability to conduct and implement a vision and strategy,