Great leaders have always been smart (i.e., possess good judgment) and knowledgeable (i.e., know their business). However, there’s a third requirement for success in today’s digital world: being tech-savvy. For most senior leaders at incumbent firms, the first two are a slam dunk. Too often, though, tech-savvy is missing and designated to a “tech team.” Without this, leaders are blind to digitally-enabled alternatives, leading to a death march of sub-optimal decisions.
The name “Disrupter Trifecta” comes from the premise that organizations need all three capabilities “crossing the finish line” to win in the market. This need was mentioned early in the interview process for my soon-to-be-released book, Organizational Velocity, and was supported consistently. In over half of the interviews I conducted, this new digital economy issue was referenced.
The relationship can be explained in the following way. Ten years ago, if the Board of Directors and top management team were smart and knew the business well, they could make the correct tradeoff decisions to propel the business forward. Today, those two characteristics are necessary but insufficient for success. Today leaders must have a deep understanding of how new technologies are removing barriers and enabling new options that were not previously possible. If leaders don’t have this, they don’t understand all the options and cannot consistently make good tradeoff decisions. To put it another way, it’s not that these leaders choose not to act on an unconventional or digital-based option; they didn’t even see it as a choice.
Tech-savvy is not about senior executives knowing how to code machine learning algorithms. However, emerging technology must be understood at more than a superficial level. A good test might be whether an executive can teach a group of non-technology professionals what these new technologies are, why they are important, and how they change what is possible.
The Catalyst for the Concept
Early on in interviews for Organizational Velocity, I had the opportunity to talk with a friend of mine who has been at the forefront of technology for over two decades. Jean-Michel Ares is the Founder and CEO at Choral Systems and has held C-level positions with GE, Coca-Cola, and Bank of Montreal. I usually leave interviews feeling like I just received gold nuggets, insights that enrich my perspective and grow over time. In this case, I left the interview with platinum bars! The concept of the Disruptor Trifecta was triggered from this interview and validated in dozens of additional interviews. What follows is an excerpt from that interview that took place about four years ago. You’ll see how prophetic the excerpt is.
What’s happened in the last ten years is that because of the evolution of technology, the next wave of risks, we’re in this phase of transition and it’s totally fascinating to me. Totally fascinating because the people that are in charge of these businesses are facing risks that they don’t actually have a visceral and deep, deep understanding of. And they’re still in charge of all these businesses.
And it’s all a matter of calibrating the degree of threat you’re facing and how viscerally you feel that this is a threat. Because everybody around the table in financial services can say, “Oh yeah, okay, the world is changing. Yeah, I see these iPhones, I see Google, I see Amazon. That’s all happening. I get it.” But to calibrate the speed and depth of the change from everything I’ve observed, you have to be immersed in that world as a technologist. Otherwise, your assessment of the threat varies significantly, all the way to the top and all the way to the board level. I believe that one of the problems is that the composition of boards does not include people who have necessarily the depth of experience. It’s very, very difficult because you have to understand technology in quite a bit of depth. You have to understand the depth of change, the speed of change of technology; you have to understand the implications on the business model that you’re currently in.
Jeff Bezos understands the market, he understands technology, and he has people like Andy Jassy and others who understand technology with such depth. They are connecting the business model and the technology with absolute precision.
Amazon Has Mastered the Disruptor Trifecta, and it Shows
Look at what Amazon has done over the last four years. The Amazon Web Services (AWS) group that Andy Jassy led grew anywhere from 28% to 49% year-over-year since 2017, and total Amazon net revenue has more than doubled from $177M in 2017 to $386M in 2020. Jassy is now set to succeed Jeff Bezos as CEO, and the cycle will continue. Amazon has mastered the Disruptor Trifecta. I’ve yet to meet anyone at Amazon that does not possess all three Disruptor Trifecta components.
This is especially true in the supply chain area, where most of my research is focused. I recently visited an Amazon fulfillment center and what I saw defied logic. I expected to see a highly organized, easy-to-understand flow of products from inbound dock doors to outbound pack and ship. What I saw looked chaotic, like nothing I had witnessed while at UPS Logistics & Distribution. There, I could clearly see how customer inventory was segregated, and higher-turning items were moved lower on shelves and closer to stations where employees pick, pack, and ship orders.
What I saw at Amazon was the same item showing up in multiple areas with no apparent rhyme or reason. I was puzzled. I knew how efficient Amazon was, but that didn’t mesh with what I was seeing. The problem wasn’t Amazon, the problem was me. Based on my previous experience, I saw barriers that no longer existed. Data-driven is not a talking point at Amazon; it’s a way of life.
I left that fulfillment center with one central concept – Physical Chaos, Digital Order. Their leaders are smart, know the business, and they understand the power of today’s connecting and thinking technologies. The fulfillment process is not only physically chaotic, but it is constantly changing. Their deep understanding and trust in technology have allowed this relative newcomer to become one of the world’s top logistics companies.
Tech Project Failed? It’s Likely Because of You, Not the Technology
Another point made in the interview referenced earlier echoed throughout many other discussions with top executives, the ability to “calibrate the speed and depth of the change.” In all the research I’ve done on disruption, it’s rare that a company has not observed a disruptive force, be it a new technology, business model, or value proposition. More often, they fail to appreciate the speed and depth of the force, so they do not act fast enough or with enough resources.
When the technology is not understood, actions taken can be a waste of time and money. I’ve seen this recently in some research I conducted with colleagues from the University of Tennessee on blockchain. We found that many of the pilot projects that were “disappointing” were poor applications for the technology. Often, there were existing technologies that could do the job.
Clayton Christensen defined sustaining innovations as those that seek to improve existing products or processes. Today, most blockchain applications are sustaining innovations (e.g., track and trace, provenance, payment processing, managing IoT networks, medical record sharing, smart contracts, digital content distribution). If blockchain is a disruptive technology, it’s potentially being applied incorrectly. As Christensen stated in The Innovators Dilemma, “If, as most successful companies try to do, a company stretches or forces a disruptive technology to fit the needs of current, mainstream customers…it is almost sure to fail.”
Tech Leadership: To Build or Buy
For too long, IT has traditionally been categorized as a function, and business executives don’t feel as if they need to understand the technology: “I don’t need to know how the clock works. I just want to know what time it is.” The problem is that if a leader doesn’t know how the clock works, he or she may think that the time is EST when, in fact, it’s GMT. And, yet, which aging executive has 10,000 hours to master such technology fluency?
The issue, of course, isn’t that executives can’t learn what they need to know. Too often, the real problem is pride. Leadership doesn’t want to look foolish, ask questions, or look less than “all-knowing.” Today’s leaders must live at the nexus of efficiency and exploration, experience and openness, pragmatism and idealism. This is uncomfortable and belies the education and experience that propelled most executives to their current leadership role. No MBA program can prepare any person adequately for leading amidst the Fourth Industrial Revolution. The nexus is uncomfortable because of uncertainty. Moving from what you know to the vulnerability of what you do not is an essential requirement to lead a company to a more innovative future.
The “buy” option can get you the tech fluency you need in the executive ranks, but the usual warning applies, caveat emptor (buyer beware). Companies need all three capabilities of the Disruptor Trifecta to cross the finish line. When I was leading UPS Ventures, all the startup leaders I met were very smart and tech savvy. However, not all of them had a visceral understanding of the business they were in…they failed too.
One final note…
I’m interested in whether the concept of the Disruptor Trifecta rings true to you. While I received tremendous validation of the idea talking with executives, there were a few leaders I have immense respect for that thought the concept was too limited. While tech-savvy may be a missing critical component for leaders adapting to the digital economy, for others, that third essential component could be mastery of international, geo-political, relationship-building, or other skills. What do you think? I would love to hear from you.