Executive Outlook
The value of human capital in the digital age
By Becky Stein and Drew Lipsher
August 2013
Companies that weren’t “born
digital” must evolve quickly to
compete with the fast and flexible
ones that were. To spearhead that
change, companies are looking
for Chief Digital Officers or
similar leaders. While the titles
and responsibilities vary, these
important new players possess
common strengths. Of the 21
research-based leadership
characteristics Korn/Ferry has
proven to be correlated with
higher performance, the
following are the most important
for digital executives to possess:
creating the new and different,
communicating effectively,
managing diverse relationships,
and demonstrating personal
flexibility.
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“Digital” has evolved from describing a new technology
to characterizing a ubiquitous way of doing business.
Digital technologies are forcing companies in every
industry to rethink the way they communicate with
their customers and create products or services to
serve their needs.
There are two types of companies: those born digital and those becoming
digital. Within those organizations, there are two kinds of executives:
digital natives, who are accustomed to technology enabling almost every
aspect of their lives and communities, and digital immigrants, who learned
this technology as they would a second language.
Today, the cost of starting a technology, digital media, or Internet company
is a fraction of what it was just fifteen years ago. The widely held theory is
that it costs roughly one-tenth of what it did in 1998, driven largely by the
reduced cost of hardware, the evolution of sophistication and developments
in open source software, and trends in outsourcing. This lowered cost
structure gives born digital companies a competitive edge.
Another advantage inherent to companies that are born digital is the
flexible mindset that breeds these new businesses, and is necessary as they
grow. Many venture-backed companies evolve into ones with a business
model, product, and/or service that is different from the one in which
the initial capital was invested. These enterprises have, in venture capital
parlance, pivoted. Twitter was a podcast directory called Odeo before it
became a microblogging site for millions of people around the world.
Fab.com started as a social network before becoming a daily deal
design site. In her Wall Street Journal article “‘Pivoting’ Pays Off for
Tech Entrepreneurs,” Lizette Chapman quotes venture capitalist
Tony Conrad from True Ventures. “Pivot to me is not a four-letter word,”
he said. “It represents some of the best methodology that the Valley has
invented. Starting something, determining it’s not working, and then
leveraging aspects of [that] technology is extremely powerful.” This flexible
and adaptable mentality is inherent in leaders of companies born digital,
elevating the value of human capital over technology costs. From a
leadership perspective, this is where the future is going.
Figure 1
The The
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to start
vs. vs.
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value
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human
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value
human
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High
$
Human
Capital
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1995
2013
But let’s face it: the vast majority of companies whose products or services
we use on a daily basis were not born digital; they’re becoming digital.
Those businesses aren’t going to sit back and allow new companies
using fresh technologies to write their obituary. For example, EMC is a
company intent on evolving, evidenced by the way it spends its IT dollars.
The percentage of EMC’s IT spend on New Capabilities vs. Lights On has gone
from 20/80 to 42/58 in fewer than ten years, with the goal of New Capabilities
exceeding 50 percent this year. That means more than half of EMC’s IT
budget will have been spent on new initiatives.
How do these companies evolve?
A company’s successful transformation depends on many variables: the
support of the board of directors and CEO, which trickles down to support
at every level; the willingness to embrace the discomfort of change; and the
organizational ability to move at the necessary speed so as not to fall behind.
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Most companies are hiring someone to spearhead the change and lasso the
opportunities. The most common title for these executives is Chief Digital
Officer, although new titles are being created with little uniformity as to
actual responsibilities. What are consistent, however, are the leadership
characteristics crucial to their success.
Stewarding a company into the digital era takes unique skills. In addition
to creating the future, these leaders must build a bridge to the past.
They do not have the luxury of knowing that everyone understands the
new customer interaction preferences as they do; they have to bring others
along. The set of required skills demands more from these digital leaders,
as they must find ways to bridge the expertise and knowledge developed in
companies that are born digital with the strategic needs and management
and cultural challenges of ones that must go digital.
Of the 21 research-based leadership characteristics Korn/Ferry has proven
to be correlated with higher performance, the following are the most
important for digital executives to possess:
Creating the New and Different: Is able to come up with the next great
breakthrough thing to do; is creative, a visionary, and can manage
innovation; is an effective strategist full of ideas and possibilities; sees
multiple futures; has broad interests and knowledge; can both create and
bring exciting ideas to market; comfortable speculating about alternative
futures without all the data.
Understanding the Business: Knows the business and the mission-critical
technical and functional skills needed to do the job; understands various
types of business propositions and understands how companies operate in
general; learns new methods and technologies easily.
Making Complex Decisions: Can solve even the toughest and most
complex of problems; is skilled at gleaning meaning from whatever data is
available; is a quick study of the new and different; adds personal wisdom
and experience to come to the best conclusion and solution, given the
situation; uses multiple problem-solving tools and techniques.
Evaluating and Deploying People Accurately: Reads people accurately;
can diagnose strengths, weaknesses, and potential; knows what skills are
required to fill a job or role; hires the best.
Focusing on Action and Outcomes: Attacks everything with drive and
energy, with an eye on the bottom line; is not afraid to initiate action
before all the facts are known; drives to finish everything he/she starts.
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Communicating Effectively: Writes and presents effectively; adjusts to
fit the audience and the message; strongly gets a message across.
Demonstrating Personal Flexibility: Is open to lifelong, continuous
personal improvement; is aware of self and impact on others; is responsive
to feedback; is very flexible; can act in ways that seem contradictory and is
adaptable to demand characteristics of different situations.
There will be a time, perhaps in the not too distant future, when having one
single person orchestrating the evolution to digital will not be required.
“Digital” won’t refer to something different in an organization, but rather
will be invisibly woven into every strategy and initiative. But we aren’t there
yet. Corporations are still largely run by digital immigrants who must find
ways to lead their businesses from a purely physical world into a more
digital-centric future. The ability to manage antiquated legacy systems
and, most damaging, old school mindsets are just some of the key
challenges that any executive leading these efforts will face.
In today’s world, as companies confront an array of difficulties around
various concepts of “digital,” successful problem solving will be driven
by agile leaders. These individuals are different from those whom most
organizations are used to seeing. They have a set of skills and an approach
that is unique to their way of thinking. They are digital natives who
understand customer relationships and interactions because they grew up
using the products and services. They possess a strong interest in change
because they are not bound by traditional models. What they may lack
in experience, they make up for in intelligence and passion.
Likewise, they are communicators and visionaries who harness strong
opinions and like debate. They are deep in multiple digital business models
and have breadth in distribution (social media, mobile, apps). They are
analytically minded and lean toward using data as well as instinct to make
decisions and lead. They are part mathematician
There will be a time when “digital” won’t refer and part marketer. They are bridge builders
to something different in an organization, but across organizational functions. They are used
to working in informal cross-functional teams.
rather will be invisibly woven into every
They don’t believe in silos and they roll up
strategy and initiative.
their sleeves. They are highly strategic, and
voracious consumers of the broad trends
across the industry. They are customer-centric. For them, this approach
is all about people — they drive the strategy, the execution, the vision.
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Becky Stein is a Senior Client Partner in Korn/Ferry’s Consumer
and Technology Practices. She is based in San Francisco.
Andrew Lipsher is a Senior Client Partner in Korn/Ferry’s Global Media
Practice. He is based in New York.
About The Korn/Ferry Institute
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that illuminate how talent advances business strategy. Since its founding
in 2008, the institute has published scores of articles, studies and books
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© 2013 The Korn/Ferry Institute