Think at London Business School: fresh ideas and opinions from LBS faculty and other experts direct to your inbox
Think at London Business School
Happy new year from Think at London Business School. 2020. The year the 21st century comes of age. We asked three members of our faculty what will dominate the business landscape in the new year – and over the next decade. This is what they said.
Julian Birkinshaw, Professor of Strategy and Entrepreneurship and Deputy Dean (Executive Education and Learning Innovation)
In 2020, the rising tension between big tech firms like Google and Amazon, and government regulators will come to a head.
Taxation will be one flashpoint. The big tech companies are masters of tax avoidance: a recent study claimed the six biggest had avoided around $100 billion (£76 billion) of taxes over the past decade. There has been some redress. For example, the $13 billion in taxes Apple was forced to pay to the Irish government. But that’s not enough to allay public concern.
Governments have had enough. Last year France announced a 3% digital services tax based on revenues not profits and aimed squarely at the big US tech firms. Many other countries, including the UK, Canada and Indonesia have come up with similar revenue-based taxes, and it looks like some of these plans will be implemented in 2020. Expect fireworks. Donald Trump, facing re-election, is not going to let this new legislation pass without a fight.
Competition rules will be in the spotlight. The EU in particular will take aim at big tech. There is no doubt competition is being stifled in some areas: Google and Facebook completely dominate online advertising; Apple and Google share control of the smartphone ecosystem. But if the problem is clear, the solution is not. Heavy fines on Google haven’t had much effect, and full-scale break-up of these companies isn’t feasible.
So, in 2020 we can expect a shift in emphasis towards interoperability – rules requiring formerly proprietary systems to open themselves up to third parties. This could mean, for example, forcing Google and Facebook to allow others to provide services to consumers on their platform. Interoperability is no panacea, but it may be the most pragmatic way forward.
There is a China angle here as well. Huawei has the potential to dominate the rollout of 5G infrastructure, and Chinese social media companies such as Byte Dance (owner of TikTok) and Tencent are increasingly influential in North America and Europe. We can expect US authorities to take an aggressive line here, and the risk of a re-escalation of trade war is real.
The third lever is data privacy legislation. Europe’s GDPR has led the way in enshrining individual ownership of personal data in law, and we are seeing similar regulations taking shape in the US, for example the California Consumer Privacy Act. The intent here is to shift power away from the big tech firms and back towards individual consumers, but how this plays out in practice is anyone’s guess.
These power struggles take years to resolve. The anti-trust investigation of Microsoft lasted almost a decade and the challenges this time round are even thornier. So there won’t be any big breakthroughs in 2020, but we can anticipate a marked escalation in hostilities between big tech and government regulators.
Tammy Erickson, Adjunct Professor of Organisational Behaviour
In 2020, companies will confront the reality that implementation of the goals that senior executives have set for their firms – more innovation, collaboration, greater agility and deep customer connections – faces innumerable roadblocks stemming from old industrial-age organisational models.
Success in today’s intelligence-oriented work activities requires a fundamental shift in the basic units of work: from fixed units (offices, functions, departments) to flexible, ever-changing multidisciplinary teams.
The old models of fixed units and hierarchical process had tremendous advantages for a world that rewarded efficiency: scale, cost, and stability. But the same models make it difficult to bring different ideas together or to respond flexibly to new opportunities. They don’t create the sort of laser focus on customer insight that is now essential.
This year, more companies will expand the use of flexible, cross-disciplinary teams. Klarna, Europe's most valuable private fintech firm, recently reorganised into nearly 300 four-to-eight-person teams each working on a specific issue. They say the decision has enabled the firm to scale faster and more effectively than would have ever been possible with a more conventional organisational approach.
“Anticipate a marked escalation in hostilities between big tech and government regulators”
And they are by no means alone. The Chinese appliance manufacturer Haier reorganised into 4,000 self-managed micro-enterprises, a structure that gives them tremendous focus on numerous niche markets and the flexibility to respond quickly to any new opportunity.
This year, others will follow.
Projects are the right unit of work for tasks that depend on diverse perspectives and discretionary effort. Taken to the logical end, they will allow companies to link compensation to metrics that truly matter today. They are also a better match for today’s workforce, allowing companies to tap into a wide variety of talent pools, offering individual workers more options and greater choice.
For 2020, power shifts to the projects.
Herminia Ibarra, Charles Handy Professor of Organisational Behaviour
Rapid, constant, and disruptive change is now the norm. Today’s leaders understand that their businesses need to become more agile, innovative, digitally savvy and customer-centric to survive and thrive. What succeeded in the past is no longer a guide to what will succeed in the future.
This approach involves a shift in leadership style. In the past, doing your job well meant having the right answers. If you could prove yourself, you’d rise up the ladder and eventually move into people management—at which point you had to ensure that your subordinates had those same answers.
Command and control was the name of the game, and your goal was to direct and develop employees who understood how the business worked and were able to reproduce its previous successes.
That no longer works. Twenty-first-century managers simply don’t (and can’t!) have all the right answers. To cope with this new reality, successful companies are moving away from traditional command-and-control practices and toward something very different: a model in which managers give support and guidance rather than instructions, and employees learn how to adapt to constantly changing environments in ways that unleash fresh energy, innovation and commitment.
The role of the manager, in short, is becoming that of a coach.
“An effective manager-as-coach asks questions instead of providing answers and supports employees instead of judging them”
This is a dramatic and fundamental shift, which has been taking place in businesses gradually over the past decade. We have observed this shift firsthand in our research on how organisations are transforming themselves for the digital age and from what our executive students and coaching clients have told us about the leadership skills they want to cultivate in themselves and throughout their firms; and we’ve noticed that more of the companies we work with are investing in training their leaders as coaches.
Increasingly, coaching is becoming integral to the fabric of a learning culture —a skill that good managers at all levels need to develop and deploy.
So, what do I mean when I talk about leaders as coaches? I mean an effective manager-as-coach asks questions instead of providing answers, supports employees instead of judging them, and facilitates their development instead of dictating what has to be done.
Coaching is a way of asking questions so as to spark insights in the other person. As Sir John Whitmore, a leading figure in the field, defined it, skilled coaching involves “unlocking people’s potential to maximise their own performance.” The best practitioners have mastered both parts of the process—imparting knowledge and helping others discover it themselves—and they can artfully do both in different situations.
It’s one thing to aspire to that kind of coaching, but it’s another to make it happen as an everyday practice throughout the many layers of an organisation. At most firms, a big gap still yawns between aspiration and practice, but there are big rewards to getting it right.
You only need to look at how Satya Nadella, the CEO of Microsoft, transformed the iconic software business. When Nadella took the reins from predecessor Steve Ballmer, the tech sector was shifting to smartphones and the cloud. Personal computing was fast losing momentum. The command-and-control management practices of the past, which had contributed significantly to Microsoft’s remarkable run of dominance, was impeding progress in the new world of mobile.
Risk aversion and internal politics were hampering cross-divisional collaboration, senior leaders were resisting open-source innovation, and the company’s stock price had stalled.
Additionally, technologies were changing so quickly that managers often had out-of-date knowledge and practices, but they kept passing these down because that’s what they knew how to do.
"It’s one thing to aspire to that kind of coaching, but it’s another to make it happen as an everyday practice"
Nadella quickly realised that Microsoft needed a cultural transformation to reassert itself as a major force in the new growth market of cloud computing, where customers will pay only for the resources they use. As Nadella himself aptly put it, the leaders of the company had to shift from being know-it-alls to being “learn-it-alls.”
He began modelling the behaviours he wanted Microsoft’s managers to adopt. He solicited thoughts from everybody he talked to and listened empathetically to what they had to say. He asked nondirective questions, demonstrating that his role was to support rather than judge. He encouraged people to be open about their mistakes and to learn from them. “He’s with you,” said Jean-Phillipe Courtois, a member of his leadership team. “You can feel it. You can see the body language. It doesn’t matter if you’re a top executive or a first-line seller; he has exactly the same quality of listening.”
Evidence suggests that when people are in doubt about what behaviour is appropriate, they copy the actions of others, particularly those who have power and status. So it’s not surprising that in these times of rapid change, which inevitably bring business uncertainty, employees look to their leaders for cues to follow. If they notice that their leaders are working to foster learning and cultivate the delicate art of leadership as conversation, they will do likewise.
In an in-depth interview with Courtois for a case study on Microsoft’s transformation under Nadella, Courtois told us: “if we want to get the transformation all the way through the organisation, our biggest challenge is to reboot our people managers.
“People manager is a job. You’re not just a sales manager, where you have a quota, a territory, customers, partners, and goals to achieve. You’re actually someone whose mission it is to pick, grow, and motivate the best capabilities to build customer success.”
So, in 2020, remove the barriers to cultural transformation, whether its midyear reviews, rankings or other operational obstacles to enabling your organisation and workforce to respond quickly, effectively and creatively to growth opportunities.