The High-Potential Leader

By Ram Charan

The Urgent Need for High-Potential Leaders

The biggest concern I hear among senior leaders today is, How can we stay relevant in this increasingly complex and fast-moving world? The truth is, some can’t. They’re not equipped to help their companies reinvent themselves for the new game. Nor are the leaders next in line, who’ve been groomed to fit the same obsolete mold.

Companies big and small are coming to realize that it will take leaders with a different way of thinking and different skills to reinvent the business. They are having to redefine the very notion of what a successful leader looks like. Now the race is on to find those with high potential to lead the company onto new paths in a world of constant change.

You’ve heard it before—the changes being wrought by things like digitization, algorithms, and data analytics will be as radical as the Industrial Revolution. We’ve already seen companies such as Facebook, Google, and Amazon cause revolutions in consumer behavior and reach the stratosphere in market value in record time. More of these are yet to come, led by people with the capacity to conceive and grow them. In a decade, the $72 trillion global economy is on a trajectory to be 50 percent greater than it is today. Products and services not yet invented will give consumers entirely different experiences and make some companies obsolete.

This is a time for leaders who can thrive in the face of relentless change, complexity, and uncertainty. Many companies have such leaders buried at lower levels. They need to find them, develop them, and find ways to use them to help the company adapt. And they need to move fast on this. “Born digital” companies are on the prowl and will gladly poach whatever high-potential talent traditional companies overlook.

High-potential leaders themselves shouldn’t just sit back and wait to be discovered. They should decide for themselves whether they have what it takes to someday take a large team, business unit, function, or the whole corporation to new heights and make a plan to ready themselves to create the future.

What “High Potential” Means Now

Everyone has potential to grow, but not everyone, not even every person with leadership skills, has the potential to lead a large, complex organization in the near and distant future.

Amid everything that is new and different, today’s high-potential leaders, or “hipos,” must be able to identify the untapped opportunities their companies will pursue and mobilize the organization. This is a weakness in many older business leaders today. Understandably. Throughout their careers, growth was defined as improving on things that already existed: increasing profits through cost cutting, tweaking products for adjacent markets, or acquiring other companies in the same industry. More radical changes like reinventing the entire business model, reshaping the entire ecosystem of supply and distribution, or rethinking the entire customer experience have been rare in the life of a company.

It’s now clear that businesses might need to be transformed more than once in a leader’s tenure, and today’s hipos must be prepared for that. They should exhibit three characteristics that the previous generation of leaders did not always need:

  1. They imagine on a large scale. Hipos can take in a ton of information from many different sources and almost instantly find what could be meaningful. In doing so, they pick up clues about what might be possible, and they dream big. In the past, wild dreams or visions of things that don’t yet exist might have been considered delusional, but hipos don’t see it that way. If they personally lack the capability to realize the picture they have in their heads, they know they can use technology, algorithms, and other people’s capabilities to make it real. They are psychologically prepared to scale it up very fast—and go after it fearlessly.

    Alphabet, now the umbrella company for Google and other subsidiaries, has a whole population of people who are working to solve the world’s biggest problems. Google X, the semisecret group charged with developing revolutionary ideas, created the driverless car and Google Glass, which is poised to take hold as a key element in the Internet of Things.

    It’s not just start-ups that need this kind of imagination. It’s every company. Hipos have it.

  2. They seek what they need to make it happen. I had just finished speaking to a group of executives about how to set up an advisory board when a young man approached me. “Do you have a minute?” he asked. Polite but straightforward, he continued, “I run a small company, much smaller than the corporations you’re used to working with. Would you consider advising me?” It’s no secret that I’ve worked with a lot of big, well-known companies, but he was undaunted. What I came to learn was that he had sized up his market opportunity, and it was huge. He wanted to grow his company very fast and was seeking help building the capacity for it.

    Hipos will talk to anyone. They don’t just stay within the hierarchy. A young Steve Jobs didn’t hesitate to call Bill Hewlett, cofounder of tech giant Hewlett-Packard, when he was seeking technical help. Pat Gallagher was young and relatively inexperienced when he was groomed to take over his family’s Chicago-based insurance brokerage in 1983. Having run only the sales force, he wanted to understand what the CEO job entailed, so he reached out to the CEO of McDonnell Douglas, a company far different and much bigger than his own. The CEO took time to talk to him, and Gallagher eventually took his firm to number four in the United States. Forums like the G100 and Singularity University provide opportunities for that.

  3. They understand the concept of the ecosystem. Companies rarely act alone in delivering their product or service. Hipos understand the complex web of participants, from the makers of small parts that go into larger ones to the mom-and-pop shops or FedEx fl eet that delivers the product. Walmart became a juggernaut of low cost because of how it used its tight relationships with suppliers, the largest of which were housed right at the Bentonville, Arkansas, headquarters. Walmart schooled its suppliers in state-of-the-art logistics that reduced inventories but kept store shelves stocked with merchandise that turned over very quickly. Both Walmart and the supplier grew, and consumers benefited from low prices.

    Digital-age versions of rethinking the business ecosystem abound. Apple’s iPod was a nifty device, but it became a sensation because iTunes changed the way music was packaged, priced, and distributed. Amazon thrives on algorithms that predict a customer’s need and delivers it through an ecosystem of sellers, purchase options, and delivery methods. Hippos have the ability to see the total picture, to conjure a mental image of the web of interrelationships, and to think imaginatively about how to redesign it.

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