With Amrop Denmark and Nils Elmark

Since the financial crisis and the launch of the smartphone, a new generation of digital companies has emerged and split the business landscape. On the old gameboard, the majority of traditional companies competed based on the business models of the 20th century. But now there’s a brand-new gameboard, with new players playing by different 21st century rules and technologies.

These new companies are 10 to 40 times more efficient per employee than the old ones. If nothing is done the incumbents are heading for their Kodak moment, but if established businesses succeed in crossing the chasm to the new gameboard, future opportunities are almost endless. We are witness to a brave new world in the making — at high speed. Over the next 10 to 20 years, we’ll have to re-design practically every industry on the planet: we need new cities, new mobility, new sustainable energy, a new supply chain infrastructure, food, education and welfare for 9 billion happy people.

This report investigates how incumbent businesses can make this transition into the future and create new and sustainable growth.

We have identified five megatrends that we believe will be the driving forces for the future. These trends are interconnected and form part of a unified business movement.

5 Megatrends That Will Drive The Future

1 - Three Technologies will be dominant from a business model perspective

That’s blockchain, artificial intelligence and Internet-of-Things. Each will have a huge impact on most businesses’ processes but, brought together, they will multiply each other and create formidable new opportunities beyond the imagination of most executives.

2 - Ecosystem Economy will wipe out the 20th century’s business models

We are already experiencing the enormous power of transaction platforms such as Alibaba or Amazon or technology platforms such as Apple that enable businesses to change and expand at the speed of thought. Next step will be network-driven social commerce platforms such as those that we are beginning to see in China.

3 - Power of the Crowd will give business direct access to funding and talent

We see more and more businesses being backed financially by communities and individuals via crowdfunding sites, and we see corporations of all sizes finding and collaborating with an expanding network of people and companies.

4 - Economies of Unscale challenges the industrial ideology that bigger is better

Soon, any entrepreneur with a bright idea will be able to buy all the business processes he or she needs as a service in the cloud. While incumbents have old technology legacy systems that are hard to change, challengers can focus on entirely new business models based on the latest technology.

5 - New Globalism will eventually replace 30 years of centralized hyper-globalization

This is no longer environmentally or socially sustainable. New technologies will make it possible to manufacture goods and services close to the future consumers, in sync with the needs of the community.

The Leaders of the Future

Operating on the 21st century technology-driven business platform takes completely new leadership skills. No longer innovating what you have, but creating what you don’t have. And when we analyze the leadership of the new generation of successful companies, we identify interesting differences compared to the incumbents on three levels:

Their top executives are extremely adventurous and visionary. They are constantly driven to explore new opportunities, often taking big risks. They are flawed — or maybe just human - but cover their shortcomings by teaming up with right-hand people who possess skills they don’t have.

Practically all successful new generation companies claim that they are tech companies. They have 9 times more tech-experts among their non-execs in the boardroom than old, last-generation companies. Similarly, the boards in young growth companies are risk takers.

Investors in young growth companies are focused on extreme growth. They think globally, they constantly and creatively explore new opportunities across industries, and focus on long term results compared to owners in listed companies, who look for immediate profit.

The amazing efficiency and growth they are creating on the 21st century business platform are based on a triangular adventurous leadership pattern, involving executives, non-executives and investors. Regardless of industry, on all three levels, there has to be a strong focus on three elements:

  • Increased tech competences on a strategic level
  • Development of new adventurous leadership teams
  • A strong shared vision and entrepreneurial culture

Executive Leadership

For the last 20 years and in particular the last decade, a breed of extraordinary entrepreneurs has been changing the global business landscape via amazing companies such as Apple, Microsoft, Google, Amazon, Facebook, PayPal, Virgin, Tesla, Space X, Alibaba and Tencent.

Behind each is an adventurous founder who had an idea that he was able to materialize into a global game-changer.

But when we look at the men (no women, alas) we find that they all have, or had, a right-hand man or woman - someone to compensate for their blind spots and make them complete in their leadership role. Steve Jobs had Steve Wozniak at his side.  Tim Cook has Jony Ive. Bill Gates had Steve Balmer. Richard Branson had Will Whitehorn. Elon Musk has Gwynne Shotwell, and Bjarke Ingels has Sheela Maini Søgaard.

It’s a repeated pattern: the Founder/CEO gets leadership backup from a team with a different skillset. Number two has what number one lacks.

All the leaders above are flawed (or just human), and their right hands cover their flaws. But the lieutenants don’t have different views of the future; they are aligned with the founders and share their vision. They are loyal but strong-minded personalities. The wingmen/women respect their boss, who respects and listens to them. Remarkably, these close alliances at the top seem to be forged very early in company life. It takes a long time for newcomers to be accepted into the inner circle. 

Another characteristic: they are not risk-averse and are all familiar with failure. Steve Jobs ran down a couple of companies, Richard Branson has run down even more. The famous architect Bjarke Ingels was close to bankruptcy but was saved at the last moment by the former McKinsey consultant Sheela Maini Søgaard, and Elon Musk is constantly struggling for survival.

Investor Leadership

Game-changing companies need adventurous investors, too. The PayPal Mafia — pure, genuine Silicon Valley venture capitalism - is a clear example. PayPal was founded by Ken Howery, Luke Nosek, Max Levchin, Peter Thiel and Elon Musk, and these five venture capitalists and entrepreneurs have had a shattering effect. Hardly any group of people has created more “disruption” than the PayPal Mafia.

They started their global money transfer business 20 years ago, and handle payments for 22 million merchants today. Peter Thiel has created Palantir, one of the world’s leading big data analytic companies. With Luke Nosek and Ken Howery, he set up Founders Fund, which has invested in startups such as Facebook, Airbnb, Lyft, Spotify, Stripe, Oscar Health & SpaceX. The latter has recently attracted a billion dollars from Google. Other great investments by the PayPal Mafia are LinkedIn and YouTube.

Luke Nosek established his own venture fund: Gigafund, and was the chairman of Deep Mind, London’s most successful AI company, before it was acquired by Google. There isn’t an industry on this planet that has not been disrupted by a tech startup which doesn’t have the fingerprints of the PayPal Mafia somewhere in its makeup.

We know how they think. Luke Nosek explained it in a rare interview: It’s about first principle thinking. “We boil everything down to the fundamental parts until it cannot be reduced any further; then we de-construct it and then they re-construct.”

The key focus in Silicon Valley is not on risk but on potential. How big can we make our new business idea? In Bavaria, Seoul and Detroit they think of the auto market as 80 million sold cars per year at a price of $20,000, which is $1.6 trillion. In Silicon Valley they think of a mobility market where people drive 10 trillion miles at a price of 1 dollar per mile, and suddenly the marketplace is $10 trillion and 6 times bigger.

Jack Ma from Alibaba has a similar approach. He doesn’t hire extreme intellectuals; he would rather choose emotional intelligence. Having the best education and the highest IQ may make you arrogant but if you care for other people, are hard-working and ambitious, you will achieve much more. Similarly, when Luke Nosek has selected a company he believes in, he never fires the CEO. 

The five venture capitalists are adventurous, both in their investments and in their personal lives. Elon Musk is obsessed with flying to Mars and willing to risk the journey himself. Richard Branson is similarly willing to risk broken limbs and black eyes. They are both drawn to space. So is Jeff Bezos from Amazon, whose space company Blue Origin intends to send an unmanned mission to the moon. Interestingly, Musk outlined the Hyperloop idea, and Branson invested in it and was for a period of time,  chairman of Virgin Hyperloop One. Ken Howery is a member of the famous Explorers’ Club, and has travelled to 87 countries.

Boardroom Leadership

Chairman Peter Ma from Ping An declared last year that his company was no longer an insurance company but a tech company. Amazon, Apple and all the other global superplayers say the same: We are tech companies. New technology is defining corporate future, regardless of industry, which is why the general interest in the term ‘digital transformation’ has increased 10-fold over the last year.

Yet technology experts are conspicuous by their absence in corporate boardrooms. A number of research projects show that between 80 to 95% of all American and European companies have boards where there are no non-exec members with tech expertise. An Amrop report, Digitization on Boards, reveals that only 5% of board members in non-tech companies have digital competences, whereas tech companies have 43% techy non-execs.

If there is nobody in the boardroom with expertise within AI, blockchain, internet-of-things, social media, cloud computing and similar key technologies, how can the people responsible for developing new corporate growth strategies steer the company into a fast-changing future?

The short answer is: they can’t. They need highly-skilled geeks for that, plus a board that is willing to take a risk.

Future boardroom leadership depends upon non-execs with tech expertise, but also daring and creative leaders. As one young consultant from The Digital Dragon, a Swedish consultancy, said: “In China they don’t talk about digital transformation, they talk about pure creation.” Indeed. Amazon started off as an online bookseller; now it sells everything and soon half of its profit will come from cloud computing, and it is winning Emmy Awards and Golden Globes for its film productions.

What we see at the boards of future growth companies is a group of extremely open-minded, creative, techy, business-savvy, risk-taking non-execs: very different from the incumbents’ traditional boardroom setup.

The Dilemma | Doing two things at the same time

The incumbent companies are in a difficult situation; maintaining a legacy infrastructure that serves an existing but often shrinking customer base, with all new investments needing to be justified by increased profit, says Nick Taylor, CEO of the business accelerator Founders Factory.

“At the same time, they are competing against a new generation of tech companies that have access to the newest technology, no obligations to existing customers, and no need to deliver immediate profits on their investments. To compete, incumbent companies have to re-build their systems from scratch and, regardless of how they do it, they have to seek talents outside. If you are a bank or an insurance company, for instance, there hasn’t been any reason to have in-house the competencies and talents that you need, until now.

You have to attract new people and skills, both at leadership level, in order to understand the new situation, and on a tech level, to actually create the new infrastructure. And I think we are beginning to see this. Companies hire chief innovation and technology officers. But they still have a problem: all incentives support the existing infrastructures. Why should people innovate if the immediate result deteriorates your KPIs? We have to make new incentives for employees to reshape their business models.

I think Goldman Sachs is doing this successfully and in 2017, its CEO, Lloyd Blankfein, said “We are a technology firm. We are a platform.”  Another approach to the dilemma may be to create your own startups which compete with your own company. Mettle is an example of that. At the start of this year, the Royal Bank of Scotland launched Mettle, an online-only-bank, developed outside of the company and competing against the established RBS branches. And more banks are following suit. This means that they are splitting top management in two. One side is responsible for innovation of the legacy system, the other will be responsible for creation of a new tech-based business model.”

Setting Up the Corporate Dream Team

From what we have identified, new technologies and entrepreneurial visions are defining future business growth at breathtaking speed. It is no longer a question of adapting to change but of taking an active and ambitious role in the creation of a brave new world.

This is the new leadership challenge.

All successful companies today are tech companies. This is why 9 out of 10 need new skills at the top. Future leaders don’t have to be able to program a smartphone or design AI software, but they have to understand how new technologies can radically impact their business, creating new growth opportunities outside traditional markets.

Future leadership cannot operate in a monoculture. It has to move freely between suit-and-tie and hoodie-and-sneakers environments. It has to be comfortable with generation and technology gaps. Sophisticated features on smartphones and new social media do not only concern ‘young people’, they concern the boardroom, too.

Future leadership has to be ambitious. Today’s world-changing leaders all think: ‘what’s the full potential of our ideas?’ And: ‘how can we get there?’ Subsequently, future leadership has to be willing to make mistakes and take risks, because they are going places where no one has been before. There is no pre-defined business solution. New leadership should be able to imagine a new future for its business — or surround itself with people who do.

All this justifies a new Leadership Dream Team. It should literally be possible to dream business dreams and realize them. This report reveals that no single leader holds all these skills.

A visionary leader setting the direction is necessary, and behind every growth company there is a strong personality. At the moment it’s a he, but hopefully soon it will be a she, too. These men alone do not constitute core leadership; they are surrounded by strong personalities who cover their flaws and shortcomings, and inspire them to new ideas and insights.

This group of people constitutes the modern leadership team. When future business builds on “ecosystems and platforms” we need a similar leadership platform that enables constantly updated leadership teams in sync with whatever skills are needed to create growth.

But what holds the new leadership team together? How can differently-skilled people with different and strong personalities collaborate so efficiently? First of all, they have a shared vision — they all know where the organization is heading, and they all agree on it. Secondly, they share a modern, creative, and adventurous business culture. They want to go on business expeditions and create a new and better world.

Isn’t that what true business leadership has always been about?

Read the full Report here.