Perspectives

Adaptive
Leadership

This Perspective from The Boston Consulting Group’s Strategy In-

stitute is the seventh in a series exploring the future of strategy.
Earlier articles examined the central role of adaptive advantage
in today’s turbulent and unpredictable business environment.
This article discusses the importance of becoming an adaptive
leader in such an environment.

W
e commonly think of leaders as strong personali-
ties who imprint their will on compliant organiza-
tions. Increasingly, however, business executives
are finding something lacking in this view of the leader as
hero. As the CEO of IBM wrote in “The Globally Integrated
Enterprise,” an essay in Foreign Affairs, “Hierarchical, com-
mand-and-control approaches simply do not work anymore.
They impede information flows inside companies, hamper-
ing the fluid and collaborative nature of work today.”

Our research and experience suggest that the fundamental

■ How can leaders chart a course shifts in today’s business environment compel us to rethink
through a turbulent environment when the nature of strategy, organization, and consequently, lead-
they cannot predict the outcomes of ership. Consider the following trends:
their choices?
Turbulence and uncertainty have undermined the effec-
■ Adaptive leaders learn through ex- tiveness of long-range forecasting and traditional strate-
perimentation and manage the con- gic planning in many industries.
text, not the instruction set.
How can leaders chart a course when they cannot predict
■ Adaptive leaders cultivate a diversi- the outcomes of their choices?
ty of views to generate a multiplicity of
options. Companies are increasingly organized into interdepen-
dent, multicompany ecosystems—a result of lower trans-
■ Adaptive leaders lead with empa- action costs and “deconstruction.”
thy, reward accomplishment with au-
tonomy, and seek winning solutions for When boundaries are blurred, who leads whom?
all stakeholders.
The pervasiveness and economics of digital communica-
tion and computation have made every business an infor-
mation business.

In such an environment, how can leaders ensure that

their organizations are reading the right signals and act-
ing on them?
 Adaptive Leadership 2

Society’s increasing interest in the social and eco- ◊ Cultivate a diversity of perspectives to generate a multi-
logical impacts of business makes it imperative for plicity of options. Whereas traditional models of leader-
companies to consider the broader value and over- ship may emphasize alignment, some adaptive leaders
all cost of their strategies. make dissenting opinion compulsory. Perhaps the most
famous example of embracing opposing views comes
How can leaders ensure that social and economic from Abraham Lincoln, who deliberately named his ri-
vectors are aligned? vals to his cabinet. Leaders are more likely to find a di-
versity of perspectives at lower levels in the organiza-
Trust in big business has steadily eroded. tion, where employees confront external realities
directly and are likely to raise critical questions. For
How can leaders regain society’s confidence? How this reason, adaptive leadership de-emphasizes hier-
can they harness the creativity and passion of the archy.
work force in pursuit of advantage?
◊ Allow leadership to be shared and to emerge from the given
The nature of competition has become more diverse. context. In a volatile world, no single person can lead
Some environments are mature and predictable, at all times and in all situations. The role of leader
while others are highly uncertain. therefore should be assumed by the person or group
best positioned to guide a specific decision. An execu-
How do leaders ensure that they are taking the right tive at W.L. Gore & Associates, the global technology
approach—or the right mosaic of approaches—for manufacturer, was quoted in The Future of Management
the specific challenge at hand? as saying: “We vote with our feet. If you call a meeting,
and people show up, you’re a leader.”1
These shifts in the business environment call for adap-
tive strategies and organizations, which in turn require ◊ Constantly question the world around you. Adaptive lead-
adaptive approaches to leadership. Adaptive leaders cre- ers are always looking outward and realigning their or-
ate the conditions that enable dynamic networks of ac- ganizations with a shifting environment. They read be-
tors to achieve common goals in an environment of un- tween the lines to intuitively grasp patterns that may
certainty. be masked by complexity. They test their own assump-
tions by running thought experiments. An example is
Dimensions of Adaptive Leadership highlighted in the biography of former Intel president
Andy Grove, who asked the then CEO: “If we got kicked
Adaptive leadership can be distinguished from more out and the board brought in a new CEO, what do you
traditional models in at least four dimensions, as the think he would do?”2
exhibit illustrates. (For more about the four di-
mensions, see New Leadership Rules, BCG White Paper, Adaptive Leaders Must Strengthen Their
May 2010.) Capabilities Across Four New Dimensions

Below we describe a number of actions companies can

Adaptive leadership differentiators
take to support each of those dimensions.
Navigate
Navigating the Business Environment. Adaptive lead-
ers must embrace uncertainty and adopt new approaches
if they are to chart a course amid today’s turbulent con-
ditions.
Win and win Empathize
◊ Manage the context in which actors interact, not the in-
struction set. In an uncertain world, rigid rules are coun-
terproductive. The best solution will arise through
learning and adapting to change over time. Netflix
CEO Reed Hastings advises in his firm’s “Reference
Guide on our Freedom & Responsibility Culture”:
Self-correct
“Avoid chaos as you grow with ever more highly per- Source: BCG analysis.
forming people, not with rules.”
 Adaptive Leadership 3

Leading with Empathy. Adaptive leaders create a ◊ Enable individuals and teams to learn through experimen-
shared sense of purpose and manage through influence tation. Randy Pond, executive vice president of opera-
rather than command and control. tions, processes, and systems at Cisco, tells his organi-
zation on his blog at the company’s site, “We’ll
◊ See the world through the eyes of others. By understand- continue to evolve as we learn what works, and as im-
ing alternative perspectives, adaptive leaders cultivate portantly, what doesn’t.” Adaptive leaders need to de-
and embrace the cognitive diversity that underpins velop platforms that enable experimentation and
adaptive organizations. Their ability to empathize with learning, including opportunities to reflect on suc-
colleagues, competitors, and other stakeholders en- cesses and failures. Leaders should also align rewards
ables them to exert influence across functional and with experimentation in a way that doesn’t punish
corporate boundaries. By seeing the world through the “failure.”
eyes of others, leaders also extend their ability to see
patterns in a complex environment. In an interview at ◊ Develop your organization’s “signal advantage.” In a
strategy-business.com, Herb Kelleher, cofounder and changing environment, organizations have to detect,
former president and CEO of Southwest Airlines, ad- filter, and decode signals in order to anticipate and re-
vised, “Treat your people well and they’ll treat you spond to what’s coming next. Leaders should ensure
well….It has to come from the heart, not the head.” that their organizations are constantly looking out-
ward and staying close to their customers. As Sir Terry
◊ Create a shared sense of purpose. In an era that has be- Leahy, the outgoing CEO of Tesco advised, “The best
come infamous for rewarding profit-making above all place to find the truth is to listen to your customers.
else, employees are understandably skeptical when They’ll tell you what’s good about your business and
leaders talk about values. And it seems that the more what’s wrong. And if you keep listening, they’ll give
that mission statements are circulated, the more skep- you a strategy.”3
tical they become. Yet because a complex and dynam-
ic environment requires people to act autonomously ◊ Increase the agility with which the organization is able to
and intuitively—often without explicit instructions or correct itself. Adaptive leaders allow decisions to be
rules—a strong sense of shared purpose and values is made at lower levels in the organization, and—to re-
more important than ever. Bill George, the former duce the time between stimulus and response—they
chairman and CEO of Medtronic, told Charlie Rose on minimize the number of layers between the field and
Rose’s PBS program, “The great leaders today are able the CEO. As retired General Stanley McChrystal told
to align people around a sense of purpose and values The Atlantic, “Any complex task is best approached by
and get that consistency all around the globe, and then flattening hierarchies. It gets everybody feeling like
empower other people to step up and lead.” they’re in the inner circle, so that they develop a sense
of ownership.”
◊ Reward accomplishment with autonomy. Adaptive lead-
ers reward people for what they accomplish, rather Creating Win-Win Solutions. Adaptive leaders focus on
than tracking hours or tasks. And instead of relying sustainable success for both the company as well as its
solely on financial incentives, they motivate employees external network of stakeholders.
by giving them time to pursue individual passions—
from a few hours of slack time a week to year-long fel- ◊ Build platforms for collaboration. In many industries,
lowships. Adaptive leaders understand that real com- the success of a company depends upon the engage-
mitment comes from individual opportunities for ment of its extended ecosystem of suppliers and col-
autonomy, mastery, collaboration, and recognition. As laborators. Technology now makes it possible for large
Marissa Mayer, recently appointed to Google’s operat- groups to collaborate on complex tasks, such as prod-
ing committee, explained in a speech titled “Nine Les- uct innovation, across functional and corporate bound-
sons Learned about Creativity at Google,” “…it is that aries. As Cristóbal Conde, president and CEO of Sun-
license to do whatever they want that really ultimately Gard, the global software and services company, told
fuels a huge amount of creativity and a huge amount The New York Times, “A CEO needs to focus more on
of innovation.” the platform that enables collaboration, because em-
ployees already have all the data.”
Learning Through Self-Correction. Adaptive leaders
encourage—indeed insist on—experimentation. Of ◊ Deploy leadership influence beyond the boundaries of the
course some experiments will fail, but that is how adap- firm. In the absence of formal authority, leaders look-
tive organizations learn. ing to mobilize a company’s extended ecosystem must
 Adaptive Leadership 4

structure the game for win-win outcomes and also use ◊ How many of the adaptive leadership practices cited
“soft power” such as vision, charisma, networking, and above do we currently employ?
collaboration to exert influence. In an interview posted
on bcgperspectives.com, Red Hat CEO Jim Whitehurst ◊ Do we have the right leadership model for our specific
told BCG that the success of the open-source technol- business environment?
ogy company comes from the fact that it was able “to
bring a huge ecosystem to bear that has been difficult ◊ What changes could we make to develop a more adap-
for others to duplicate.” tive leadership model?

◊ Align the business model with its broader social and ecolog- We conclude with a quote from John Clarkeson, former
ical context to create “social advantage” and strengthen CEO of BCG, who presciently and vividly sketched this
the business’s sustainability. Leaders must do more than new model of leadership 20 years ago in a BCG Perspec-
maximize profitability. They must ensure the sustaina- tive titled “Jazz vs. Symphony”:
bility of their companies’ business models and look for
opportunities to align economic and social vectors for Leadership will flow to those whose vision can in-
sustainable advantage. As John Mackey, CEO of Whole spire the members of the team to put their best abil-
Foods, recently told Darden School of Business Profes- ities at the service of the team. These leaders will
sor R. Edward Freeman (in an interview on Whole create rather than demand loyalty; the best people
Foods’ site), “The leadership’s job is to manage the will want to work with them. They will communi-
business in such a way as to create value simultane- cate effectively with a variety of people and use the
ously for all of these interdependent stakeholders. It is conflict among diverse points of view to reach new
a better strategy for [maximizing long-term profits].” insights. They will exert influence by the values
they choose to reinforce. They will make leaders of
Modulating the Leadership Model their team members.

Unpredictable environments will require leadership Roselinde Torres

styles characterized by the four dimensions outlined Martin Reeves
above. Not all environments or challenges are alike, Claire Love
however. Just as different organizational models are
necessary for different environments, so too are differ-
ent leadership styles. (For more about different organi- Roselinde Torres is a partner and managing director in the New
York office of The Boston Consulting Group. Martin Reeves is a
zational models, see “People Advantage,” BCG Perspec-
senior partner and managing director, also in the New York office,
tive, March 2010.) Over time, an organization might and the director of the BCG Strategy Institute. Both are BCG Fel-
move from one leadership archetype to another—for lows. Claire Love is a project leader in the New York office and an
example, when a stable industry is disrupted, a shift to ambassador to the BCG Strategy Institute.
a more experimental style might be required. Or when
You may contact the authors by e-mail at:
an industry matures and becomes more stable, then a
reeves.martin@bcg.com
more deliberate, analytical style may be optimal. When torres.roselinde@bcg.com
an organization is not yet adaptive, but needs to become love.claire@bcg.com
more so, strong individual leadership may be required
For the earlier Perspectives in the series, see “New Bases for
initially to disrupt the status quo—but might later give Competitive Advantage: The Adaptive Imperative,” October 2009;
way to a more collective style. “Adaptive Advantage,” January 2010; “Signal Advantage,” February
2010; “People Advantage,” March 2010; “Social Advantage,” June
2010; and “Simulation Advantage,” August 2010.

T here is no universal checklist for becoming an adap-

tive leader, but by focusing on the four dimensions
we’ve described, leaders can better equip themselves
1. Gary Hamel with Bill Breen, “Building an Innovation Democracy:
W.L. Gore,” excerpted in The Future of Management, Harvard Business
School Press, 2007.
2. Richard Tedlow, Andy Grove: The Life and Times of an American Busi-
for a turbulent and unpredictable business environ- ness Icon, Penguin Group, 2007.
ment. To gauge how adaptive your leadership model is, 3. Taken from “How Leadership, Loyalty, and Transparency Fuel
ask yourself and your leadership teams just three ques- Growth,” a speech given at the National Retail Federation’s 99th An-
nual Convention & Expo, January 2010.
tions about what you are doing and how you are think-
ing as leaders: