Why your digital transformation needs a leadership development budget

Written by
Nelson Phillips, professor, Imperial College Business School

11 Nov 2020

11 Nov 2020 • by Nelson Phillips, professor, Imperial College Business School

If every firm is becoming a technology firm, then every leader needs to become a digital leader, writes Imperial College Business School’s Nelson Phillips.

Digital transformation is no longer just a buzzword. In fact, for many firms, digital transformation is now an ongoing process rather than a one-time radical change, and forms a core part of their innovation processes. What was once a highly specialised field discussed by consultants and chief technology officers (CTO) has become a highly desirable skillset – appearing in an increasing number of job titles and on more and more CVs.

But this raises an important question: if digital transformation has become “business as usual”, why are firms investing so heavily in digital technology and technological innovation and so little in preparing the leaders who will oversee it?

While IT departments, consultants, and external technology providors plan and support the roll-out of digital technologies, it falls to managers to put these new systems to work, to inspire employees and customers to engage with them and, most importantly, to implement new routines and processes to get the most out of these investments.

This point is critically important, and all too often overlooked. If every firm is becoming a technology firm, then every leader needs to become a digital leader. But what does it mean to be a digital leader? How should a learning and development team approach this problem? What sort of leadership development should be included in the digital transformation budget?

Developing digital leaders

Nurturing digital leaders requires the development of new leadership competencies. First, there are new technological competencies – basic skills that leaders need in order to understand digital technology and its impact on organisations and industries. The following three technological competencies are particularly important: 

  • basic technological literacy (including an understanding of blockchain, cloud services, artificial intelligence and data analytics)
  • a basic understanding of disruption and disruptive innovation
  • an understanding of platform strategy. 

The goal is not to make leaders into experts, but to familiarise them sufficiently with core digital technologies and the basics of technology strategy to allow them to engage effectively with experts and staff on decisions and investments. 

There are also new organisational competencies that successful leaders require. Organisational competencies are about managing people, something that, perhaps counterintuitively, becomes even more important for organisations undergoing digital transformation. Developing a coaching style of leadership, the ability to manage diversity, and the ability to lead with high emotional intelligence through digital communications platforms are all key to successfully leading teams following digital transformation.

Finally, there are ethical competencies - the skills needed to understand and manage the ethical challenges that digital transformation creates. While the exact ethical competencies required will differ from organisation to organisation, there are two that are particularly important. 

First, digital leaders need to become familiar with the basics of cyberethics. This includes challenges around privacy and machine decision making. Second, as we move from a world populated by technology that was largely linear to one where technologies are exponential, the impact of digital technologies poses both a huge opportunity, but also a huge risk. Leaders need to understand and be sensitised to these exponential dynamics, and learn to spot and manage them.

Exciting opportunities exist to create new business, improve existing processes, and drive efficiency. But for this to happen, it is not enough to have excellent IT departments, CTOs with vision, and world-class technology. Firms need leaders, at all levels, with the competencies to exploit the digital transformation that is happening around them. 

Nelson Phillips is professor of innovation & strategy, co-director of the Centre for Responsible Leadership, associate dean of external relations and Programme Director for the Leadership in a Technology Driven World Executive Education Programme at Imperial College Business School