How Data Has Calcified an Outdated Leadership Model

You can’t change what you can’t see and for most people what they can’t see is impossible to imagine. In times of turbulent change, this creates great risks because the coming change builds slowly and then flips quite quickly. So quickly you can’t recover. This happened for the Romanovs during the industrial age and is happening in board rooms across the country as the information age takes hold.

Two fundamental things are keeping organizations from digital transformation: accounting practices and data architectures. Both of these are organized around transactions and both generate lagging indicators of health and success. Everyone is familiar with the common disclaimer “Past performance is not indicative of future results.”

On the financial side, the value of connections, relationships and even people get thrown in either the bucket of ‘goodwill’ or ‘externalities.’ Both of these get regularly ignored in day-to-day decision-making because they are murky, opaque, and don’t lend themselves to being counted. And we love to count. And add. And subtract. Revenue — costs.

On the data architecture side, because we like to count and transactions are the easiest thing to count, most of our application and vendor databases are architected around content and transaction objects. I suspect that this is even true of many CRM and HCM systems — those that are ostensibly about keeping track of people.

All of this has led to analytics and reports that can tell us how many times something happened — a document was accessed, an account got updated, a bonus was given, or a group had activity. Looking at this Facebook analytics page is a great example of this. The views! The reach! The likes!

But ultimately, what does this tell us? Can I see that Barry, from one of my key prospects has been engaging more deeply each week for the last three related to product questions, which might suggest he is ready for a call from us? No. Nor does it tell us that there are 35 people just like Barry because I can see a segment of people that have behaved just like him. That would give me more indication of value than 1,500 likes. That also means we can likely see that 80% of expense reports are completed by their deadline — but we can’t see that it requires each employee an hour a week, over multiple days and multiple systems to complete them. We see the output but not the cost. If we saw the cost, I’m betting expense systems would be very different. All of this behavior goes un-noticed but it a critical leading indicator of future behavior and actions. Why wouldn’t we want that?

Connection, relationships, and community are many organization's primary competitive advantage in a world where products and services are commoditizing rapidly because they are what will allow organizations to rapidly innovate. Controlling costs and increasing efficiency, which drove the transactional leadership mindset, only mattered if you had control over market access. The Internet has destroyed that control. As an individual I could design my own car and have it built in China if I want to — I don’t need the Ford dealership down the street. This dynamic makes the focus on maximizing efficiency somewhat absurd.

Instead, most organizations will thrive based on their relationships and the ability to understand their market and where it is going. This requires a growth mindset vs the fixed mindset that optimized for efficiency. But our analytics are holding us back — and until we understand the need to see how individuals are navigating through our ecosystems and market, our organization will be at the mercy of the challenges and fail at taking advantage of the opportunities wrought by digital technologies.

And change is coming. Executives seem to be hoping to wait it out, without making major investments to get ahead of it. It reminds me of the Romanovs, sitting in their gilded cage as the richest most powerful family in the world. Until they weren’t.