Flatter firms look to networks for more innovative future

Throughout the summer of 2015 PurpleBeach has been gathering insight and opinion into the changing nature of business. In particular, we wanted to understand how leadership, management and innovation have changed since the financial crisis landed with a bang at the end of the last decade.

Discussions started in July over breakfast in London with business leaders from a range of sectors, including financial services, media, technology and energy. They were then extended to a wider crowd of contributors online.

Our findings, which have been informed by more than 70 CEOs and senior business people, reveal that few organisations and leaders now operate as they did pre-crisis.

Businesses are stripping away management layers

Half (51%) of leaders said they have increased headcount in the last five years, but just a quarter (28%) have added new management layers. More than a third (37%) of firms have actually removed layers of managers to reduce cost and become more adaptive. 79% of leaders said their firms are now more responsive to change than they were in 2010.

This is consistent with the wider corporate shift we are seeing from hierarchy to networks, alongside the emergence a new model of accountability where team members (rather than managers) hold each other responsible for results. This tends to result in greater expectations of performance and allows leaders to focus more on providing strategic direction and empowering people to achieve objectives.

Leaders are making more considered, data driven decisions

Decision making processes have also evolved. Half (52%) of leaders said that they spend more time making business decisions compared to five years ago and three quarters (77%) are making greater use of performance data as part of their decision making processes.

This is welcome news. In the past, leaders were more likely to put off making decisions because they were scared of making the wrong one. In today’s fast changing world, where competitive advantage is more transient and strategy must therefore be more fluid, there is no time for procrastination.

Forced to be more decisive, leaders are using more metrics to inform their decisions and calibrating the data through discussion with people in their personal, operational and strategic networks.

There has been a divergence in approaches to risk

Trading through one of the most uncertain and complex periods in history, many businesses have changed how they approach risk. Globalisation and technological change contribute to uncertainty and allow new forms of competition to spring up without a moment’s notice, so half (53%) of leaders now spend more time and effort understanding and managing risk than they did in 2010.

A third (37%) of leaders, however, have adopted a different approach. They accept that uncertainties abound, but because they now run leaner and more flexible businesses, they choose to spend less time worrying about risks than they did in 2010.

Innovation is becoming more externalised

More than half (56%) of firms now spend more time developing new services and ways of doing business than they did in 2010. 58% are being more open about their innovation efforts, engaging people outside of the business to obtain a wider range of input and ideas. Only 14% of organisations today choose to innovate entirely behind closed doors to avoid tipping off competitors.

A third (33%) of leaders have put in place dedicated innovation teams and half (49%) now encourage participation from their entire organisation in innovation efforts. It is important, however, to note that there isn’t a one size fits all approach to innovation. Instead of seeking to copy Google, businesses should find an approach that works for their own particular requirements.

Team development is crucial for modern leaders

Selected by three quarters (75%) of respondents, the ability to develop an effective team is considered the most crucial attribute for leaders today. A high level of self-awareness and keen customer focus – each selected by almost half (46% each) of respondents as important for modern managers – help here.

The nature of today’s matrix organisations and extended teams mean that traditional leadership needs to give way to a new form of network leadership. Instead of relying on hierarchies and positional power, leaders must their treat teams like networks, develop new skills and invest more time and effort in building and energising their working relationships.

Tomorrow’s leaders need to be highly adaptable, comfortable with complexity and acutely aware of their own strengths and weaknesses. They will be able to overcome uncertainty, focus on what they can do to help others and create a work environment that thrives on high levels of autonomy, trust, sharing and collaboration. This will be a huge step for some, but they are skills that can be developed.

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As many of you will know we usually hold an annual in-person PurpleBeach Experience, but as that’s not possible this year, we have decided to create our very own Boxset around the theme of “new”.

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