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Volume 19, Number 20 -- May 24, 2010

Creativity Is the New Business Kool-Aid, IBM CEO Study Finds

Published: May 24, 2010

by Alex Woodie

CEOs around the world today place more emphasis on the creativity of their leaders than their rigor, management discipline, integrity, or vision, according to a newly released study from IBM. Indeed, the study finds that the creative management style--which is marked by taking calculated risks and communicating in new ways--will lead to more success as companies struggle to find their way in an increasingly complex and interconnected world.

The key message that IBM heard over and over from the 1,500 CEOs, general managers, and senior public sector leaders that it interviewed from September 2009 through January 2010 was that creativity has become a more valuable leadership attribute than in the past. What's more, creativity--meaning not only the capability to create something new but to drive "disruptive innovation and continuous re-invention"--is now more important than other leadership qualities, like management discipline, rigor, or operational acumen.

In other words, it's now better to be able to rapidly generate potentially innovative or disruptive business plans and products than it is to be able to carry them out, to maintain one's integrity in carrying it out, or even to be able to conjure up grandiose and strategic "visions" of where an organization ought to be headed. Of course, there will always be a place for true business visionaries, but the idea here is that tactical, short-term creative thinking in smaller chunks is more conducive to surviving and thriving in the "new" business climate than the big-chunk, long-term planning that has served corporations so well in the past.

Not surprisingly, IBM positioned the growing need for creative business thinking alongside the most obvious aspect of today's business climate: the global financial crises (GFC). (Of course, were it not for the new and creative financial services products, like collateralized debt obligations and credit default swaps--or if the investment banks that peddled junk CDOs had a little more integrity or the agencies that rated them investment grade had demonstrated a little more rigor and discipline--we might have never had the GFC in the first place, but this is both the hand we're dealt as well as another story for another day.)

The new focus on creativity is a "remarkable" change, says Frank Kern, senior vice president of IBM's Global Business Services division. "Coming out of the worst economic downturn in our professional lifetimes--and facing a new normal that is distinctly different--it is remarkable that CEOs identify creativity as the number one leadership competency of the successful enterprise of the future," Kern states in IBM's CEO study announcement. "But step back and think about it, and this is entirely consistent with the other top finding in our study--that the biggest challenge facing enterprises from here on will be the accelerating complexity and the velocity of a world that is operating as a massively interconnected system."

Complexity is the biggest challenge facing CEOs today. That compares to three previous CEO studies from 2004, 2006, and 2008, when CEOs consistently identified coping with change as the most pressing business challenge. The CEOs also expressed concern that existing strategies of incremental change would not be adequate to get in front of a world that's become more volatile and uncertain.

While some CEOs worried about the looming complexity, others use it to their advantage. In its study, IBM calls these companies "standouts," because they are able to boost revenues, profits, and market share while their competitors fall by the wayside. It's not surprising that these standout companies are loaded with "creatives," which is the term IBM uses to identify people who are creative.

There are many aspects to the new complexity equation. For example, 74 percent of CEOs of companies in Japan expect the shift of economic power to developing economies like China or Brazil to have a major impact on their organizations. Nearly nine out of 10 CEOs of U.S. companies expect more government regulation over the next five years, which compounds the uncertainty.

While "market forces" continue to dominate the external factors that CEOs use to gauge what's impacting their businesses, technology has steadily risen in importance in their minds, from the sixth most important factor in 2004 to the second most important factor today. But technology is both a blessing and a curse in the current era, as it can either help to alleviate complexity or just add to the mess.

IBM also measured something it calls the "complexity gap." There is a 30 percent difference between the level of complexity that CEOs expect to face in the next five years and the level they feel they can cope with. Put another way, eight in 10 CEOs expect their environment to grow significantly more complex, but fewer than half believe they know how to deal with it successfully, according to IBM. The "standouts" have a gap of just 6 percent.

So, how should your company deal with the complexity nightmare? Why, become a creative standout, of course! IBM offered these tips to get there.

First, get creative people into leadership positions. Creative people will be open to new ideas and aren't afraid to take action before "full clarity" is achieved on a given topic. They take calculated risks, disrupt the status quo, and aren't afraid of failure.

Second, reinvent customer relationships. In other words, use the Internet and other new channels (Twitter, blogging, Facebook) to more closely collaborate with customers across the globe. In the back office, consider business intelligence tools to filter the mounds of customer data into actionable information.

Third, build operational dexterity. Basically, this means work hard to become a dexterous and nimble "standout" operator. Get rid of complicated processes and implement easy-to-use products. For a System i shop, this could mean ditching those 5250 screens for new GUIs. Whatever you do, be a wizard and mask the back office complexity that's necessary, as you present a simplified interface to customers and partners.

You can access the 76-page paper titled Capitalizing on Complexity at www.ibm.com/ceostudy.




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