Transformational Leadership:
How Innovation, System Design, and the Reinvention of Work are Changing the Game

"Productivity innovation" has been the driving force behind the USA’s improved standard of living over the past half century. Now "productivity innovation" is being learned, adapted and its effect is transforming other economies around the world. To appreciate the power of transformation one needs first to understand the systemic changes at work in the new global economy. Ireland, Singapore, Bermuda, and Iceland were big winners in Global Economy 1.0. At just the right time, each of these independent states had both innovative government and private sector leaders working together with flexibility and speed to carve out unique business opportunities that transformed their small nations into powerful players on the world stage. Global Economy 1.0 winners focused on training to build highly skilled workforces, low cost offshore manufacturing centers and tax advantaged transfer pricing.

Now in Global Economy 2.0, the timing and opportunity is again right for transformational leadership. High speed broadband communications; a new generation of asset-lite supply chain systems; increasingly sophisticated and powerful private equity and sovereign funds; and the emergence of virtual project teams combining extremely high skilled workers from around the world together are helping form the new ground rules for global business innovation.

Where as, Global Economy 1.0 was about commoditizaton and reducing costs; Global Economy 2.0 is about designing highly efficient end-to-end business systems which result in differentiation and competitive advantage. With an excess number of low cost factories in the developing world the selling of factory capacity has become a commodity. But significant profit pools can be created through technology enabled systems cleverly synchronizing end-to-end solutions that manage and track the virtual flow of goods, the physical flow of goods, and the financial flow of goods in a multi-tier global supply chain. Supply chain virtualization is one of the best examples of how work is getting reinvented in innovative ways in Global Economy 2.0. Today's better way is for firms to focus on speed-of-delivery from an original customer purchase order through to final acceptance by an end user customer. The derivative effects of an end-to-end systems design approach go beyond just lower costs by minimizing inventory and warehouses. Best-of-class companies like Apple and Tesco have elevated supply chain innovation to a defining part of their "end customer experience" and making it a significant differentiator in an age of otherwise product or service sameness.

So what are the talents and skills that separate transformational leaders in Economy 2.0 from traditional executives? Transformational leaders work hard to understand their business challenges in terms of a holistic, end-to-end system. The "first principles" of transformational leadership start from the vantage point of uncovering the systemic ways that "end customer experience" can be transformed into the most important competitive differentiator. The best transformational CEOs are instinctively believers in excellent design and make it a point to elevate design decisions to the CEO level. This means product and service design; work process systems design; supply chain systems design; sales channel and customer support systems design. The best transformational leaders view their company in its totality as a system that combines a new lexicon of concepts like customer adoption curves, growth inflection points, transparency of working capital & cash flow metrics, and identifying profit pools along a value chain of activities, always culminating in customer satisfaction and customer loyalty metrics.

Transformational leaders in the most admired early stage companies are inspired by the desire "that there must be a better way" of doing things. Without a "better way", the odds for success are very much against the start-up’s survival. Entrenched large enterprises became large because they previously learned the skills of adopting innovation into their business practices and then broadly deployed these processes. In Economy 2.0 virtualization, off-shoring to shared service centres, much improved broadband communications, and the reinvention of work are making it easier for firms to accelerate collaboration and enhance the adoption of "productivity innovation".

There is an inertia in large organizations to empower mid-level with the authority to say "no"; but not the authority to say "yes". Consequently, managers are forced to politically manage their pet projects through the organization; making deals not to block a colleague’s project if they in turn don’t block theirs. The best transformational leaders instinctively stay focused on "superior end-customer experience" involving themselves in the design considerations of simplifying everything that they expect their organizations do well. These leaders know that what one decides not to do, is even more important than adding more things to do.

"Productivity Innovation" demands a such a design talent, even more than management skill. Transformational leaders always elevate design decisions to the CEO level and take a personal interest in inspiring everyone in their firms to share in the high standards of easily understood end-to-end systems that lead to a better way.