|Author Name:||Ken Favaro, Per-Ola Karlsson and Gary Neilson - Rotman School of Management|
|Date:||Aug 19 2020|
Looking ahead 25 years, CEOs will have to be more innovative, entrepreneurial, empathetic and risk savvy than their predecessors.
AS OF THIS WRITING, 60 PER CENT OF U.S. college students and 40 per cent of MBA students are women. Those are high percentages, and we expect them to hold — if not rise. Based on several data trends and the continued crumbling of barriers, we estimate that by 2040 — a quarter century from now, when today’s college and business school graduates will be taking the CEO reins — women will represent some 30 per cent of the incoming class of the top 2,500 global CEOs. And that proportion will only increase over time.
To punctuate the rise of female leaders and to help personify the challenges CEOs will encounter by the middle of this century, we have envisioned a prototypical chief executive of 2040, and in this article we will introduce you to her and the challenges she faces.
We call her Melissa. By the time Melissa becomes a CEO, she will be operating in a very different competitive environment from that of today. Before we get to know her a little better, let’s take a look at that environment.
We anticipate the acceleration of a major shift in the competitive landscape already emerging today: the clustering of companies into two primary competitive categories, which we call ‘integrators’ and ‘specialists’. Most firms will fall into one of these two camps.
Generally speaking, integrators will be large-scale organizations focused on providing distinct, solutions-based value propositions to their customers. These solutions will be built on a unique set of complementary capabilities, in the same way that Amazon — by virtue of its superior logistics and distribution system — is able to sell a broad array of products to consumers of all stripes. Specialists, by contrast, are the complementary players who provide the products and services that integrators sell. Just as there are thousands of small retailers supplying one Amazon or eBay, there will be many more specialists than there are integrators. Specialists are the next-generation accessory makers, parts suppliers and inventors who excel at one particular—often narrow — thing.
Like integrators, specialists will compete with distinct market propositions based on a core set of unique, advantageous capabilities whose outputs align with the integrators’ strategies. But whereas successful integrators will dominate their markets for decades, many specialist firms will have short life spans — say, seven to 15 years, depending on the industry they occupy. If they survive longer, they will pivot frequently as the demand for their specific products and services changes, depending on how the integrators’ strategies evolve in the face of potential market disruption.
Taken together, these trends will lead to the emergence of a highly entrepreneurial and focused CEO. Unlike the industry builders of the early 20th century, she will likely direct her energy into one of two career trajectories: she may run an integrator company like Amazon, or she may choose to run a specialty firm — or more likely, a series of them over time. The career path of tomorrow’s CEO will depend on the kind of company for which she is best suited; it is unlikely that she will be equally adept in the two environments.
If she wants to be the CEO of an integrator, she will need to follow the model of Jeff Bezos (or an earlier exemplar, Michael Dell) and develop the skills to lead a company that excels in assembling the best components from specialty-firm partners into a complete solution for end consumers. Key to her company’s fortunes will be dependable, reliable execution; superb supply chain management; a deep understanding of customers; and the ability to shape, reshape, and customize products and services to customers’ unspoken needs. This means that as CEO, she will need to spend a lot of time understanding how her company, its vendors, and its customers work in a holistic, deeply integrated system.
By contrast, the CEO of a specialty firm will be an even more sprightly, shape-shifting entrepreneur. If she finds that her company is being outpaced by new competitors or is no longer relevant to the market — and she may well encounter both of these challenges — she may be forced to shift strategies or exit the business rapidly. Indeed, forward-looking ‘specialty CEOs’ will expect their companies to be in existence for relatively short periods, knowing that they may be bought out by another firm, or that their specialty — and their ability to compete — could have a limited shelf life.
The specialty CEO of 2040 will therefore need to be able to quickly divest a business when it is no longer viable and assemble a new one just as rapidly. That is why her tenure may well be shorter than the tenure of those at the helm of integrators. A small handful of executives in places such as Silicon Valley are already engaging in a prototype of this career model. Known as ‘serial CEOs’, their ranks will continue to swell as the specialty model takes hold in the coming decades.
Another interesting facet of the specialty-firm model is the built-in opportunity for ‘on-ramps’ and ‘off-ramps’, given the prospect that many firms and their leaders will be in place for such short durations. It may well be possible for executives to more easily come in and out of industry — something that bodes well for leaders with families.
What else does this evolving competitive landscape mean for Melissa and her path to the C-suite?
In aggregate, Melissa’s education and early-career experiences are laying the groundwork for a view of the world and of work that is quite distinct from that of people occupying the corner office in 2015. She is likely to have had several high school and college experiences that developed her leadership, entrepreneurial and collaborative skills. She has probably had experiences leading virtual teams, and she has spent time volunteering, travelling or working in at least one place that is dramatically different from her home region.
More than likely, Melissa will be a graduate of one of the many MBA programs that have adapted their pedagogy to appreciate, emphasize and develop women’s typically more empathetic style of leadership. In addition to early-career international corporate assignments, she might spend time working for a mission- driven service organization such as Teach for America or an international NGO, or launching a new venture in an emerging market. In doing so, Melissa will be developing a worldliness and respect for the power of diversity that far outpaces what today’s CEOs had at her age — and likely possesses even now. A continued focus on learning and seeking experiences in unfamiliar settings will be critical throughout her career.
By the time more women like Melissa reach the CEO’s office — and assume an increasing number of influential organizational positions generally — we can expect her employees to follow the behaviour she models. A wealth of evidence suggests that women leaders manage people very differently than their grandfathers did. Given this, the office of tomorrow may well be less authoritarian, and more collaborative and balanced, than the office of today.
Melissa’s empathy and emotional intelligence will come in handy, because her ability to work in teams will be crucial. If she was steeped in teamwork as a student, she will need to embrace it even more now that she’s in the top spot, given the importance of building distinctive, cross-functional capabilities. The CEO of the future’s role will be to integrate these capabilities, to ensure that everyone helps build and sustain them, and to keep everything working in a highly refined system.
It will behoove Melissa to have a broad understanding of systems, both human and technological. She will be a master in her understanding of the way information flows, operating in a complex and open environment where relationships between organizational elements and companies, their partners, and a range of stakeholders are more dynamic than ever.
Steeped in technology use from her early years, Melissa will be more comfortable with the fact that information technology is deeply integrated into every experience than most present-day CEOs are, and she will be keenly interested in potential disruptions brought on by sudden changes in technology. She will understand how technology enables a reduction of scale and lowers barriers to entry.
Melissa will lead an organization that is yet another significant grade flatter than anything we see around us today, because governance, regulatory compliance and quality processes will become even more automated and built into the everyday workings of the firm. Better decision-support systems and a greater focus on company-wide capabilities will make it much easier for information to reach Melissa than is the case for most of her peers today.
To help run her company, Melissa will rely on a small but diverse group of people who share chemistry and understanding. Members of this team will remain in close communication as advisors to the CEO in ways that go beyond their functional roles. If Melissa has a particularly cohesive and high-functioning C-suite, several of its leaders may follow her when she moves to a different company — perhaps even to several different companies if they are leaders in specialty firms.
We may also see the emergence of ‘corporate capabilities officers’ who oversee those few crucial things that the company does uniquely well — its particular strength in innovation, customer insight or supply chain—that provide the foundation for its successful strategy. These roles will vary by organization, depending on the firm’s specific competitive strengths.
With greater access to education throughout their careers and by being drawn from a richer talent pool, employees at all levels will be more highly skilled than today’s employees. Many will have earned specialized degrees and multiple certifications (we are already seeing these trends today.) Melissa will have to relate to this workforce on a completely different level than CEOs of the past; she will be as apt to seek out a frontline employee’s expertise as she is to provide clear direction herself.
In order for her company to be successful, Melissa will need to be more entrepreneurial, financially astute, and risk savvy than her predecessors. Having grown fully attuned to the age of transparency, investors will be even less forgiving of missteps and excuses than their increasingly-exacting brethren today, and even more tuned in to the company’s challenges. Investors will pay very close attention to Melissa’s words and actions. Every eye and ear will be focused on her accountability and performance.
As a result, responsibility to all stakeholders will be an increasingly important part of the corporate profile. Regardless of whether existing regulations attempt to prevent her company from doing the wrong thing, Melissa will understand that it is too expensive to risk running afoul of employees, customers, suppliers, investors, NGOs and social and environmental groups. Future employees, customers and stockholders will not have patience with companies that merely pretend to have a social and environmental conscience.
For all of these reasons, Melissa’s communication skills will be paramount. It’s hard to imagine anyone reaching the corner office in 2040 who does not possess extraordinary listening, speaking, writing, and engagement abilities. The latest forms of social media — which will be the immediate tools of all constituencies, regardless of age — will put Melissa in direct contact not just with investors, but with the range of other stakeholders who want to hold management accountable — whether she likes it or not.
We have attempted to paint a picture of the CEO’s role 25 years from now — much of it admittedly speculative, but based on our long and deep understanding of the position and the underlying fundamentals driving organizational change.
Leadership has experienced an amazing evolution, and the road ahead is going to be less and less predictable. It will require every ounce of flexibility, emotional intelligence and creative thinking that executives like ‘Melissa’ can muster.
Ken Favaro is a Senior Partner with Strategy&, a member of the PwC network of firms. Based in Dubai, Per-Ola Karlsson is a Senior Partner with Strategy&. Gary Neilson is a Senior Partner based in Strategy&’s Chicago office.
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