October 2010

Leadership at all levelsLeading TMT organisations into the digital future

About this researchIn developing this paper, Deloitte LLP and Spencer Stuart have combined perspectives frominterviews with a number of leaders from Technology, Media and Telecoms clients with their ownexpertise and experience of developing leadership at all levels in organisations.

This paper is the second in the ‘Digital Leadership’ series, which explores how TMT organisationscan develop the agility to successfully navigate the digital transformation whilst developing thenew skills and capabilities required for the digital economy. The first paper in the series, called‘New Shapes and Sizes’, explores organisation design and can be downloaded at:www.deloitte.co.uk and www.spencerstuart.co.uk

Contents

Executive Summary 2

The leadership challenge for TMT organisations 4

Key themes

1. Vision and identity 5

2. Business model 6

3. Organisation 7

4. Innovation 8

Why leadership is so important 12

Leaders’ insights 14

Leaders’ cognitive skills 15

Leaders’ emotional intelligence 17

Building leadership at all levels 18

Actions for TMT leaders 19

Conclusion 20

Authors and TMT contacts 21

b

Ed SheddLeader, Global Media Practice

Grant DuncanHead of Media, Spencer Stuart

Foreword

Digital is revolutionising the technology, media andtelecoms (TMT) sector, acting as a catalyst to changebusiness models and putting increased focus on Leadershipto guide organisations through the change. In developingthis paper, Deloitte LLP and Spencer Stuart havecombined perspectives from interviews with a number ofleaders from TMT clients with their own expertise andexperience of developing leadership at all levels inorganisations.

This paper is the second in the ‘Digital Leadership’series,which explores how TMT organisations can developthe agility to successfully navigate the digitaltransformation whilst developing the new skills andcapabilities required for the digital economy. The firstpaper in the series, called ‘New Shapes and Sizes’, exploresorganisation design and can be downloaded at:www.deloitte.co.uk and www.spencerstuart.co.uk

1Leadership at all levels Leading TMT organisations into the digital future

Executive summary

TMT leaders have been, and continue to be, challengedto demonstrate a set of skills and insights that are newto almost all of the current leaders across the industry.They need to navigate their organisations throughincomparably tough market conditions whilst alsorepositioning and transforming them.

“You can put all the checks, balances and controlsin place but unless you change the culture it willbe meaningless. Unless there is real leadership thatstands up and talks about digital, that lauds it,that boycotts award ceremonies unless they haveonline awards, that sponsors online awards, itwon’t become a digital culture.”

Malcolm Wall, former Chief Executive for Content,Virgin Media.

Many leaders are still struggling to make complexchoices about the future of their business, to articulatea convincing narrative of what digital means for them.TMT organisations need to develop leadership at alllevels so that the right people can take key decisionsaround business model and product innovation.Traditional organisations need to develop agility tomanage the transition to a new market place which isdefined by consumers whose consumption habits anddemands are ever-changing.

“I’ve been in this business 12 years and for the first8 years we were ahead of our customers, deliveringmulti-channel, PVRs, high def, etc. As an industrywe are now behind our customers’ expectationsand demands – devices have changed everything.”

Mike Darcey, Chief Operating Officer, BSkyB.

“We don’t need someone who just breaks eggs; weneed someone with a ferocious intellect who canset out a clear and compelling vision and alignpeople and their behaviours to it.”

Rona Fairhead, Chief Executive Officer, Financial Times Group.

Digital has been a double-edged sword for Technology,Media and Telecoms (TMT) organisations. On the plusside it has created many new avenues for growthamongst a connected and technology-savvy consumerbase. On the flip side, it has suddenly and drasticallyreduced the effectiveness of business models that havesustained the industry for decades. The recentdownturn has added to the pressures resulting fromthese structural shifts by draining balance sheets of cashand organisations of the resources to effect change.

Never has the call for leadership been stronger. Nowmore than ever, organisations need leaders with theability to galvanise a group of people to work togetheron tough problems, many of which have no knownsolution. We define leadership as a set of actions oractivities, rather than as a position or the uniquecharacter of a visionary. As such, we argue thatleadership is needed across TMT organisations as theytackle the multifaceted challenges of the digitaltransformation; leadership is needed at all levels.

Traditional players need to overcome significant culturalbarriers as they look to change working practices thathave thrived for many years. Leadership is abouthelping people to transition past these existing ways ofworking and seeing the world, it is about adaptingorganisations for the new environment they are facing.

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By bringing these three dimensions together, leadersmust build leadership at all levels, developingleadership capability throughout the organisationalhierarchy and ensuring that legacy structures do notimpede the ability of individuals across the organisationto exercise leadership.

Using the media sector as an anchor, this paperidentifies explicit actions for TMT leaders to improveleadership within their organisations in the digital age,quoting a wide range of successful TMT leadersthroughout.

This is the central challenge for chief executives andtheir management teams. What mix of approaches willenable them to successfully navigate the road out ofrecession and to transform their organisations to keeppace with their consumers? This is a question that canonly be answered by the executive team. We believethat it can be broken into three broad topics:

1. Reshaping organisations, rather than uniform costreduction approaches or the closing down of legacybusinesses.1

2. Increasing innovation (both product and businessmodel), at all levels of the organisation.2

3. Building leadership at all levels – the subject of thispaper.

The UK TMT industry demonstrates enduring strengthsin creativity, quality, and dynamism. The UK creativesector consistently punches above its weight in theinternational market. A third of all television formatsales around the world are created in British Productioncompanies. The sector is a major part of the domesticeconomy contributing 6.4% of GVA. Furthermore itcontinues to be a leading export success for the UK.In order to maintain this position, senior leaders willneed to demonstrate leadership in four dimensions –developing the insights necessary for successful changewithin complex systems, building the cognitive skills tomanage effectively in demanding environments, andencouraging the emotional intelligence to motivatetheir people.

3Leadership at all levels Leading TMT organisations into the digital future

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The leadership challenge forTMT organisations

“19 year olds use media inter-changeably, listeningto the radio on YouTube, watching a movie on theiriPod – yet media organisations keep different typesof content production in silos – music, TV, filmdivisions etc. We just haven’t moved with ouraudience”.

Martin Morgan, Group Chief Executive Officer, DMGT.

The recent cyclical economic downturn has been severeand although there are signs of recovery, structuralchallenges remain for media companies from disruptivetechnology and business models.

Figure 1. The impact of the recession on the TMT sector

In researching this paper, Deloitte and Spencer Stuartinterviewed leaders from some of the UK’s largest TMTfirms. The theme of these interviews was the DigitalTransformation and the impact it is having on theirbusinesses. A consistent theme emerged: digital ischanging the TMT world, and many organisations arenot changing quickly enough.

“We came to the conclusion, maybe an obviousone, that we are confronted with a real revolution.In the future digital will be compared to electricityand the consequences it had on people's lives andon society. It is not only the change in the medialandscape, but the way people will be educated,will learn, will communicate, make friends, shop,work. Everything in their daily life will be impactedby the development of digital. These changes willbe dramatic. And accordingly nothing short ofdramatic change will do for our organisations,structures, talent pool, etc.”

Maurice Levy, Chairman and Chief Executive Officer ofPublicis Groupe.

TMT leaders are challenged by the financial climate, theemergence of digital technology, consumers’ demandsfor improved services at lower cost and increasingcompetition from new market entrants.

The economic downturn was a record recession andhas arguably created the harshest conditions since theend of the Second World War.4 The budget deficit willexceed £150 billion and national debt will peak at over70 percent of GDP despite implementing real cuts inpublic spending. This has been a tough recession forsome TMT organisations (see figure 1 on the right).

Furthermore there are many new competitors in an everconverging market pace. Technology firms such asGoogle now deliver vast volumes of media andaggregate even more, whilst social networking sitescapture eyeballs that once belonged to the traditionalmedia. In response to the availability of new, on-trendservices, consumer interest is moving ever further andfaster than traditional organisations have necessarilyanticipated.

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Local press is a great example within the media industryof where a real threat to survival has galvanised radicalchange to the traditional business model.

“If you look at local press, in many ways you see amore rapid evolution ... Maybe it’s because they’relooking over the precipice. They got to a point 18months ago where you had to have your headreally deep in the sand not to know that you hadto change rapidly to survive.“

Martin Morgan, Chief Executive, DMGT.

It is clear that digital is, or will become central to thefuture success of established media organisations.Although some parts of the industry face immediateextinction, others are caught in a Catch 22 situation,where inaction will certainly lead to a long, slow declinein fortunes, but radical action could either save thebusiness or accelerate the decline. One of ourinterviewees perfectly summed this effect:

“We need to try things out and see what works,without cannibalising the existing business.”

John Robson, Vice President & General Manager,Paramount.

The level at which the digital leader sits within anorganisation typically indicates an organisation’s ‘stateof digital evolution’, and the extent to which digitalmedia is integrated in to the core business strategy. Fora digital vision to be defined with the degree of clarityand certainty necessary to drive transformative change,it is imperative that digital is on the agenda of the mostsenior leaders within the business.

“Media companies are unlikely to reap the benefitsof the digital revolution until the CEO is really livinga digital lifestyle themself, day-to-day. If a digitalstrategy is just a tick-box on the CEO’s “to-do” listthen the business will never be able to proveproperly that targeted and behavioural advertising(i.e. Digital) has more impact than old styleadvertising.”

Ashley Highfield, Managing Director and Vice Presidentof Consumer and Online UK, Microsoft.

Against this tough backdrop, the need to deliver highquality programmes, technology and customer servicewill become ever more critical. Despite revenue andprofit reductions – and because of the advent of digitaltechnology – consumers expect easy access to highquality products at a lower cost. Consumers expect tobe able to get content when and where they want it.Broadband users want fault free, high quality service, ata low cost. And mobile phone users expect exemplarydata and voice services wherever they are.

Four key themes emerged from our interviews, whichhighlighted the leadership challenge facing TMTorganisations. These four themes throw up thefollowing questions for leaders of TMT organisations:

1. Vision & Identity. Have I got a clear understandingof how to change my organisation to maximise theopportunity from digital?

2. Business Model. How do I evolve my businessmodel to integrate digital successfully?

3. Organisation. How do I organise to takeadvantage of digital? What are the capabilities Ineed? How do I acquire, grow and nurture digitaltalent?

4. Innovation. How do I create an environmentwhere innovation drives my organisation forward?

In the following pages, we will reflect on thesequestions and offer solutions based on the combinedexperience of our interviewees and our own knowledgeand expertise.

1. Vision and identity Have I got a clear understanding of how to change myorganisation to maximise the opportunity from digital?

The decline in revenues resultant from the economicdownturn provides media organisations with a strongrationale to drive digital change. Urgency and a fear ofdeath provide the catalyst to re-shape businesses.To take advantage of this opportunity, it is vital thatdigital is a core part of the business strategy. For this tobe the case, senior leaders must define a clear vision fordigital within their organisation.

5Leadership at all levels Leading TMT organisations into the digital future

“Attempts to increase the numberof advertising minutes per hourwill simply create a feedingfrenzy for advertisers that willnot yield any long-term winner. There are parallels with the pricepromotions of The Sun and The Mirror where there was noreal winner.”

Malcolm Wall, former Chief Executive Officer, Content, Virgin Media

“Attempts to increase the number of advertisingminutes per hour will simply create a feeding frenzyfor advertisers that will not yield any long-termwinner. There are parallels with the pricepromotions of The Sun and The Mirror where therewas no real winner.”

Malcolm Wall, former Chief Executive Officer, Content,Virgin Media.

Digital provides the potential for media organisations toradically change the blend of products and servicesoffered to consumers by getting closer to customers,using consumer data to target particular offerings,market products directly to specific segments, and buildrelationships with customers through two-waydialogue.

“When I'm thinking about digital it’s not just aboutwhat it means in terms of being able to change theoperational structure of my business to be moreefficient at a cost level. It’s about what it does interms of allowing me to ... access new revenuesources, as both circulation and advertisingrevenues are going to be under continuedpressure.“

Arnaud de Puyfontaine, CEO of Hearst UK, NationalMagazines.

Additionally, more accurate and immediate tracking ofmarketing and advertising initiatives enables greaterunderstanding of level of return on investment:

“Influence at the top table is paramount to thesuccess of digital. Getting invited in to theleadership team can have a significant impact as itputs digital on the agenda of every leader in thebusiness and can bring digital into the widerbusiness strategy. Equally, a business’ digitalstrategy and stage of evolution determine whereDigital Leaders sit within the organisation.”

Rebecca Miskin, General Manager, iVillage.

2. Business model How do I evolve my business model to integrate digitalsuccessfully?

The established business model of traditional mediaorganisations needs to change. Digital provides anopportunity to get closer to customers than everbefore, yet the extent of digital adoption withinestablished media organisations has been limited todate. The challenge for leaders is in balancing therevenue shift from established and lucrative oldproducts, to the relative ‘unknown’ of new digitalproducts. This context has influenced the mindset oftraditional media leaders to become more risk aversethan the ‘digital natives’ who operate in a legacy free,wholly digital world.

The rapid pace of digital change threatens the businessmodel of established media organisations and it iswidely accepted by leaders that simply selling more forless is not a winning response.

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“We can track an advertising campaign and itsimpact on the buying habit of a consumer in astore – we can give you exact ROI. Incredible ...”

Mark Rabe, Managing Director, Yahoo! UK.

Digital also allows media organisations quick access tomuch larger audiences than has historically been thecase. For example, NBC’s realisation that they hadaccess to 30million female customers through iVillagewas formative in achieving greater acceptance of digitalwithin the traditional business.

Despite the benefits of embracing digital, there was astrong feeling among the people that we talked to thatmedia organisations have not yet moved far enough – asense of digital ‘transition’ rather than ‘transformation’:

“The whole film eco-system is set up around thewindows as they exist now – this has to change sothat we can get our product to our consumerswhen they want it.”

John McMahon, Managing Director Europe, SonyPictures Home Entertainment.

Leaders need to decide what and how to change,when:

“We have more routes to market than ever before,we can have a direct relationship with ourconsumers. All of this is great – but there is morecomplexity than we have ever faced ...”

John Robson, Vice President & General Manager,Paramount.

There is clearly a tension between maintaining the oldproduct set and transitioning to a new product setwhich likely has different content generation andcontent distribution channels. Concerns regardingrevenue are central to this – new digital products mayinitially return limited revenue in comparison toestablished media channels; the challenges ofmonetising digital offerings are well documented andas-yet unresolved.

It is apparent that the mindset of traditional medialeaders differs significantly to the ‘digital natives’, withthe revenues achieved through traditional mediaworking to hold back change. By way of example – thedigital turnover achieved by the Guardian Media Groupin FY09/10 was circa £30 million against a turnover of£280 million for GMG’s continuing businesses. To atraditional media baron, the relative comparisonsuggests the transition to digital must be slow andmeasured. However, digital natives within organisationswhich have yet to return a positive balance sheet(YouTube, Spotify and Ocado among them), would seethis as a huge return and one which should sparkfurther investment and growth.

3. OrganisationHow do I organise to take advantage of digital? Howdo I acquire, grow and nurture digital talent? What arethe capabilities I need?

Organisational structure is an obvious consideration forleaders in embedding digital within traditional mediaorganisations. Beyond this, recruitment of new digitaltalent (potentially from outside the industry), isrecognised as being essential to achieving successfulchange. Subsequent retention of new recruits isdependent on leaders establishing a work environmentwhich recognises and nurtures digital talent; theentrepreneurial approach and work habits of whomtend to differ significantly from the typical traditionalmedia organisation. The adoption of different, digitalways of working will provide leaders with theopportunity to consider whether organisationalcapabilities must be maintained in-house, or can beachieved through successful partnering.

Leaders need to identify how the structure of theirorganisations must change to accommodate digital as acore offering. Organisations have previously tackled thisin different ways, although within the population thatwe interviewed it is now widely recognised that digitaland hard-print organisations must be fully integrated, orat least very strongly linked to achieve greatestefficiency of working and to safeguard brand integrity.

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“We have more routes to marketthan ever before, we can have adirect relationship with ourconsumers. All of this is great –but there is more complexitythan we have ever faced ...”

John Robson, Vice President & General Manager, Paramount

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“Interestingly, integration [of print and online] hasled to some changes in working practices, includingdifferent working hours ... But everybody nowunderstands that the whole offering – thecombination of the print and digital product – isimportant.”

Rona Fairhead, Chief Executive Officer, Financial TimesGroup.

It is evident that recruitment and retention of digitaltalent is recognised by leaders as being critical tosuccess. Big gestures in the appointment of digitalrepresentatives at board level are reinforcing theimportance of digital, yet recruitment below this ismore complex: digital talent typically originates fromoutside the traditional media industry, tends to beyoung and can struggle with the alien corporatehierarchy of large media organisations.

“The sourcing and recruiting of talent is nowbecoming more open-minded for mediaorganisations ... employees don’t need to haveblue-chip experience any more, they need to beentrepreneurial and are increasingly likely to come from smaller, niche companies.”

David Pearce, Chief Financial Officer, BBH.

Leaders need to consider how best to integrate verydifferent working styles and working practices to form acoherent whole that combines creative dynamism andcommercial reality.

“The real challenge is not in finding talentedindividuals, it’s making sure they can be effectivewithin the business. You have to work hard toensure you have a cohesive organisation ...”

Simon Waldman, Group Product Director, LOVEFilm.

Key to retaining talent is adopting an approach wherebusiness units and the individuals within them areempowered to make their own decisions, to experimentwith new ideas and to promote lean, value-creatingpractices.

From an organisational perspective, the impact ofdigital extends beyond the boundaries of theorganisation; there is strong awareness thatpartnerships and collaborations with so-called‘frenemies’ will be critical to long-term success. Leadersneed to consider what capabilities they must buildwithin the existing employee population, versus whatcapabilities they might source though successfulpartnering.

“It’s all about working in collaboration with peoplewith whom you are also in competition – we workin partnership with Google but on the other handwe are lobbying to contain them ... Apple andAmazon for example, are companies that we buyfrom, sell and supply through and partner. It’s verycomplicated and not what management are usedto dealing with.”

Carolyn McCall, Former Chief Executive, GuardianMedia Group.

4. InnovationHow do I create an environment where innovationdrives my organisation forward?

Fundamentally, innovation underpins progress in thedigital age, and the need to be innovative now touchesthe majority of organisational roles in some form. Thechallenge for leaders is in achieving an environmentwhere innovation is channelled so as to be as costeffective and efficient as possible, without being stifled.

In this digital era, innovation is a key organisationalcapability; fundamental to building new structures,creating new products and services, identifying newbusiness models, launching new offerings andultimately to establishing a new position within thedigital market place. The theme of ‘innovation’ extendsthrough digital product and service offerings to thecustomer experience; BSkyB face the cultural challengeof encouraging the 9.5 million homes who are used todealing with BSkyB on the phone to move to an onlinehelp model.

Leadership at all levels Leading TMT organisations into the digital future 11

”This is about retraining our customers to use theinternet as their first port of call.”

Mike Darcey, Chief Operating Officer, BSkyB.

Related to this, it is important to note that innovation isno longer the domain of the organisation’s ‘creatives’,and is arguably now a core competency for the majorityof roles in media organisations where digital has anylevel of impact. For example, in a digital worldunderpinned by technology, IT specialists are key toturning good ideas into new digital revenue streams.

“I see software engineers being as creative andimportant and critical as the editorial creativetalent.”

Erik Huggers, Director Future Media and Technology,BBC.

By its very nature, innovation invokes a degree of trialand error and ‘feeling the way’. This is a significantdeparture from the linear and planned productionprocesses of old and marks a step-change toestablished methods of working within traditionalmedia organisations. The user-informed evolution ofBBC iplayer is one example where user consumption/activity has guided the process of product development,necessitating a fluid production process but achievingan end product which is arguably stronger and morepopular as a result. As the BBC’s Erik Huggers observed:

“The iPlayer isn’t simply about wrapping sometechnology around the programme ... it’s aboutcreating a new user experience.”

The leadership challenge here is to create anenvironment where innovation is accepted andencouraged, but to strike an appropriate balancebetween innovation of new ideas and control of spend.It was an express concern for many that we spoke to,that the process of innovation is managed in such away that it achieves ‘best value’ for return oninvestment.

“There’s a need to avoid seven year old kids on thefootball pitch syndrome.”

Rona Fairhead, Chief Executive Officer, Financial TimesGroup.

Google has adopted a different approach to managingthis challenge. They famously give a large number ofemployees one day a week to work on ‘personal’projects, thereby encouraging entrepreneurialism andinnovation. Efficiency of working is achieved through an‘ideas market’ where individuals choose which projectsthey want to work on – everyone wants to work on theinnovative, exciting ideas, such that bad ideas simply donot get off the ground and available skills are put tobest use. The institution achieves control through the‘wisdom of crowds’ – a fantastic example of individualsdemonstrating leadership at all levels.

Whenever an organisation faces a serious issue or crisisthere is always a call for greater ‘leadership’.

When people become disillusioned with a governingparty they will decry the fact that the current set ofleaders do not give them the ‘leadership’ that theyneed and they will call for new ‘leaders’ who will. The banking crisis, public sector debt, and BP’senvironmental disaster – all of these have seen, or will see, a call for better leadership.

Yet leadership is a poorly defined term with nocommonly recognised definition.

In our view, leadership is not a role, nor a specificcapability bestowed on people through innate traitswith which they are born. If this was the case it couldnot explain why great leaders can become very poorleaders – for example, Churchill as Prime Ministerpre and post World War II; Capello in the World Cupqualifiers and then in the contest itself.

We do not believe that great leaders are born great;too often the term leadership is mistaken for adescription of a person. We separate a leader as anentity from leadership as action.

We therefore advocate that leadership can be learned –it is a set of skills that can be developed over time. We identify leadership as a set of actions or activitiesnecessary to mobilise a group of people to worktogether on tough, complex problems.

We find a framework developed by Keith Grint atWarwick business school a useful way of definingleadership. Organisational issues can broadly be dividedin to three categories

1. Tame problems: problems that have been seenbefore and for which there is a known solution.They may be complicated – but the right personand the right process will solve the problem. Heartsurgery is an example of a tame problem. Heartsurgery involves a complicated process – but withthe right person (a specialist surgeon) we knowhow to do it. In this framework the approach totame problems is management – getting the rightperson and process in place.

2. Crises: unexpected situations which occur quicklyand need to be taken under control. Crises requiresomeone to give the answer to the problem. Forexample, during the 7/7 bombings in London theparamedics getting into the underground stationstook control of the crowd and told them exactlywhat to do. Crises require commanders – people inauthority who have the answer to the crisis we arefacing.

3. Wicked problems: problems that have not beenseen before, for which there is no commondefinition and no known solution. Wicked problemsare typically multidimensional, involving numerousstakeholders with differing opinions. For example, awicked problem is identifying what we want to doto stop heart disease occurring. One approachwould be to address the underlying social issues,but what would this mean? Do we stop the fastfood industry? Do we educate our children to eatbetter? Do we put school meals back in place? Whopays for all of this? Do we ban smoking andalcohol? There are many definitions of the problemof heart disease; there are many stakeholders, all ofwhom have a right answer. Working on wickedproblems is what we determine as the task ofleadership.

Why leadership is so important

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Leadership is tough. Often it is about overcomingdeeply ingrained behaviours and leading organisationsthrough radical change so that they can survive.Ironically, the reasons why organisations becomesuccessful in the first place are what makes them sotough to change. Ways of working that have beensuccessful in the past become deeply ingrained. Peopleare very determined to protect the way that things havehistorically been done. Many of our intervieweesreflected that their biggest challenge is changing theorganisational culture to embrace new ways ofworking.

Our contention is that the changes that digital isbringing are presenting the TMT industry with a seriesof wicked problems for which there are no knownsolutions. How will the music industry effectivelymonetise IP in the future? What will happen tobroadcast? How will newspapers maintain revenue ata level where they can produce the high qualityproduct that we all want? These are all wickedproblems.

Leadership is about energising people in mediaorganisations to work together to define the bestpossible solution. In order to do this, we assert thatindividuals need to demonstrate leadership in fourdimensions – as depicted in the pyramid diagrambelow:

1. The leaders’ insights necessary for successfulchange within complex systems.

2. The leaders’ cognitive skills to manage effectivelyin demanding environments.

3. The leaders’ emotional intelligence to motivatetheir people through difficult times.

4. The leaders’ ability to build leadership at alllevels.

Figure 2. The four dimensions of leadership

13Leadership at all levels Leading TMT organisations into the digital future

Leaders’ insights

• Ability to change the context• Ability to break reinforcing systems

Building leadership at all levels

• Pushing down accoutability• Removing organisational barriers• Developing leadership across the system

Emotional intelligence

• Creating compelling narratives• Working effectively in teams• Focus on real work across boundaries

Cognitive skills

• Ability to develop effective strategies• Focus on operational delivery• Focus on lead indicators

Leaders’ insights are about high-level judgements anddepend primarily on clarity and courage, rather thanskills. The role of the leader here is to make sure thatpeople are doing what you need them to be doing, tochallenge accepted ways of working and to identify andbreak negative reinforcing loops. Ways of working thathave been successful in the past become deeplyingrained. People are determined to protect ‘the waythat things are done around here’.

The rapid decline of local media is a classic example ofsmart people adopting system behaviours whichultimately achieved an undesirable outcome. Thesesystem behaviours are variously badged ‘reinforcingloops’ or ‘conspiracies of optimism’. ‘The system’ iswhat people refer to as ‘culture’ or ‘power relationships’or ‘how things happen’ or ‘the acceptable standard’.

Many could see the internet transforming the localmedia space as classified and local advertising moneymigrated online. However many traditional local printbusinesses did not respond to the transformingmarketplace quickly enough, maintaining businesscycles that were structured around the print run andkeeping digital and physical sales teams separate. Thelocal press and directories businesses are examples ofsections of the industry that have been devastated –and the question has to be asked whether theleadership of these sectors moved far enough, fastenough. Google and internet search engines came intobeing in the 1990s and their impact on local advertisingmarkets was written about many years ago.If you as a leader wish to break through these systembehaviours, what do you do? Two things:

• First; you need to change the context in which yourpeople work – don’t let a good crisis go to waste.2010 presents a once-in-a-generation opportunity tochange how we work, especially to move to anorganisation set up for the digital world. There is areal culture clash going on in TMT organisations andthis is an opportunity for leaders to move theirorganisations to a new way of working.

This move to new ways of working has to be madevery visible to all across the organisation. Largesymbolic gestures are important, as is focusing on thekey ways of working that need to change. Where doold behaviours have to change? Where do you needto integrate a digital mindset in firmly establishedways of working? For example: in broadcast, is thedigital team really integrated with the creatives at theinception of an idea? In advertising, are digital expertsand above-the-line resources working together as ateam?

“You can put all the checks, balances andcontrols in place but unless you change theculture it will be meaningless. Unless there is realleadership that stands up and talks aboutdigital, that lauds it, that boycotts awardceremonies unless they have online awards, thatsponsors online awards, it won't become adigital culture.”

Malcolm Wall, former Chief Executive Officer,Content, Virgin Media.

Significantly, this move to new ways of working is notall about pain – some TMT organisations have alreadymade this move and one of the consequences hasbeen a more productive and satisfying workenvironment, albeit a more demanding one. It isimportant that context shifting, organisational changeis supported by clear messaging and clear signals ofcommitment from leadership – the ritual slaughter ofa ‘sacred cow’ will do, a clear shift of resources orcommitment to stakeholders will also help.

• Second; you need to choose the points at which tobreak the system behaviours that channel yourpeople’s actions in some undesirable directions –know where to apply the pressure. This could includechanging financial procedures and constraints, exit orclosure of high-profile problems, taking a firm grip ofthe family of divisions and functions, simplifyingaccountabilities, making public commitments to achanged approach.

We label these two groups of actions leaders’ insightsbecause they are fundamentally about high-leveljudgments and depend primarily on clarity and courage,rather than skills.

Leaders’ insights

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By cognitive skills we mean the coupling of intellectual/rational skills with the wisdom to deliver results. Withoutthese intellectual skills, regardless of insight and inspiration,TMT leaders will be unable to make digital ‘stick’.

Organisations across TMT sectors have to rethink bothwhat they do and how they do it, in a way that the TMTsector has not experienced since the advent of television.Leaders will have to grapple with major restructuringprogrammes which take out cost from legacy businesseswhile investing in new technology and transitioning to newbusiness models. Leaders must therefore drive their peopleto think differently and consequently to behave differently.Old ‘truths’ will have to be challenged and re-set. This willrequire first rate strategic thinking coupled with an abilityto translate it into meaningful and transformative action.

Building these cognitive skills requires continuedinvestment in development, continued recruitment ofexperienced practitioners from neighbouring sectorsand moving leaders to roles in other firms facing thesame challenges.

Carolyn McCall, former Chief Executive of GuardianMedia Group, echoed this view:

“We need outsiders with fresh eyes ... there is still afear or a threat that this will destabilise the teambut we need new people to shake things upbecause we need to look at commercial models ina very lateral way.”

Strategic thinking, operational delivery and effectivegovernance are critical responsibilities of the leader. This requires leaders to master technical skills andbehavioural skills, which constitute the intellectualfoundation of effective leadership. It is not aboutcrafting a great operational strategy in isolation; it isabout the ability to then deliver both through peopleand across complex organisations.

Leaders need to have the ability to create solutionswhich will work in their organisational context; henceour definition of cognitive skills as the coupling oftechnical mastery with well developed behavioural skills.However, this type of cognitive skill cannot bedeveloped in the classroom – it needs to be developedthrough working with frameworks and applying themto real work. David Pearce, CFO, BBH, described it as aneed for greater “corporate awareness”:

“Leaders within media organisations now need tounderstand where their organisation’s capability gapsare and where they can partner to address these.”

In addition to all of these ‘baseline cognitive businessskills’, many TMT leaders require commercial skills atreasonably junior levels in organisations so that they cantake important decisions about digital opportunities.

Leaders’ cognitive skills

15Leadership at all levels Leading TMT organisations into the digital future

• Know when to compete and when to co-operate.Digital businesses are so dynamic that new ideas,models and industries can spring up practicallyovernight. A business attempting to respond to eachnew thing from scratch will almost certainly become ajack of all trades, but master of none. The solution isto know where your products are differentiated fromthe competition in the minds of the customer andthen co-operate to build or share the technical andcommercial underpinnings that enable them.

16

Digital therefore requires a combination of technical,creative and commercial skills across key people inorganisations:

“This needs creative technologists – tell me wherethey sit in an organisation?”

Tim Bonnet, Chief Executive Officer, Tequila/TBWA.

Leaders need to be able to:

• Create and articulate effective and compellingorganisational strategies. Individuals should bereaching out to successful leaders across the TMTsectors and in entirely different national andinternational markets for advice and examples.

• Demonstrate a systemic understanding of how todeliver operational goals. Many TMT leaders benefitfrom mentoring (advice) and coaching (personaleffectiveness) in judging the right degree of directmanagement versus delegation.

• Develop the ability to ‘thin-slice’ data – knowingwhen to ‘deep-dive’ on potential derailing issuesthrough the effective and rapid analysis ofsituations. Building a stock of ‘good questions toask’ is essential. Many failures would have beenaverted if leaders had been able to explore thefollowing scenarios; ‘Demonstrate to me that wehave the capabilities necessary to deliver this’, or‘Show me what we would miss if we adopted asimpler standardised approach’, or ‘Why are wespecifying this rather than letting our frontline peopledecide?’.

Writing lists of emotionally-intelligent leadershipbehaviours is already a substantial industry, but what isstriking in our discussions with effective TMT leaders ishow isolated many of them appear. They feel that theyhave to come up with the ideas for digital change andfor doing more with less. They feel that they have tolead the charge for change rather than pass the torchto their team. They feel that they cannot rely upon theircorporate colleagues to work collaboratively rather thancompete with each other for resources. Furthermore,leaders are frequently locked into a parent/childrelationship with other parts of their organisations whoare competing for primacy as digital evolves. Perhaps itshould not be surprising in cultures which emphasisecreativity and technical excellence that emotionalintelligence has been under-valued and under-deployed.

Although leaders must lead – and do so visibly – thereis still a residual culture of not valuing management orleadership. Technical or creative people are the heroesof the organisation. Furthermore there tends to be awide gap between the leadership of the organisationand the frontline – often mirroring the relationship with‘talent’ in creative organisations.

To enable TMT leaders to continue to be effective andto lead their organisations through the digitaltransformation, their leaders need to work with theirteam to:

• Make the time to think and reflect honestly andopenly with their teams.

• Create compelling narratives of the changes facingthe organisation that all can identify with.

• Frame challenges effectively to get people, acrossorganisational boundaries, focused on the real workthat they need to do.

• Reduce ‘fear’ and disabling beliefs by fostering moreenabling states of readiness to face unexpectedpressures, while still retaining a sense of reality andrisk.

Furthermore leaders in public roles are dealing with everincreasing stress through pressures such as greateraccountability and transparency, caused by the ever-present 24 hour news services, an increased desire forhigh quality services at lower costs and so on. InOctober 2009, Gordon Brown discovered the risks ofthis increased transparency, where being unable toanswer a seemingly innocuous question about biscuitson MumsNet led to insinuations of being out of touch.Judith Woods, writing for the Telegraph, argued; “Whata dismal show that our Prime Minister failed to comeup with a single iconic brand name.”

Leaders have to develop levels of personal resilienceand self-belief to withstand this pressure. To besuccessful they have to develop personal insight andawareness of their own strengths, blind spots, potentialde-railers and untapped resources and potential. Thishelps build personal understanding of their ownleadership style and also facilitates a ‘best team’approach to leadership; building teams of people withcomplementary skills which play to each individual’sstrengths and also compensate for each other’sacknowledged gaps.

Leaders’ emotional intelligence matters – they mustbring their own strengths, values and personality to therole and, to avoid a mass exodus of talent, they mustbe able to take people with them. Appropriate self-belief is perhaps the most important emotionally-intelligent attribute leaders need to ensure they deploy.Leaders need to invest time in building self awarenessand developing their self belief, they also need to investin creating effective teams of complementary individualsthat they can work with; ensuring they have thepersonal resilience and peer support necessary for theseturbulent times.

Leaders’ emotional intelligence

17Leadership at all levels Leading TMT organisations into the digital future

Business leaders in today’s increasingly complex anddynamic economic environment are discovering whatmany of their peers in the public sector have known fora long time; that leadership is a collective endeavourand an ongoing process that is dispersed throughouteffective organisations. Leadership is no longer seen asthe preserve of the most senior, nor is it sensible to seeleadership linked exclusively to higher ranks. There is arequirement to push down accountability and developleadership throughout the system. This can fostergreater degrees of responsibility, innovation, problemsolving capability and the motivation to givediscretionary effort. However there is a fine balance tobe struck. For instance, leaders in Children’s Serviceshave to take tough and important decisions on childprotection that could end in a national scandal. Leadershave to be able to take the call as to when to ‘deep-dive’ into an emerging issue and when they can trustothers within their organisations to deal with iteffectively using their own authority.

Forget about hierarchyWhen addressing their varied ‘wicked problems,5 TMTleaders need to have the ability to influence and inspireothers in the system outside direct reporting lines,articulating a common purpose then probing intospecifics. The use of ‘positional power’ limits a leader’sinfluence on a system. Across all sectors, organisationalboundaries are beginning to blur, with partnerships,collaborative working and commissioning. Buildingleadership capacity and capability across organisationsto deal with complex and messy issues is a key facet ofeffective leadership

Set the toneAs Greg Dyke6 reflects, too often people inorganisations feel they are successful despite theirmanagement rather than because of them. The role ofthe leader has to be to create a culture that embraceslearning and is able to effectively challenge disablingmyths. Linking organisational leadership to front linedelivery through developing effective leadership at alllevels is a key task for leaders.

Arnaud de Puyfontaine, CEO of Hearst UK, NationalMagazines, summarised the challenge for leaders:

“You’ve got to create the vision, you’ve got to setthe agenda, you’ve got to establish a proper set ofvalues that will be the common element foranybody. So we must create the environment forsome great mavericks with innovative ideas and foran entrepreneurial type of approach with plenty offreedom.”

Remove the barriers To achieve this leaders have to remove structuralbarriers which hinder the delivery of successfuloutcomes (such as duplication of work, unclearaccountabilities or overly restrictive bureaucracy),allowing all to focus on the real work of theorganisation. They also have to focus on developingleadership capability throughout the organisation. Our experience suggests that leaders in successfulorganisations have made the development of peopleeveryone’s responsibility and have put in place enablingmechanisms to build the skills and capabilities necessaryfor leaders in individual functions to lead agile, highlyproductive teams.

Building leadership at all levels ultimately relies onleaders bringing together the previous dimensionsdiscussed in this paper. Leaders need the right insightsto break negatively reinforcing systems. They must buildthe cognitive skills necessary to further improveoperational delivery in an environment of fiscalconstraint. And, their levels of emotional intelligencemust be sufficient to harness the collective talents andideas of individuals across the organisation.

Building leadership at all levels

18

Building the leadership capacity and capabilities of yourorganisation has to be one of your highest priorities.For some this has been embedded in the organisation’sDNA for many decades. To address the financial crisisand realise the opportunities it also represents, youshould consider the following questions:

Chief executive

• Is your transformation plan in place with goals,milestones and means? Have you created appropriatenetworks to enable leaders across the organisation tointeract with the plan and discuss challenges andopportunities with you directly?

• Do you have a senior team who are workingcollectively together to enable change?

• Can you articulate a brief yet compelling message ofchange, framed appropriately to ‘connect’ with yourstaff?

• Have you considered specific interventions, such astailored coaching, to build your personal cognitiveskills?

Human resource director

• Where do you need to intervene to close gaps inorganisational leadership that are critical totransforming performance?

• Do you have a leadership programme in place that isintegrated with the overall transformation plan, andwhich builds leadership at all levels in theorganisation, rather than just the ‘top-tier’?

• What is your headcount reduction plan?

• Are you building the right organisational capability todeliver the digital agenda over the next 6-12 months?Over the next 2-5 years?

Frontline operating director

• Which lower-priority activities can you cease?

• Which major operating risks are likely to be exposedby reduced budgets and what is your mitigation plan?

• Are you connected to other leaders across theorganisation, so you have the opportunity to solve‘wicked’ issues together?

• Do you have a good grasp of the opportunities thatdigital offers you? Do you have the authority to bringthese to life?

• Do your staff have the skills to perform at lowerheadcount levels?

Finance or planning director

• Are accountabilities for performance crystal clear? Aregovernance and control processes simple, understoodand effective?

• Is your legacy cost reduction plan in place with goals,milestones and means?

• Do you know where to invest ‘digitally’ to have thegreatest impact on the long term future of thebusiness?

• Have you placed sufficient emphasis on budgets formanaging change or building leadership capability?

• Do you know which legacy businesses and functionswill close or merge?

Actions for TMT leaders

19Leadership at all levels Leading TMT organisations into the digital future

Leadership of organisations across the world is squarelyon the agenda of shareholders, institutional investorsand employees of all organisations. The digitaltransformation and the fallout from the economicdownturn challenge the leadership skills and capabilitiesof all TMT organisations. Undoubtedly an organisationwhich is best led will have a better chance to surviveand thrive. Furthermore, the tough decisions neededrequire leadership at all levels. Authority and powershould be distributed throughout organisations so theright people in the right places can take the decisions ...and very few of them can call on personal experienceof this degree of resource squeeze.

The UK TMT sector demonstrates enduring strengths increativity, quality, motivation and independence – butthe delivery track record is mixed. We believe thatcapitalising on these strengths and moving to the newrealities of high-productivity, demanding and skilledorganisations is not about recruiting or developingmore leaders, it is about exercising more leadership atall levels. Senior leaders will need to demonstrateleadership in four dimensions – developing the insightsnecessary for successful change within complexsystems, building the cognitive skills to manageeffectively in demanding environments, encouraging theemotional intelligence to motivate their people andactively developing leadership at all levels.

Furthermore these dimensions have to be addressedsystematically. It is no good being emotionallyintelligent without the requisite cognitive skills or viceversa. Most importantly of all, leadership needs to bedeveloped across the entire system so thatorganisations can move to a more agile, delivery-focused structure that will enable the traditional tocompete with the new on an even footing.

Recent DTT thought leadership

TMT Predictions 2010 –www.deloitte.com/tmtpredictionsTelevision’s Got Talent: Perspectives on the UK Televisionsector – www.deloitte.co.uk/tmt/televisionThe Deloitte CFO Survey –www.deloitte.co.uk/cfosurvey2010 TMT Global Security Study –www.deloitte.com/tmtFor more on our recent thought leadership, please visitwww.deloitte.uk/tmt

About TMTThe Deloitte LLP Technology, Media &Telecommunications Industry Group is represented ineach sector of the firm: audit; tax; consulting; andcorporate finance. The UK practice includes more than1,500 professionals dedicated to helping their clientsevaluate complex issues, develop fresh approaches toproblems and implement practical solutions. Clients ofDeloitte LLP include some of the world’s and the UK’stop software companies, computer manufacturers,wireless operators, satellite broadcasters, advertisingagencies and semi-conductor foundries – as well asleaders in publishing, telecommunications andperipheral equipment manufacturing.

Notes

1 See New Shapes and Sizes

www.deloitte.co.uk/newshapesandsizes

2 Paper to be published in Spring 2011

3 Digital Britain Report, Department for Business Innovation &Skills, http://interactive.bis.gov.uk/digitalbritain/report/

4 Record recession for UK economy, BBC News, 23 October2009: http://news.bbc.co.uk/1/hi/8321970.stm

5 Rittel & Webber ‘Wicked Issues in Social Planning’

6 Greg Dyke “Inside story”

Conclusion

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Leadership at all levels Leading TMT organisations into the digital future 21

Contacts

Authors

Deloitte

Keith LesliePartner, Central Government 020 7303 5494kleslie@deloitte.co.uk

Adam CanwellDirector, Technology, Media & Telecommunications020 7007 8073acanwell@deloitte.co.uk

Marianne GreenSenior Manager, Technology, Media &Telecommunications020 7303 2726magreen@deloitte.co.uk

Matt GuestManager, Technology, Media & Telecommunications020 7007 8073mguest@deloitte.co.uk

Adrian BassettManager, Technology, Media & Telecommunications020 7298 3560abassett@deloitte.co.uk

Spencer Stuart

Alastair RolfeHead of Marketing, Spencer Stuart020 7298 3560arolfe@spencerstuart.com

TMT Contacts

Deloitte

Ed SheddLeader, Global Media Practice020 7007 3684eshedd@deloitte.co.uk

Will GoslingPartner, Technology, Media & Telecommunications020 7007 8132wgosling@deloitte.co.uk

Howard McMinnPartner, Technology, Media & Telecommunications020 7007 9765hmcminn@deloitte.co.uk

Spencer Stuart

William AlexanderHead of European Technology Communications &Media, Spencer Stuart020 7298 3405walexander@spencerstuart.com

Grant DuncanHead of Media, Spencer Stuart020 7298 3464gduncan@spencerstuart.com

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