Virtualities vs Realities: Leadership Challenges in SMEs

1. Virtualities vs. Realities in Digital Times - a Leadership Challenge in SMEs Bengt Johannisson, professor Linnaeus University/Jönköping University Presentation at Det Danske Ledelseakademi 2011 Conference, Copenhagen Business School, December 5-6, 2011

2. Agenda • Points of departure – Leadership and SMEs • Family-Business characteristics for all times? • Organizing in digital times • Lessons for stakeholder management • Conclusion

3. How it used to be • Entrepreneurship carried by strong-willed individuals (men!) running businesses • Organizations structured as hierarchies with distinct boundaries and strong legal defence • Uncertain environments due to lack of information but regulated by strong institutions

4. How it is becoming • Entrepreneurship carried by the many in all sectors of society • Organizing in constellations for firms with fuzzy boundaries • Ambiguous environments that are out of control, enacted through social media that construct realities out of coincidences and stories

5. Leadership is about • Envisioning new futures • Making sense in ambiguous times • Controlling by creating a sense of community that breeds commitment • Bringing out and amplifying the capabilities of followers • Epitomizing the need for recognizing change as a natural state

6. Featuring SMEs • Almost all firms are small family businesses • Running a business is an existential challenge • Most small firms are not radical innovators, that is do not remain entrepreneurial in the traditional sense • People are close in SMEs and SMEs are close to their (local) communities

7. The Family Business Logic • Active and visible ownership • Stable ownership and leadership • An long-term focus on doing business • Multiple objectives also including community • Independence against financial institutions • A flexible government • Owners identify with the busines and the business is identified with the owners

8. Strengths of SME/FBs • Feed families, places and economies • Has a potential for strategic awareness • Increased standardization and customization call for more improvisation • Help societies to make adaptation to a changing world smooth • Nurture familiness as a unique resource

9. SME/FBs as Gazelles Turn Weaknesses into Strengths • Existential motivation, not profit orientation, crafts familiness and creates persistence • Alert and frequent actions but humble visions replace irrelevant plans • Human and social capital reduce dependence on financial capital • Dialogue and interactivity, not pro-action, mean co-creating own development conditions

10. Familiness - Combining Business, Family and Community Concerns • Motivates and turns tensions between business and social considerations into sources of energy • Facilitates concerted action among owners, management and employees • Builds a bridge between the firm and the local community

11. In Digitial Times Entrepreneuring SME Dresses Differently • Any initiative, commercial or social, is invited • The web offers an arena for experimenting • Barriers to entry and exit are reduced • A U-shaped founder profile emerges • Running a business may appear as a temporary commitment independent of way of life – crafting mixed careers

12. The Return of ‘Papierlöst ledarskap’ • Digital dialoguing replaces documents • Networking instead of formal negotiations • Personal trust replaces impersonal contracts • Swift trust needed to deal with emerging opportunities

13. Digital Times Enforces Personal Networking that • Breeds new and feeds existing firms • Crafts the identity of the founder/leader and builds the legitimacy of the firm • Organizes social learning and brings resources to the firm • Informs when there is a need for a new mindset and a re-orientation of the firm

14. Running a Firm is a Passion that Calls for Human Encounters • Digital relating is like love without kisses • Trust is embodied and based on personal chemistry that fits • Joint intuitive decision-making calls for total presence, genuine dialogue and a confirming handshake

15. Proximities in a Digitalized and Globalized World • Synchronicity becomes both a necessity and an opportunity – kairos rules • Demand and supply are neighbours • Diffusion and materialization of ideas are immediate • Social media make new communities – personal, as well as national or global movements – emerge over night

16. Virtual Organizing Challenges Formal Structures • The globalization of the market has enforced the role of branding and the need for outsourcing beyond cost-efficiency • Changing logics – from the value-chain to the value-star call for new roadmaps • Turbulent times call for new modes of organizing: bunsha, adhocracy and heterarchy

17. Message for SME Leaders:Entrepreneurship is Genuinely Collective • The family is a basic social unit in business life as well as in everyday life. • The main source of product development is the dialogue with critical customers • In locations such as Herning individual firms are seldom entrepreneurial • As natural born entrepreneurs children play together

18. Leadership Challenges in SME Operations • Mobilize the digitial natives within and outside the family • Recognize the experience of those who have been dwelling in the business context • Build an absorptive capacity for user-driven and open innovation • Invest as much in building legitimacy as in creating uniqueness

19. Leadership Challenges beyond SME Business Operations • Replace a paternalistic outlook with a perspective that makes the women visible and generally facilitates succession • Establish a dialogue with not only commer-cial stakeholders but with societal a well • Pay special attention to the local schools in order to preserve an entrepreneurial attitude • Realize that social media may amplify any coincidence inte a major threat

20. Conclusions • The edge of chaos is everywhere • SME familiness appears as an energizer and a stabilizer in a turbulent world • In SMEs leadership means orchestrating internal commitment and external involvement • Increasing global visibility of any firm means that both economic and social issues have to be considered