Adaptive leadership provides a set of tools to meet the challenges of disruptive change. When confronting a truly disruptive change, the old rules and strategies stop working. No one has the answers and there is no “playbook” to follow. Leaders need new attitudes and new behaviors.
To begin, we’ll examine the story of Netflix – a plucky newcomer that started with a vision and was able to adapt and change at crucial moments to become an industry leader.
The beginning. In 1997, Netflix founders Marc Randolph and Reed Hastings were searching for a vision. They were impressed with Amazon’s success selling books online and wanted to try something similar. But they didn’t have a product to sell.
They considered, then rejected, the idea of selling and renting video tapes by mail. Tapes were bulky, fragile, and too expensive to ship. By the end of 1997, though, the DVD entered the U.S. market and Netflix had found its product.
The challenge. Netflix began offering online rentals and sales in 1998. The idea started to catch on, but not quickly enough to turn a profit. In 2000, the “dot-com” bubble burst and Netflix found itself in deep trouble.
Hastings and Randolph considered selling the company to Blockbuster Video. They pitched the synergistic benefits of a combined operation. Blockbuster would run the brick-and-mortar business while Netflix would run online rentals and sales.
The response. Blockbuster CEO John Antioco told them, “The dot-com hysteria is completely overblown.” Blockbuster didn’t think the online business model would ever make money. Nothing more came of the offer.
Blockbuster made efforts to compete with Netflix, but it was too late. Blockbuster filed for bankruptcy in 2010. Its video rental stores, once everywhere, had all closed by 2014, except for a single store in Bend, Oregon.
Blockbuster’s failure isn’t entirely due to Netflix, but its story could have been different if it had taken Netflix’s offer seriously. Meanwhile, Netflix had moved on.
Navigating change. In 2005, YouTube debuted. Netflix saw YouTube’s viewership skyrocket and, instead of burying its head, began looking into streaming video.
Netflix considered, then abandoned, an effort to offer movie downloads. It pivoted to streaming movies on demand. That move came just in time to compete with streaming upstarts like Hulu.
By 2009, Netflix streams had overtaken its DVD shipments. In 2011, Netflix entered the market as a producer of original content – another paradigm shift. Today Netflix has nearly 270 million users and is available worldwide.
Netflix did what Blockbuster could not – adapt to transformative changes in the marketplace. Let’s take a look at adaptive leadership and see how it can help organizations rise to meet transformative change.
Adaptive leadership is a method pioneered by Harvard professors Ronald Heifetz and Marty Linksy. Traditional leadership is based on a top-down, command and control style. By contrast, adaptive leaders “lead without authority” by seeking out a broad range of ideas and encouraging everyone to develop beyond their current abilities.
Adaptive leadership distinguishes between two kinds of problems: technical challenges and adaptive challenges.
Technical challenges can be difficult and risky, but they’re conventional. They can be addressed using “off-the-shelf” solutions and normal processes. Handling technical challenges is within the reach of a conventional, top-down leadership style.
Adaptive changes, on the other hand, involve transformations for which there are no existing procedures or ready solutions. No one is an expert. Adaptive changes require people to change and grow.
Adaptive leadership means bringing people together and fostering growth. Here are some traits needed to be an adaptive leader.
Character. A final characteristic of adaptive leadership is showing character and building psychological safety. Without character, leaders can’t build trust. Without psychological safety, team members won’t risk rocking the boat or thinking outside the box.
Emotional intelligence. Emotional intelligence is the top skill needed for adaptive leadership. E.Q. includes awareness of strengths and weaknesses, showing empathy, and building relationships. Without E.Q., leaders can’t see their own limitations or empower others.
Organizational justice. In the context of adaptive leadership, organizational justice means hearing every voice. When an organization is facing a transformational change, it needs every point of view. An adaptive leader must make sure that everyone feels heard.
Development. To reach the best solutions, adaptive leadership fosters a culture of growth and development. Both leaders and team members need to develop new skills and attitudes. Leaders must have a tolerance for creative failure.
Origin story. Netflix began with a bright idea: Do with video what Amazon was doing with books – sell (and rent) them online! Video stores were common then and everything was moving online. The idea was an improvement, but not a revolution, in the market.
Crisis point. Netflix reached its crisis point after the dot-com crash of 2000. The idea to sell the company to a competitor was a conventional response. We might say Netflix didn’t fully rise to the occasion.
Blockbuster had the chance to transform itself. But it didn’t make the effort needed to change and held on to the conventional wisdom that “dot-com” businesses would never work. Adaptive leadership could have changed the situation. Without it, Blockbuster was gone within a few years, while Netflix was just getting started.
The future. Netflix had more opportunities to seize the future – and it took them. The rise of YouTube is a case in point. In 2005, YouTube featured short, low quality homemade videos – often with cats in leading roles. For conventional leaders, cat videos don’t look like competition for Hollywood productions. But Netflix took the idea seriously and ran with it. They made a false start with downloading, corrected course, and became a major player in the new streaming marketplace. That was unconventional thinking. In the future, Netflix might even break the paradigm again and use AI to produce original content that is customized and custom scripted after the taste of users – an AI enabled on-demand customization.
On the cusp of market disruption, Netflix adapted to lead the market by facing change head on. That’s the essence of adaptive leadership meeting adaptive change. Netflix could have buried its head in the sand, or woken up too late, like a Blockbuster. Instead, it overcame its limitations.
Netflix made another leap into original programming a few years later. That may seem normal now but was a bold move at the time. It was another market disruption that called for new attitudes, mental shifts, and skills.
Adaptive leadership can help your organization meet its own transformative challenges, especially in today’s unfolding AI revolution and AI transformation. If you would like to learn more, please contact us.
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TEP.Global not only has a combined 100 years of experience and expertise in people management, talent acquisition, executive assessment, but also deep knowledge in building teams and workplace culture in organizations of all sizes. For more information and insights, please contact us.
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