The inner game of leadership is what determines success

When a company loses money, you can blame the external environment - which might be perfectly valid. Or you can look at leadership quotient - that is, how the leader's own worldview and ability to respond to change might be holding back the company's ability to rise to the challenge. When your industry gets disrupted, you can blame it on external factors. Or you can look deep into your own leadership mindset to see if you can manage the change better.

The recent news that Singapore Airlines (SIA) has for the first time in five years suffered an unprecedented loss of $138 million in the last quarter got me thinking about my days at Kodak, the photographic film company that gave its name to the "Kodak moment" to refer to meaningful events that should be captured forever on Kodak camera film.

Those were the days when years of sustained performance and iconic global brand leadership had contributed to a mindset of arrogance and defiance, almost as if the success that we owned would never leave us and we would ride its waves forever.

The benefit of perfect hindsight tells us that Kodak failed to understand the threat to its business from digital film. Looking back as a former Kodak employee, I think the company's long litany of mistakes that resulted in bankruptcy sprang from a crisis of leadership.

What else but a low leadership quotient can explain why the company chose to acquire the pharma company Sterling as opposed to the electronics division of Philips which was also available for about the same value? The connection between silver halide chemistry and pharma was seen as more strategic than the digital business that had the potential to redefine the business model for the future. We all know how that story unfolded.

Back to SIA. The airline built its reputation on a well-differentiated offering to the premium long-haul segment. But its competitors have caught up and moved forward. SIA is losing market share in particular to the Middle East carriers which have fashioned themselves on the same business model. Its full-year profits fell by 55.2 per cent to $360 million. It needs to reinvent itself. What got it here will not take it to where it wants to be.

So here is the question: Can you offer more benefits at the same or less cost? Can you increase market share when your prices are higher than competitors'? These are challenging questions that require the SIA leadership to address apparent contradictions, which often elicit either-or answers.

The general feeling in most organisational leadership theories is that you can do one or the either, as doing both is not seen as feasible. That is, however, a constrained mindset, a structure of the leadership mind that will never be able to accept that it is indeed possible to do both.


ST ILLUSTRATION: MANNY FRANCISCO

What leaders need is a different worldview - a self-transforming structure of mind that is able to re- concile polarities to be able to accomplish both - to succeed in the short term and the long term.

INNER AND OUTER GAME

Bob Anderson and Bill Adams in the book Mastering Leadership refers to it as "conscious competence".

We are always playing two games - an outer and inner game. The outer game of leadership consists of leadership competencies, such as developing technical or managerial skills, needed to accomplish results. Most efforts to develop mastery in leadership focus on the outer game of competence.

The inner game comprises the leader's meanings making system, the underlying beliefs and assumptions developed over time, the way the individual makes sense of the world. All competencies are built on the inner game, on the platform of consciousness. The better the outer game and the more mature the inner game, the more effective is the person's leadership.

It is possible to measure and quantify a leader's inner game or structure of mind. This is done using a psychometric assessment designed by the Leadership Circle, that gives a score, or ratio, of creative competencies over reactive tendencies. This ratio can then be tracked against a company's performance as defined by the leadership, whether it be earnings per share, return on investment and so on. Ample research, cited in the Anderson and Adams work, shows that the more evolved the structure of mind, the better the performance of the company.

Making decisions based on the past is a bit like driving into the future using only our rear-view mirror. This view of the world has a significant impact on the leader's ability to understand the difference between what is possible and what is probable. Our patterns of actions and habits of thought ensure that we continue to see things in a linear and sequential manner, driven always by a cause- and-effect mode of thinking.

In SIA, its leaders have acknow- ledged the complexity of the external environment and cited the intensity of competition and political and economic uncertainty as continuing to put pressure on yields.

The locus of control from which they are operating is largely external. It is clear from SIA's own messaging that they view the external environment as controlling them. The company is thus subject to all the external challenges that interfered and managed to derail all their best efforts at achieving their business performance goals.

The tendency among many leaders is to look outside, to see how things happened to them in ways that they found hard to respond.

FROM EXTERNAL FORCES TO SELF-AWARENESS

For leaders, the most critical part of closing your performance gap is to actually see it, not in terms of the outcomes, but in terms of self-awareness.

What has been your role in the results you are getting?

This is the inner game which takes place in the mind of leaders and those who work for them. It is the inner state of being, the lens with which you see the world, the frozen beliefs and assumptions which drive choices and actions, that can inhibit excellence in performance.

Are you or your team playing to win or are you playing not to lose?

Erica Ariel Fox in her book Winning From Within talks about what you should be doing and what you really end up doing which creates the performance gap.

This is a result of the state of mind that makes you stumble because of what is going on inside you. You are getting in your own way without even realising it.

Self-awareness is the foundation on which the leader builds his or her attitude and mindset which connects to his or her values and beliefs. Together it constitutes a person's inner operating system, the consciousness, the state of being.

Coping with ever-increasing complexity and planning for the future require a completely new way of making sense of the world and doing what needs to be done to generate or maintain competitive advantage.

Thinking anew and acting anew require a new level of consciousness, a new set of beliefs and assumptions about the business, leaders' inner state of being, and the state of the world they live in.

Making decisions based on the past is a bit like driving into the future using only our rear-view mirror. This view of the world has a significant impact on the leader's ability to understand the difference between what is possible and what is probable. Our patterns of actions and habits of thought ensure that we continue to see things in a linear and sequential manner, driven always by a cause-and-effect mode of thinking.

Dealing with complexity requires not the understanding of what is probable, but what is possible, a sense of what could happen, not because the past tells us that, but because we are willing to look at things from completely new and unexpected perspectives.

This requires a significant shift in the way leaders think, the conversations they have, the questions they ask or do not ask, and the very language of the organisation. This is not easy, as conventional thinking is safe thinking and does not, on the face of it, lead to greater levels of risk.

Authors Jennifer Garvey Berger and Keith Johnston, in a book Simple Habits For Complex Times, suggest that in complex situations, leaders concentrate on the present more than the future, look at the possible more than the probable, and conduct small-scale experiments to learn what might work.

Professor Robert Kegan at Harvard University, who has done a lot of work on adult development, refers to the structure of mind that drives performance.

Just as a Honda, which is otherwise a well-designed car with a good engine, cannot perform like a Ferrari, the leader's state of mind has to evolve to be able to deal with uncertainty and complexity in order for the business to perform at the levels the organisation needs.

A more complex mind is a more developed mind and will be able to distinguish between the complicated and the complex problems to find a simple solution.

When you engage a complex situation, you can simplify it, but that does not mean that the world is simple. It means that there is more to a given situation than just a cause-and-effect relationship, and you have a complex mind that is capable of finding answers from a much broader perspective.

This requires the ability to distinguish between issues that are technical problems and those that are adaptive challenges, in the words of Harvard Professor Ronald Heifetz. An adaptive challenge is something that requires a new way of thinking and cannot be resolved by throwing technical solutions at it or using skills that have worked before.

For example, if a train system breaks down frequently, the technical solution is to increase the maintenance schedules. The adaptive challenge, however, might be that the train system's ownership structure and mandate means employees view maintenance as not their problem.

Unlike technical challenges that can get fixed quickly with appropriate skills, with adaptive challenges you have to dig harder to identify underlying issues and discover a solution that does not exist. You need a whole new mind.

As Einstein said, "you cannot resolve a problem with the same state of mind at which the problem was experienced".

Leaders need to be coached so that they can evolve the structure of their mind, and unleash their creative state of being to be able to overcome the adaptive challenges they face.

They have to think differently. Certainty is a cruel mindset. It hardens our minds against possibility. In this age of the Great Disruption, as robotics, artificial intelligence and technology transform entire industries, we desperately need leaders who delight in the unknown. Those who have learnt that the past is not a good guide for the future. Those who are not afraid to fail, and have the conviction to make the leap of faith. Those that understand the words of Goethe: "The dangers of life are infinite. Safety is one amongst them."

The bend in the road need not be the end of the road, if leaders find a way to transform themselves.

• Pratap Nambiar is the founder and executive chairman of Thought Perfect, a Singapore-based organisation that provides business performance coaching to chief executive officers.

A version of this article appeared in the print edition of The Sunday Times on June 11, 2017, with the headline 'The inner game of leadership is what determines success'. Print Edition | Subscribe