LEADERSHIP 4.0 COMPETENCIES TO ENHANCE DIGITAL TRANSFORMATION IN ORGANIZATIONS

COMPETÊNCIAS DA LIDERANÇA 4.0 PARA IMPULSIONAR A TRANSFORMAÇÃO DIGITAL NAS ORGANIZAÇÕES

Alex Rogério da Silva Calado alex.calado@ufrpe.br

Universidade Federal Rural de Pernambuco - Recife/ Pernambuco, Brasil, Brasil

Ricardo André Cavalcante de Souza ricardo.souza@ufrpe.br

Universidade Federal Rural de Pernambuco - Recife/ Pernambuco, Brasil, Brasil

According to Schwab (2017), the exponential advance of innovations based on combining technologies such as artificial intelligence, robotics, Internet of Things (IoT), nanotechnology, and biotechnology, among others, characterizes the Fourth Industrial Revolution (4IR). 4IR is forcing: companies to reexamine the way they do business and require new higher-level skills for workers; governments to establish new ways of doing politics and delivering public services; and people to rethink how to develop careers, cultivate skills, and nurture relationships, while concerns about privacy, consumption patterns, and time devoted to work and leisure emerge.

However, technology is only half of the 4IR equation (McKinsey, 2022). To thrive in the 4IR, companies must ensure that their workers are properly equipped through upskilling and reskilling and then hire new people when necessary. Upskilling means that employees learn new skills to help them in their current positions as the skills they need evolve. Reskilling is the real challenge: workers are retrained with new skills that will enable them to fill different positions within their companies. According to Luchtenberg (2022), with 4IR technologies in the hands of a workforce empowered with the skills needed to use them, an organization’s digital transformation journey can move from aspiration to reality.

Digital transformation has become an important enabler for sustainable growth and innovation (Cathey, 2023). It can stimulate new business models, services, and revenue streams that can help companies boost bottom-line results. It can encourage greater operational efficiencies and productivity by streamlining complex processes, automating manual tasks, and removing redundancies. Furthermore, it allows organizations to improve customer experience, which is critical to increasing consumer loyalty and repeat revenues.

Digital transformation, or digitalization, occurs through technological, organizational, and human drivers (OECD, 2019; Oliveira & Souza, 2022). Technological drivers involve tools, digital technologies, and ICT infrastructure. Organizational drivers include adopting strategies, agile practices, and innovative approaches to (re)design business processes. Human drivers include knowledge, soft and hard skills required by stakeholders.

The Future of Jobs Report 2020 (WEF, 2020) points out that businesses are set to accelerate the digitalization of work processes, learning, and expansion of remote work, as well as the automation of tasks within an organization. However, the ability of global companies to harness the growth potential of new technological adoption is hindered by skills shortages. Still as found by the Future of Jobs Report 2020, skills gaps among organization’s leadership are a perceived barrier to the adoption of new technologies to accelerate the digitalization of work processes, and leadership and social influence will be one of the most demanded skills for the coming years. The coming decade will require purposeful leadership to arrive at a future of work that fulfills human potential and creates broadly shared prosperity.

Leadership is a competency associated with different skills such as social influence, persuasion and negotiation, decision-making, judgment, negotiation, delegation, and taking responsibility (DQ Institute, n.d.). According to the Education 2030 learning framework (OECD 2018), developing competencies involves mobilizing knowledge, skills, and attitudes and values to address complex demands.

In light of the specific skills demanded by 21st-century work and the challenges posed by the 4IR, this study is guided by the following research question: What are the Leadership 4.0 competencies necessary for leading a digital transformation journey in knowledge-based organizations? To address this research question, the study presents the findings of a mapping of the competencies required by leaders in the context of 4IR, as identified in the specialized literature. The contribution of this study lies in specifying and grouping the Leadership 4.0 competencies into a Reference Model, which can be utilized for various purposes, including diagnosing Leadership 4.0 competencies gaps in an organization aspiring to embark on a digital transformation journey.

Reference Model of the Leadership 4.0 Competencies

Digital Transformation, or digitization, empowers and simultaneously necessitates leaders to continually adapt their strategies, business models, products, services, processes, technology, and organizational structure under conditions of volatility, uncertainty, complexity, and ambiguity (Kohnke, 2017). Digitization places demand on leaders, requiring heightened flexibility, risk management, and agility in decision-making. It is inherent to the 4IR, where innovation is driven by diverse combinations of digital technologies (Schwab, 2017).

Competency gaps in leadership within organizations present significant challenges to the implementation of digital transformation (Bughin et al., 2018). The pivotal aspect of a digital transformation initiative is its alignment with leadership, serving as the indispensable foundation for organizational change (Kohnke, 2017). Consequently, leadership stands as a fundamental factor for the successful digital transformation of organizations.

According to DeRue and Ashford (2010), leadership can be defined by five essential elements: Leaders and Followers, where followers exert influence by providing input to leaders, and effective followers contribute to a constructive dialogue; Influence, a process by which leaders communicate ideas, gain acceptance, and motivate followers to support and implement changes; Organizational Objectives, emphasizing effective leaders' role in fostering a shared vision and guiding followers to align with organizational goals; People, highlighting the centrality of leading, working with, and guiding individuals with a shared vision; and Change, emphasizing that setting objectives and influencing are inherently linked to organizational adaptation to rapidly changing global environments.

As observed by Oberer and Erkollar (2018), a significant challenge for 4IR extends beyond finding or implementing the right technology; it also involves addressing a lack of digital culture and skills within organizations. Knowledge-based companies must cultivate a robust digital culture, with clear leadership driving transformative change. The imperative is to develop a Leadership 4.0 culture within organizations. Leadership 4.0 places less emphasis on traditional managerial skills, such as budget, scope, and deadline management, and is more closely associated with cognitive, interpersonal, emotional, and digital capabilities (Schwab, 2017; Bughin et al., 2018). The primary objective of this study was to comprehend and structure the Leadership 4.0 competencies. To achieve this, a Reference Model of the Leadership 4.0 competencies (Figure 1) was developed.

Figure 1
Reference Model of the Leadership 4.0 Competencies
Source: Prepared by the authors.

The design of the Reference Model of Leadership 4.0 Competencies is inspired by and theoretically founded on some works. Guzmán et al. (2020) present leadership skills and characteristics in the context of Industry 4.0 based on a literature review. The Digital Intelligence framework (DQ Institute, 2019) groups digital skills through matrix relationships between competency areas and levels. The Education 2030 Learning Framework (OECD, 2018) defines competency based on knowledge, skills, and attitudes and values. The Future of Jobs reports (WEF 2018, 2020, 2023) highlight the key cognitive, social, and technical skills demanded by 21st-century work in response to the challenges posed by the Fourth Industrial Revolution (4IR).

Guzmán et al. (2020) categorized conventional leadership skills into four groups: Cognitive skill, which encompass speaking, active listening, writing, reading comprehension, active learning, and critical thinking; Business skill, involving operation analysis, management of personnel resources, management of financial resources, and management of material resources; Interpersonal skill, which encompass social perceptiveness, coordination, negotiation, and persuasion; and Strategic skill, involving visioning, systems perception, system evaluation, identification of downstream consequences, identification of key causes, problem identification, and solution appraisal.

Guzmán et al. (2020) also synthesized the Leadership 4.0 characteristics (or profiles): Responsive leadership entails effectively adapting to various situations; Swarm leadership involves navigating complex adaptive systems, where decisions, innovations, and directions emerge from the system itself; Learning and innovation leadership focuses on fostering the absorption of new knowledge and the collaborative generation of new ideas; Open leadership involves effectively communicating and exchanging constructive feedback; Agile leadership involves considering various scenarios, exploring different options, and embracing diverse ideas; Participative leadership involves decentralizing and sharing decision-making responsibilities; Network leadership involves supporting both internal and external connections; Trust leadership focuses on establishing an organizational culture grounded in trust; Digital leadership refers to make the right thing into the strategic success of digitalization of the company and in its business ecosystem; and Collaborative leadership encourages workers to experiment and contribute new ideas.

Finally, Guzmán et al. (2020) highlight the relationship between the characteristics of Leadership 4.0 and conventional leadership skills. The authors conclude that business skills are less in demand for the Fourth Industrial Revolution (4IR). Instead, leadership styles suited for 4IR are more collaborative, participative, and decentralized, encouraging people to make decisions and experiment to create an agile and responsive network culture.

This work uses Leadership 4.0 profiles and cognitive, interpersonal and strategic skills surveyed by Guzmán et al. (2020) to specify Leadership 4.0 competencies in terms of the knowledge, skills, and attitude and values.

The organization of the Reference Model of Leadership 4.0 Competencies into competency areas and levels is inspired by the Digital Intelligence framework (DQ Institute, 2019). Digital Intelligence (DQ) comprises a comprehensive set of technical, cognitive, meta-cognitive, and socio-emotional competencies grounded in universal moral values, enabling individuals to navigate challenges and seize opportunities in digital life. DQ has three competency levels (digital citizenship, digital creativity and digital competitiveness), eight competency areas (digital identity, digital use, digital safety, digital security, digital emotional intelligence, digital communication, digital literacy and digital rights) and twenty four competencies, each related to the intersection of one competency area and one maturity level. The DQ competencies involve the articulation of knowledge, skills, and attitudes and values to support digital life, where digital interactions are pervasive in personal, educational, and professional contexts.

The Reference Model of Leadership 4.0 Competencies defines twelve Leadership 4.0 competencies, organized through a matrix relationship between four competency areas (connectivity, development, versatility, and personal) and three competency levels (digital culture, digital attitude, and digital transformation), detailed in the following sections. Leadership 4.0 competencies are also articulated through knowledge, skills, and attitudes and values. According to the Education 2030 learning framework (OECD, 2018), competency development involves mobilizing disciplinary, epistemic, and procedural knowledge, a wide range of skills — cognitive, social, emotional, practical, and physical — to apply knowledge in unknown and evolving circumstances, and attitudes and values guiding how knowledge and skills are used at personal, local, social, and global levels to tackle challenges and seize opportunities.

Leadership 4.0 Competencies mobilize essential skills for workers and jobs required for knowledge-based economy. The last three Future of Jobs reports (WEF 2018, 2020, 2023) highlights Leadership and social influence and Empathy and active listening, related to Working with people, as core skills required by workers.

Areas of the Leadership 4.0 Competencies

The Areas of the Leadership 4.0 Competencies are intricately linked to the key traits of digital leaders and followers. The following areas constitute the columns in the Reference Model, forming the vertical grouping of Leadership 4.0 competencies:

· Connectivity: Relates to the connection and cohesion between the leader and followers, fostering agile, decentralized, and collaborative decision-making with shared responsibility. Connectivity entails the distribution of decision-making within a team, where the leader establishes the necessary space and opportunities for decentralized decision-making.

· Versatility: Reflects the ability to swiftly act and react to changes and challenges, keeping pace with continuous shifts in project and operational constraints regarding scope, time, and cost. Versatility measures how digital leaders and followers respond rapidly to changes and challenges in an increasingly volatile and immediate environment. It involves leading groups or organizations toward constructive transformation, setting direction, and aligning people with the strategies necessary to achieve the organization's vision.

· Development: Establishes strong interpersonal relationships between the leader and stakeholders, especially followers. It involves leading by example, inspiring behavioral changes, and fostering skills optimization within the team. Bilateral trust serves as the foundation for the mutual support that the leader requires. Once a trust-based relationship is established, the leader can naturally inspire and develop skills in individuals to catalyze the digital transformation movement.

· Personal: Relates to the behavioral and emotional skills and other human factors of the digital leader. The acquisition and enhancement of leadership skills are influenced by the uniqueness of personalities, values derived from cultural context, and the leaders' personal experience (Guzmán et al., 2020).

Levels of the Leadership 4.0 Competencies

The Levels denote progress in achieving Leadership 4.0 competencies, reflecting the required maturity in a digital transformation journey. The following Levels form the rows in the Reference model, constituting the horizontal grouping of Leadership 4.0 competencies:

· Digital Culture: Signifying the ability to employ both hard and soft skills to cultivate a coherent and ethical mindset, embodying the fundamental behaviors of a digital leader.

· Digital Attitude: Reflecting the ability to implement Leadership 4.0 methods based on acquired knowledge, positively influencing work performance and team well-being to achieve superior results.

· Digital Transformation: Envisaging a digital leader capable of promoting digital transformation in the work environment, inspiring innovation and fostering healthy team integration leading to personal satisfaction.

Leadership 4.0 Competencies

Table 1 shows the Leadership 4.0 Competencies Matrix, offering a brief description of the twelve Leadership 4.0 competencies across four competency areas and three competency levels.

Table 1
Leadership 4.0 Competencies Matrix

Source: Prepared by the authors.

Based on the literature review findings, Leadership 4.0 competencies are specified into knowledge, skills, and attitudes and values. Table 2 outlines the competencies at the Digital Culture level. Table 3 then specifies the competencies at the Digital Attitude level, and finally, Table 4 details the competencies at the Digital Transformation level.

Table 2
Leadership 4.0 Competencies at the Digital Culture Level

Source: Prepared by the authors.

Table 3
Leadership 4.0 Competencies at the Digital Attitude Level

Source: Prepared by the authors.

Table 4
Leadership 4.0 Competencies at the Digital Transformation Level

Source: Prepared by the authors.

The Leadership 4.0 Competencies outlined in this work can be used to identify skill gaps in both team leaders and their followers. By diagnosing these leadership competencies gaps, organizations can plan actions to address weaknesses, preparing teams more effectively for a digital transformation journey.

The case study aimed to diagnose and capture the team's perceptions of the work environment. Each team member, including the leader, completed a brief and objective questionnaire, providing their perspective on each Leadership 4.0 competency in the context of their work environment. The anonymous feedback was then analyzed to identify any shortcomings highlighted by the team.

The case study was implemented within two teams at Accenture Brasil[1], the Brazilian branch of the multinational software development organization. Team I consisted of one leader and five followers, while Team II consisted of one leader and seven followers. Both teams were engaged in software development and bug-fixing, operating in a remote work setup.

Both leaders and followers completed an electronic questionnaire (Table 5) containing closed questions (Q1 to Q12) related to each Leadership 4.0 competency. Additionally, there was an open-ended question (Q13) that addressed individual perceptions about the work environment.

Table 5
Questions for diagnosing the team’s Leadership 4.0 competencies

Source: Prepared by the authors.

The answer choices for closed questions Q1 to Q12 followed a Likert scale: "Strongly disagree", "Disagree somewhat", "I don't know", "Agree somewhat", and "Strongly agree". Figure 2 displays the perceptions of the six members (leader and followers) of Team I and the eight members of Team II regarding Leadership 4.0 competencies. For each competency, the certainty index is presented as the percentage of "Strongly agree" responses to questions Q1 through Q12.

Figure 2
Teams I and II Perceptions on Leadership 4.0 Competencies from Questions Q1 to Q12
Source: Prepared by the authors.

When analyzing Figure 2, a certainty index of less than 50% indicates the main weaknesses related to Leadership 4.0 competencies. Therefore, for Team I, the competencies to improve are Agility, Articulation, Adaptability, Innovation, and Decentralization. For Team II, the competencies to improve are Articulation, Innovation, Decentralization, and Self-organization.

Tables 6 and 7 present the responses of Team I and Team II, respectively, regarding the open-ended question Q13, which evaluates the work environment. Question Q13 was optional, and not all participants responded. The answers obtained were analyzed to identify Leadership 4.0 competencies weaknesses.

Table 6
Team I Feedback on Questions Q13

Source: Prepared by the authors.

Table 7
Team II Feedback on Questions Q13

Source: Prepared by the authors.

The diagnosis, based on feedback from team members participating in the case study, identified the Leadership 4.0 competencies that need improvement. With this discovery, we can consult the specification of Leadership 4.0 competencies (Tables 2, 3, and 4)—the main contribution of this work—to identify the knowledge to be acquired, the skills to be developed, and the attitudes and values to be exercised by leaders and followers. This will strengthen the most needed Leadership 4.0 competencies, such as Agility, Articulation, Adaptability, Innovation, Decentralization, and Self-organization as diagnosed in the case study.

Agility goes beyond a set of practices—it's a philosophy that must be embedded into the organizational culture as part of an ongoing journey. According to Rigby et al. (2021), companies that embrace these principles become more adaptable and thrive in complex, ever-evolving business environments. Organizations that can quickly adjust and adopt a humanistic, collaborative approach are better positioned for success.

Denning (2022) highlights that for agile practices to succeed, the focus should be on continuous value delivery, maintaining sustainable work at a steady pace, promoting transparency and simplicity, empowering employees, prioritizing customer needs, and fostering collaborative, self-organizing teams while embracing uncertainty and exercising visionary leadership. Thus, organizations must integrate practices that encourage flexibility and adaptability in dynamic environments. Rigby et al. (2021) also suggest that companies should establish a clear strategy, consider various scenarios, and nurture a culture of experimentation where failures are seen as learning opportunities.

To strengthen Articulation and enhance collaboration between teams, it is necessary to understand the network of existing professional and interpersonal relationships. Establish mechanisms such as a community of practice to encourage the exchange of experiences and the dissemination of information and knowledge. Additionally, value and reward attitudes such as sharing best practices.

To enhance and make better use of connections, leaders must structure their professional and interpersonal networks around effective communication, negotiation, and conflict resolution. According to Northouse (2022), clear communication and accurate information dissemination are crucial for strengthening connections through articulation, enabling leaders to guide their teams in problem-solving and achieving goals. Leadership grounded in articulation enhances professional networks by encouraging the exchange of resources and ideas among participants.

Goleman (2021) underscores the importance of leveraging connections ethically and persuasively, with trust and reciprocity as the foundation for building alliances and strengthening one's reputation. The ability to resolve conflicts through mutually beneficial solutions and negotiate long-term outcomes further solidifies professional relationships. By ethically and effectively balancing the exchange of information, services, and power, leaders ensure that their networks remain sustainable, fostering continuous innovation and growth within the organization.

To strengthen Adaptability, leaders must adjust their behavior to fit the situation, balancing competing values like control versus empowerment, and rapidly adapting strategies in the face of disruptions (Schulze and Pinkow, 2020).

Executive coaching plays a key role in developing flexible leaders. Beyond diagnosing challenging situations, leaders should identify and nurture the skills of their followers, fostering a sense of independence and adaptability within the team (Boyar et al., 2023). Demonstrating behavioral flexibility, shifting between centralized and decentralized leadership styles, and adjusting to the needs of the group are crucial behaviors for cultivating adaptability (Boyar et al., 2023).

To strengthen Innovation and develop innovation-oriented capabilities in people, it is necessary to train and mentor the team in creative problem-solving approaches. Establish physical, technological, and psychological spaces that promote a growth mindset, risk-taking, learning from failures, and experimentation. Additionally, create a system that encourages individual and collective contributions of new ideas.

To foster innovation, leaders must integrate knowledge and practices such as cultivating an innovative mindset and embracing experimental approaches. This helps create a safe environment where employees feel comfortable taking risks and proposing changes, which is key to driving organizational innovation. Damanpour (2020) argues that leaders can establish an environment that lowers internal barriers, like the fear of failure, while encouraging the generation of new ideas and the decentralization of knowledge. By adopting these strategies, leaders can guide and inspire their teams to align with the organization's vision for the future.

Soto Setzke et al. (2021) emphasize that leaders should support practical experimentation and celebrate small wins, implementing a flexible, incremental reward system that acknowledges minor achievements to build confidence and encourage calculated risks. By nurturing creative individuals, minimizing negative influences, and setting balanced goals, leaders can create physical and psychological spaces that promote collaboration and innovation. In this environment, individual contributions are appreciated, and mutual support becomes integral to the organization's progress.

To strengthen Decentralization and enable participative and shared decision-making by the team, it is necessary to understand and practice leadership techniques, establish evidence-based management mechanisms using available information and knowledge, and foster a culture of trust and delegation of responsibilities.

To facilitate decentralization, leaders must embrace practices of shared leadership development by identifying and delegating responsibilities to team members with leadership potential. Hoch and Dulebohn (2022) suggest that shared leadership distributes decision-making across the team, leading to a more collaborative and efficient approach to overcoming organizational challenges. By recognizing individuals with the right skills and assigning management tasks accordingly, leaders promote spontaneous decision-making and reduce the need for constant oversight, ultimately enhancing team engagement and fostering greater autonomy.

According to Pearce and Conger (2022), trust and support in decision-making are crucial for effective decentralized leadership. By delegating decision-making authority, leaders not only build a trusting environment but also help the team develop its own leadership abilities. Zenger and Folkman (2023) highlight that exceptional leaders cultivate this trust by creating a culture that encourages decentralized decision-making and instills confidence in individuals’ abilities to tackle complex challenges.

Finally, to foster Self-organization within teams, leaders must avoid rigid management structures and fixed instructions that can limit team autonomy and adaptability. Denning (2022) suggests that adopting agile management practices helps keep teams motivated and cohesive, facilitating conflict resolution and removing obstacles. Denning highlights that by fostering a culture of empowerment and collaboration, leaders can act as facilitators who support teams in their autonomous work. This approach involves understanding the team's workflow dynamics and creating an environment that respects individual differences, thereby encouraging self-organization and agility.

Emotionally intelligent leaders are better positioned to integrate their teams and cultivate a healthy work environment where employees feel valued. Goleman (2020) emphasizes the importance of recognizing and respecting the workflow dynamics within teams, while clearly communicating an inspiring vision to guide the self-organized efforts of the team and foster alignment around common goals. This approach to emotional intelligence highlights the strong connection between emotional skills and organizational effectiveness, contributing to the development of healthier and more productive work cultures. Leading with a focus on results while removing obstacles that hinder the performance of self-organizing teams is essential. Brown (2022) argues that effective leaders should foster an environment where vulnerability and courage are valued, enabling teams to feel safe to collaborate and innovate. Brown (2022) also highlights the importance of understanding the unique characteristics and preferences of each team member, including what motivates them outside of work, to create a more engaged and productive atmosphere.

The rapid pace of digital transformation across various sectors of the knowledge economy and education, driven by the Fourth Industrial Revolution (4IR), demands the holistic integration of knowledge, skills, and attitudes and values, giving rise to the so-called Leadership 4.0 competencies. These competencies require greater attention to cognitive and interpersonal skills and less emphasis on traditional deadline, scope, and cost management. This study aimed to identify the key Leadership 4.0 competencies through a survey of specialized literature.

The outcome of this work is the specification of a Reference Model of Leadership 4.0 Competencies, structured through a matrix relationship between three competency levels (digital culture, digital attitude, and digital transformation) and four competency areas (connectivity, versatility, development, and personal), defined the twelve Leadership 4.0 competencies: Openness means creating a supportive environment that welcomes all feedback; Agility involves swift action, risk-taking, and learning from failures; Trust involves forming professional bonds with followers based on mutual trust; Empathy is about understanding and considering others' perspectives and feelings in professional relationships; Articulation involves leveraging internal and external competencies within a networked environment to maximize team interactions; Adaptability means responding to unplanned situations and swiftly adjusting to adversities; Innovation involves preparing and fostering team abilities to innovate; Communication is about effectively engaging diverse audiences through various channels and creating space for fluid interaction; Decentralization means participatory and shared leadership, where individuals actively engage in decision-making processes; Self-organization stimulates collective effort to collaborate organically around tasks or challenges; Collaboration involves fostering teamwork that leverages individual competencies; and Resilience involves maintaining a positive, proactive, and learning-oriented attitude despite failures and obstacles.

This work also included a case study that diagnosed deficiencies in Leadership 4.0 competencies within two teams comprising a total of fourteen individuals, including leaders and followers, from a large software industry company. Based on feedback from these teams regarding Leadership 4.0 competencies in the workplace, the main weaknesses were identified. With these findings in hand, the complete specification of Leadership 4.0 competencies, encompassing knowledge, skills, attitudes, and values gathered from specialized literature, was consulted. Subsequently, recommendations were made for strengthening the deficient Leadership 4.0 competencies.

The Leadership 4.0 competencies mapped and specified in this study have broad applicability and can benefit various audiences: Researchers focusing on competencies needed for the Fourth Industrial Revolution (4IR); HR professionals interested in recruitment and leadership development; Organizations seeking to pinpoint barriers in their digital transformation journeys; Leaders and professionals looking to gain an edge in the workplace; and Educators aiming to cultivate competencies essential for the 21st-century workforce.