Strategic Implications of the Changing Role of Leadership in the Digital Age

Table of Contents

LIST OF FIGURES

LIST OF TABLES

LIST OF ABBREVIATIONS

1 INTRODUCTION
1.1 Background l
1.2 Objectives
1.3 Structure and Methods

2 LITERATURE REVIEW
2.1 Fundamentals of Leadership
2.1.1 Definition and Distinction: Leadership
2.1.2 Evolution of Leadership Approaches
2.1.3 Full-Range Leadership Theory
2.1.4 Modern Leadership Concepts
2.2 Influencing Factors on Leadership in the Digital Age
2.2.1 VUCA
2.2.2 Digital Transformation
2.2.3 Technological Developments
2.2.4 New Work
2.2.5 Societal Changes
2.3 Fundamentals of Digital Leadership
2.3.1 Definition: Digital Leadership
2.3.2 Competencies of Digital Leaders

3 METHODS
3.1 Methodological Approach
3.2 Structure and Approach
3.3 Data Analysis

4 RESULTS
4.1 Research Findings
4.2 Competence Profile of a Leader in the Digital Age
4.3 Discussion

5 practical implications

6 LIMITATIONS AND FUTURE RESEARCH

7 CONCLUSIONS

appendices
Appendix 1 - Expert Interview Guide vn
Appendix 2 - Participants in Expert Interviews
Appendix 3 - Coding Scheme
Appendix 4 - Full Comparison of Leadership Styles

LIST OF REFERENCES

Abstract

In today’s world which is characterized by profound change, leaders are ex­pected to successfully steer companies through the difficulties of the digital age. To encounter the challenges leaders face on this journey, digital leader­ship has emerged as a potential approach, however, empirical research on the concept is limited. Hence, the main purpose of this thesis is to investigate dig­ital leadership by outlining the extent to which it emerges as a unique leader­ship style. Based on a comprehensive literature review and a qualitative anal­ysis of ten expert interviews, this thesis contributes to an enhanced under­standing of digital leadership. The results indicate that the role and perception of leadership itself are changing. The challenges arising from the new context of the digital age require leaders to display behavioral complexity and possess versatile competencies. By comparing digital leadership with established lead­ership styles, the thesis finds decisive congruence of various leadership com­petencies, while many digital competencies emerge as new. Overall, competen­cies regarding employee empowerment are of paramount importance. The complexity of the digital age requires leaders to exhibit situationally appropri­ate leadership styles. Therefore, digital leadership combines established lead­ership styles and is enriched by new behaviors required in the digital age. The extent of uniqueness is contingent on the new context in which leadership occurs.

Keywords: Digital leadership, leadership style, digital transformation

List of Figures

Figure 1: Evolution of major leadership approaches

Figure 2: Full-Range Leadership Model

Figure 3: Influencing factors on leadership in the digital age

Figure 4: NOPA+ Model

Figure 5: Most important skills of leaders in the digital workplace

Figure 6: Steps of qualitative data analysis

Figure 7: Interrelation of challenges and new competencies

List of Tables

Table 1: Comparison of established leadership styles

Table 2: Six roles of a digital leader

Table 3: Leadership competencies in the digital age

Table 4: Competence profile of a leader in the digital age

List of Abbreviations

Abbildung in dieser Leseprobe nicht enthalten

1 Introduction

1.1 Background

Digital seems to be the new normal. The Internet of Things (IoT), big data, new work, Industry 4.0, artificial intelligence (AI), cloud computing, and social net­working are just some of the widely discussed innovations of the digital age, which are profoundly transforming our entire world. Emerging digital technol­ogies are changing our way of working, living, and communicating, and pos­sess the power to disrupt entire businesses. Sooner or later, all industries, business segments, divisions and activities will be affected, forcing companies to embrace digital transformation to ensure survival (Harting et al., 2015, p. 2). This critical awareness is becoming especially present on companies’ exec­utive levels. According to a survey by MIT Sloan Management Review and Capgemini Consulting, 78% of questioned executives are certain that achieving digital transformation will become crucial to their companies’ success in the near future (Fitzgerald et al., 2013, p. 2). In accordance, a study by Capgemini Consulting and the Massachusetts Institute of Technology (MIT) found that businesses which are actively managing digital transformation achieve higher revenues (+9%), significantly larger profits (+26%), and a greater company value (+12%) than their competitors (Westermann et al., 2012, p. 7). However, less than one-fifth of respondents believed to excel at executing digital transfor­mation accordingly (Whitehurst, 2015, pp. 1-2). This partially reasons in the fact that the majority of companies possesses relatively low digital maturity levels and is not adequately prepared to respond to the challenges of digitali­zation (Petry, 2016, p. 23). Thus, potentials of digitalization remain untapped, and companies experience difficulties in reaping benefits of digitalization measures (Fitzgerald et al., 2013, p. 6). Often, a lack of leadership is cited as a major obstacle in achieving successful digital transformation (Whitehurst, 2015, p. 4).

In order to capture the value of digitalization, companies are in need of strong leaders who guide them through the turbulent times of transformation. In fact, leadership is seen as the driving force of the digital age (Crummenerl and Kemmer, 2015, p. 3). In the Global Human Capital Trends study by Deloitte, 80% of 10,400 human resources (HR) and business leaders agreed that leadership displays a critical factor in driving digital transformation success­fully (Bersin et al., 2017, p. 7). As today’s age is characterized by volatility, uncertainty, complexity and ambiguity (VUCA) (Petry, 2016, pp. 38-39), leaders face various new challenges when steering companies through digital transformation: changing customer- and employee expectations, a fast-paced environment, and higher competitiveness are creating a new context for lead­ership (Volini et al., 2019, pp. 1-2). Kane et al. (2019, p. 35) further identified conflicting mindsets of different generations, demands for flexible work­places, higher needs for productivity, and a resulting shift in organizational culture as critical challenges induced by digital disruption. In line with these challenges, 80% of respondents of the Global Human Capital Trends study by Deloitte believe that leadership in the new context of the 21st century pos­sesses unique and new requirements (Volini et al., 2019, p. 1). A similar tenure was found in a study by Forbes Magazine, which uncovered that 95% of sur­veyed companies think the digital age requires a different, new leadership type (Link, 2018). Consequently, the suitability of leadership styles characterized by hierarchical structures, power, control and authority has come into ques­tion, which however still seem predominant in today’s corporate world (Bohnenkamp et al., 2017, p. 7). There is substantial consensus that this type of leadership cannot accommodate the needs of the digital age (Bolden and O’Regan, 2016, pp. 443-444; Anderson et al., 2017, pp. 1-2). Consequently, a discussion about the necessity to completely rethink leadership has flared up (Kane et al., 2019, p. 34). Rooted in the numerous challenges of the digital age as indicated above and the resulting societal changes and shifts in values (Wächter, 2019, p. 302), leadership research has seen a proliferation of new styles and theories (Anderson and Sun, 2017, p. 1), various of which contain characteristics and competencies which seem suitable to successfully encoun­ter the challenges of the digital age.

Despite the existence of various modern and empirically researched lead­ership styles which deem suitable in the context of the digital age, digital lead­ership has emerged at the center of the discussion. Various researchers high­light the critical importance of digital leadership (van Dick et al., 2016, pp. 6­7; Crummenerl and Kemmer, 2015, p. 16), which is perceived to contain the most suitable leadership skills of the digital age (Barron, 2016). A study by the Deutsche Gesellschaft für Personalführung e.V. (DGFP) supports this notion, as it found that the vast majority of questioned executives sees the develop­ment of digital leadership skills as highly relevant and inevitable for business success in today’s world (van Dick et al., 2016, p. 6). Despite the perceived importance, little research exists on the topic of digital leadership and its the­oretical foundation is currently still insufficient (Lippold, 2019, p. 2). While digital leadership has been intensively discussed among consulting firms, the term has, so far, hardly been explicitly mentioned in scientific leadership re­search (Dörr, Albo and Monastridis, 2018, p. 38). Only few studies empirically examine digital leadership and the impact of digitalization on leadership. Yet, no clear definition or competence profile of a digital leader have been estab­lished. In this sense, researchers also speak about a leadership gap which has developed, as competencies needed in the digital age are largely not existent among executives (Schomberg, Sobieraj and Kruse, 2016, p. 90; Gebhardt, Hof­mann and Roehl, 2015, p. 5). Even more, there is lack of comprehension of which competencies are requested of leaders, as according to DGFP’s study, most executives admit not knowing which competencies are required in the digital age or how they can be developed and enhanced (van Dick et al., 2016, p. 8). The Global Human Capital Trends study by Deloitte further points out, that only 5% of companies believe to have strong digital leaders in place (Bersin et al., 2017, p. 79), and the majority of responding executives of DGFP’s study rank their own abilities as digital leaders to be low. Concluding, there appears to be a large discrepancy between the importance of leadership in the digital age as a driving factor of digital transformation in companies and the current state of knowledge of the suitability of leadership styles and required compe­tencies within this new context. Despite the perceived relevance of digital lead­ership in times of digital transformation, the concept remains largely unex­plored and shall therefore stand at the center of this thesis.

1.2 Objectives

As outlined above, leadership displays a critical factor for business success within the digital age, as leaders are regarded as the driving force to master digital transformation. The consequences of the profound alterations induced by digital transformation have had a particularly strong impact on the busi­ness world, leaving leaders faced with various new challenges and tasks. Clearly, in an environment which is constantly undergoing profound change processes, leadership behavior needs to be adapted to the new circumstances in order to be effective. However, in spite of the perceived importance of lead­ership for business success, it remains unclear how leadership is changing as a result of digital transformation, and which type of leadership and which competencies emerge suitable to encounter the challenges of the digital age. Despite the existence of a number of researched leadership styles which pos­sess specific characteristics that seem appropriate to lead in the digital age, there is an ongoing controversy focusing on digital leadership which is seen as the most desirable leadership style of today’s leaders. The concept of digital leadership has been widely discussed and ascribed immense importance albeit being insufficiently empirically explored. Hence, it appears to be of relevance to focus this research on further investigating the concept of digital leadership. Ultimately, this thesis aims to answer the following main research question (RQ):

RQ: To which extent does digital leadership display a unique leadership style which emerges due to digital transformation?

Consequently, the overall objective of this thesis is to investigate the concept of digital leadership by outlining the extent to which it emerges as a unique leadership style in today’s age which is characterized by digital transfor­mation. This shall contribute to reducing the research gap around the concept and will be approached by combining the topics of digital transformation and leadership within this research. In order to adequately address the complexity of this research question, three sub-questions (SQ) shall add to the establish­ment of a comprehensive answer.

SQ1: Which challenges are leaders facing as a result of digital transfor­mation?
SQ2: What are the most critical competencies leaders need to successfully lead in the digital age?
SQ3: Which type of leadership style seems most suitable to successfully lead in the digital age?

In order to approach the topic of digital leadership in the context of this thesis, it seems crucial to analyze the challenges for leaders in the context of digital transformation to substantiate necessary modifications in leadership behav­ior. Hence, this research aims to outline the challenges leaders are facing re­sulting from digital transformation. On the basis of the identified challenges, the most critical competencies leaders need to successfully lead in the context of the digital age shall be outlined. Hereby, it is of specific importance to as­certain whether new competencies have gained relevance which are not re­flected in established leadership styles. By analyzing selected modern leader­ship approaches, this thesis aims to establish a basis for comparison which will allow to determine the emergence of new competencies, and a suitable leadership style in the digital age. It is essential to analyze whether existing leadership styles deem adequate to meet the respective challenges and repre­sent required competencies in order to be able to clarify the emergence of digital leadership as a unique leadership style in the digital age.

Apart from assessing the substantiation of digital leadership as a unique leadership style and thereby contributing to reducing the research gap on this topic, this thesis will also establish a competence framework which depicts the most important competencies needed to lead in the digital age. As there seems to be no comprehensive understanding of the required competencies and how they can be developed, the findings of the thesis outlined in a competence profile can serve companies as a basis for leadership development training and recruitment. In addition, the findings of this thesis may help leaders to better understand the challenges posed upon them and the suitability of lead­ership styles to face these. Thereby, the thesis offers insights for leaders to potentially adjust their leadership style and behavior and acquire competen­cies in accordance to the challenging circumstances of the digital age.

1.3 Structure and Methods

Firstly, a theoretical foundation for the investigation of the research objectives is established in chapter two, which provides essential knowledge on three different topics: fundamentals of leadership, influencing factors on leadership in the digital age, and digital leadership. The literature review was conducted throughout the duration of the thesis, as digital leadership is a very recent topic on which new approaches are continuously being published. In the third chapter, the research context, methodology and utilized approach are pre­sented, before the research results of this qualitative study are summarized and discussed in the fourth chapter. The research of this thesis comprises of ten semi-structured exploratory interviews with experts from various back­grounds which were transcribed verbatim. The analysis and discussion of the research results gained throughout the expert interviews allow for the identi­fication of critical competencies of leaders in the digital age. Hence, a compe­tence profile is visualized accordingly. In the fifth chapter, the practical impli­cations of this thesis are discussed, followed by limitations and recommenda­tions for future research outlined in the sixth chapter. Finally, the seventh chapter concludes the main results of this thesis.

2 Literature Review

2.1 Fundamentals of Leadership

To establish a basic understanding of the topic of leadership, the term shall be defined and characterized contrasting to management, before the major historical approaches of leadership research shall be outlined briefly. The first theoretical sub-chapter further encompasses the review of the well-established leadership styles of the Full-Range Leadership Theory (FRLT), as well as selected modern leadership styles and will critically reflect upon their suita­bility in the context of the digital age.

2.1.1 Definition and Distinction: Leadership

Leadership displays a topic which has been a subject of interest for centuries. Considering the fact that the search for distinct qualities and characteristics of successful leaders is retraceable to antique philosophers like Aristotle (Northouse, 2013, p. 12) allows for an imagination of the richness of writings on this topic. Despite the existing plethora of research about leadership, it continues to remain a complex and puzzling concept for researchers (Northouse, 2013, p. 14). Building the foundation of this thesis, leadership shall be defined and its value in times of change shall be outlined by con­trasting it to the concept of management.

As a vast number of scholars have delved into the theories of leader­ship, the definitions are versatile and have not yet reached a universal consen­sus (Northouse, 2013, p. 2). In a review of numerous existing definitions of leadership, Yukl (2010, p. 21) points out various differences between them, however, finds that most of them ‘reflect the assumption that it involves a process whereby intentional influence is exerted over other people to guide, structure, and facilitate activities and relationships in a group or organization’. More simplified, Northouse (2013, p. 5) states ‘leadership is a process whereby an individual influences a group of individuals to achieve a common goal’.

Controversy has arisen on whether leadership differentiates itself from management, as many definitions, as the ones presented above, allow to draw several parallels to the concept of management. However, Kotter (1990, pp. 3­8), among other scholars, argues that a clear distinction between the two con­cepts must be made. While management is about ensuring order, consistency and reducing chaos and complexity in organizations by planning and organiz­ing structures, processes and capacities, leadership is concerned with change and movement in organizations. Thus, leadership is especially critical in situ­ations of crises and profound change, as leaders are prone to deal with chang­ing circumstances, establishing directions for movement, as well as influenc­ing and inspiring followers through a shared vision to achieve strategic goals (Kotter, 1990, pp. 3-8; Northouse, 2013, p. 12). In addition to management practices traditionally focusing on hard factors, a leader's soft skills are in­creasingly crucial for the achievement of a company's strategic goals (Wächter, 2019, p. 301). Thus, strong leadership emerges as especially important in times of upheaval and displays a key driver of organizational success.

2.1.2 Evolution of Leadership Approaches

In line with the various definitions of leadership, a variety of approaches can be found when reviewing existing leadership theories. The evolution of lead­ership approaches displays an adaptable, developmental process, in which new theories are often based on prior ones, partially incorporating and build­ing up on previously recognized findings (Ahmed, Nawaz and Khan, 2016, p. 1). The following chapter shall give a brief overview of the historical evolution of leadership research, as the approaches shape a basic understanding of lead­ership and remain relevant even in current research. An overview of the his­torical evolvement of the conceptualizations and their time and extent of at­tracted research interest is displayed in Figure 1.

Abbildung in dieser Leseprobe nicht enthalten

Figure 1: Evolution of major leadership approaches

Source: Adapted from Antonakis, Cianciolo and Sternberg (2004, p. 7)

Trait Approach

In the 19th century, Carlyle’s (1888) Great Man Theory actuated leadership re­search. The first efforts towards theorizing leadership were embedded in the inherent potentials of individuals, claiming that leaders were born, not made (Horner, 1997, p. 270). Based on this belief, certain individuals, often seen as heroes, were meant to take on leadership roles, as they possessed a rare rep­resentation of unique characteristics (Ahmed, Nawaz and Khan, 2016, p. 1). Progressing on this state of thought, researchers began investigating the defi­nite set of characteristics which constituted great leaders in the 1930s (Northouse, 2013, p. 19). It was believed that leaders were born with certain personal, physical and mental characteristics which differentiate them from followers (Horner, 1997, p. 270). Laying the foundation of leadership research, the trait approach focused on the personas of leaders and aimed to identify certain inherent traits, which inevitably made them effective leaders (Northouse, 2013, p. 19).

Behavior Approach

In the 1940s, theorists of the behavior approach delved into the investigation of what leaders do, rather than who they are, and found evidence that leader­ship behavior could be trained, refuting the assumption that leaders are born (Horner, 1997, p. 270; Northouse, 2013, pp. 75-76). Behavioral leadership re­search focused on the impact of leaders’ actions on organizational effective­ness (Horner, 1997, p. 270) and found that leaders could display two behav­iors: task behaviors, which aimed at achieving certain goals, and relationship behaviors, which aimed at accommodating followers (Northouse, 2013, p. 75). Multiple studies were conducted in the mid 20th century to identify a leader­ship style which allowed an effective combination of the two behaviors (Northouse, 2013, p. 95). According to Lippold (2019, p. 2), a leadership style is defined by the way in which leaders execute their leadership role, indicating a fundamental pattern of their behavior towards followers. Lewin, Lippitt and White (1939, p. 273) outlined three distinctive leadership styles: democratic, autocratic, and laissez-faire. The difference between democratic and autocratic leadership is embedded in either an abundance or a lack of participation op­tions by the followers, and laissez-faire is characterized by an absence of lead­ership behavior (Lewin, Lippitt and White, 1939, p. 273).

Contingency Approach

In the 1960s, a combination of trait, behavior, and the requirements of situa­tions allowed researches of the contingency approach to assume that the im­pact of a single variable of leadership was contingent on other variables (Horner, 1997, p. 271). This implied that effective leadership was contingent on matching leadership styles to the right situation (Northouse, 2013, p. 123). In this course, Fiedler (1967) investigated the situational favorability for influ­ence and found that certain leadership styles proved to be more effective in certain organizational contexts (Horner, 1997, p. 271). Further, House’s (1971) Path-Goal-Theory emphasized followers as a strong variable, and investigated how a leader’s style, the task, and characteristics of followers could impact follower’s motivation and thus affect performance and satisfaction (Northouse, 2013, p. 157; Horner, 1997, p. 271). Concluding, contingency the­ories found that no ideal leadership style exists, as its effectiveness is depend­ent on the situation (Ahmed, Nawaz and Khan, 2016, p. 2).

Relational Approach

Instead of conceptualizing leadership from the perspective of the leader, fol­lower or context, the relational approach originated in the 1970s and theorized leadership as a process (Northouse, 2013, p. 161). This approach was mainly represented by the Leader-Member Exchange (LMX) Theory by Danserau, Graen and Haga (1975), which focused on leader-follower interactions. Researchers uncovered that leaders maintain individual relationships with followers, de­pending on the compatibility of leader and follower, and followers’ willingness to enlarge their area of responsibilities. The theory distinguished between high-exchange relationships, characterized by trust and respect, and low-ex­change relationships based on sole fulfilment of agreements (Yukl, 2010, pp. 235-236). Researchers found that high-exchange relationships induce positive outcomes for the involved individuals, and for overall organizational perfor­mance (Northouse, 2013, p. 182).

New Leadership Approach

In the 1980s, emotional aspects of leadership gained relevance, giving birth to the new leadership approaches, also coined hybrid forms, which consolidate existing approaches (Sohm, 2007, p. 20). Burns (1978) introduced two dimen­sions of leader-follower interaction: transactional, implying a relationship- based exchange, and transforming, implying a personal relationship establish­ment which enhances leader’s and follower’s motivation, ethics, and morals (Antonakis and House, 2002, p. 7). Based on these two dimensions, Bass and Avolio (1994, pp. 2-6) developed and refined the encompassed leadership styles and conceptualized a Full-Range of Leadership Model. According to Kirk- bride (2006, p. 23) ‘the Full Range Leadership model is probably the most re­searched and validated leadership model in use world-wide today.’, as it has passed major empirical tests and its validity has received wide support (Anto­nakis and House, 2002, pp. 27-28). Additionally, several researchers have indi­cated that various facets of transformational leadership appear fitting also in the context of the digital age (Eggers and Hollmann, 2018, p. 60; Dorozalla and Klus, 2019, p. 93; Dörr, Albo and Monastridis, 2018, p. 44).

The historical evolution of major leadership approaches shows that many dif­ferent, yet somehow interlinked theories have been developed which build on one another. Hence, various aspects of these approaches remain relevant in leadership research until today. Due to the efficacy and universality of the FRLT developed within the new leadership approach, and the perceived the­matic relevance of transformational leadership within the scope of this thesis, the theory shall be outlined in the following, while reflecting on the suitability of the encompassed leadership styles in times of digital transformation.

2.1.3 Full-Range Leadership Theory

The Full-Range Leadership Model conceptualized by Bass and Avolio (1994) aims to display the complete range of leadership styles from non-leadership behavior to transformational behavior (Kirkbride, 2006, p. 24). In its current form, the FRLT consists of nine distinct factors, as displayed in Figure 2, which have been proven to be measured reliably by the Multifactor Leadership Ques­tionnaire (MLQ) (Antonakis, Avolio, and Sivasubramaniam, 2003, p. 262). The nine factors shall be outlined in the following to enable a more comprehensive understanding of the leadership styles, while reflecting on their applicability in times of digital transformation.

Abbildung in dieser Leseprobe nicht enthalten

Figure 2: Full-Range Leadership Model

Source: Own elaboration based on Bass and Avolio (1994, p. 6)

Transformational Leadership

Despite the abundance of leadership theories, much research efforts have been directed towards transformational leadership, as Anderson and Sun (2017, p. 1) uncovered that 22.7% of leadership articles published between 2000 and 2014 addressed this specific style. Hence, transformational leadership has been dominating leadership research. It combines aspects of trait, behavior and contingency theories resulting in an integrative theory of organizational leadership and is regarded as the most comprehensive hybrid approach exist­ent in leadership research (Sohm, 2007, p. 7). In essence, transformational leadership facilitates a process that transforms people and organizations (Northouse, 2013, p. 185), which implies critical thematic relevance for the research objectives of this thesis. Transformational leadership is characterized by a remarkable exertion of influence, which impacts followers’ values, beliefs, and capabilities (Bass, 1999, p. 11) and intrinsically motivates and challenges them (Northouse, 2013, p. 185). It aims to enhance followers’ abilities and inspire them to strive for a greater good based on a common vision (Bass, 1999, p. 11). In the FRLT, it is characterized by five factors, also referred to as the five I’s (Antonakis, Avolio, and Sivasubramaniam, 2003, pp. 264-265; Antonakis and House, 2002, pp. 9-10):

(1) Idealized influence (attributed): Leaders are perceived by followers as being charismatic, confident, powerful, and ethical. This is the emo­tional component of leadership.
(2) Idealized influence (behavior): Leaders act based on values, beliefs, mis­sion and moral orientation and display a role model for followers.
(3) Inspirational motivation: Leaders motivate and inspire followers by en­visioning the future and communicating visionary goals and how to achieve them.
(4) Intellectual stimulation: Leaders stimulate followers’ creativity to solve problems innovatively by questioning the status quo.
(5) Individualized consideration: Leaders act as a coach, advise and support individual followers to reach empowerment and development, and help them to grow and self-actualize.

Numerous studies have demonstrated a connection between transformational leadership and various success criteria (Antonakis, Avolio, and Sivasubrama­niam, 2003, pp. 262-263). The meta-analysis by Wang et al. (2011, pp. 249-253) particularly portrayed the effectiveness and importance of transformational leadership, as it was found to be strongly positively related to followers’ job satisfaction, team- and organizational performance, motivation, organiza­tional commitment and effort. Further studies pointed towards its positive re­lation to followers’ willingness to change (Anderson and Sun, 2017, p. 3) and its general positive influence in situations of transformation (Herrmann, Felfe and Hardt, 2012, p. 70) and high uncertainty (Kauffeld, Ianiro-Dahm and Sauer, 2011, p. 117). Moreover, it is positively related to innovation success of com­panies (Jung, Wu and Chow, 2008, pp. 590-592). Finally, Hinkelmann and Enzweiler (2018, p. 5) evaluate transformational leadership as the most suita­ble style in times of digital transformation, and Northouse (2013, p. 185) at­tributes transformational leadership’s popularity to its focus on intrinsic mo­tivation and follower growth; aspects which deem crucial for today’s work­force, which longs for inspiration and empowerment in times of volatility.

Transactional Leadership

Generally, transformational leadership is often contrasted with transactional leadership (Anderson and Sun, 2017, p. 1). According to Bass (1999, p. 11), the most effective leaders make use of a combination of both styles. Transactional leadership is seen as a crucial basis for effective leadership (Antonakis and House, 2002, p. 9), as repeated exchange can lead to mutual trust and result in the development of transformational leadership (Sohm, 2007, p. 24). Gener­ally, transactional leadership is characterized by the formally regulated eco­nomic exchange between leader and follower and is often described as the most commonly displayed leadership style to retain the status quo of perfor­mance (Avolio, Waldman and Yammarino, 1991, pp. 10-13). Motivation is achieved through extrinsic rewards and a focus is set on supervision, control, and performance (Ahmed, Nawaz and Khan, 2016, p. 4). In the FRLT, transac­tional leadership is characterized by three factors (Bass and Avolio, 1994, p. 4):

(1) Contingent reward (CR): Leaders reward or sanction the efforts of fol­lowers based on contractual agreements.
(2) Management-by-exception active (MBE-A): Leaders control for devia­tions from standards and take corrective actions.
(3) Management-by-exception passive (MBE-P): Leaders interfere only after the deviation has occurred.

Also, transactional leadership (i.e. CR and MBE-A) has been found to be related to team performance (Anderson and Sun, 2017, p. 4), and CR was associated with follower job satisfaction and general leadership effectiveness (Judge and Piccolo, 2004, pp. 762-765). However, as transactional leadership’s main pur­pose is to maintain the status quo, and it is based on control and supervision, it does not appear appropriate in times of change, disruption, and uncertainty and shall therefore not be further considered within this thesis.

Laissez-faire Leadership

Finally, the ninth factor of the FRLT describes laissez-faire leadership, which is characterized by passivity, as the leader is indifferent towards activities, avoids involvement, and is inactive in his role (Antonakis and House, 2002, p. 10). The demonstrated lack of leadership in laissez-faire leadership is eviden­tial for the irrelevance of this style in the digital age.

Despite the wide support and confirmations from various studies, Antonakis, Avolio and Sivasubramaniam (2003, p. 286) agreed that the FRLT cannot ac­count for all concepts of leadership, however believed that it displays an adequate starting point for expansion. In fact, within the last 20 years, leader­ship research has seen an explosive augmentation of the development of lead­ership styles (Anderson and Sun, 2017, p. 1). Researchers speak of a ‘chaos that characterizes the existing literature on leadership styles’ as Anderson and Sun (2017, p. 2) uncovered various overlaps of modern leadership styles, par­ticularly with the dominant transactional/transformational leadership styles, and argued that the FRLT might lack distinct dimensions of leadership behav­ior which have surfaced in new leadership theories.

Self-evidently, research on the FRLT is of immense depth and richness and has majorly shaped the leadership paradigm. Especially transformational leadership has been exposed as suitable for the challenges and requirements of the digital age. However, as various leadership theories have emerged re­cently, other modern leadership styles and their suitability in times of digital transformation shall be discussed.

2.1.4 Modern Leadership Concepts

Apart from the outlined transformational leadership, there are various other modern leadership styles which have been mentioned as suitable and hold va­lidity and relevance for effective leadership even in the age of digital transfor­mation. In order to outline which leadership style appears suitable in the dig­ital age, it seems adequate to briefly illustrate three selected styles of estab­lished findings from leadership research that contain characteristics and com­petencies which seem relevant for effective leadership in the context of digital transformation.

Authentic Leadership

Authentic leadership has majorly gained attention in recent times of crises, upheaval and uncertainty, as people are demanding honest and trustworthy leaders (Northouse, 2013, p. 253). George and Sims (2007, xxxi) define an au­thentic leader as someone who ‘brings people together around a shared pur­pose and empowers them to step up and lead authentically in order to create value for all stakeholders’. Thus, having a real sense of purpose, being passion­ate about one’s actions, acting upon strong values, establishing enduring rela­tionships, being self-disciplined, determined to achieve goals and acting com­passionate and heart, count as the most important features of authentic lead­ers (George and Sims, 2007, xxxi-xxxiii). These values are regarded as particu­larly important today, as the workforce demands strong relationships with leaders, giving them a sense of security and resulting in higher commitment. Also, self-discipline and courage are seen as necessary in difficult situations to move forward and remain goal oriented (Northouse, 2013, pp. 259-261).

Especially in an uncertain environment, authentic leadership provides con­sistency and can successfully influence followers to support change initiatives despite impediments (Yukl, 2010, p. 346). Various positive correlations with followers’ willingness to perform and work satisfaction can be found (Hinkel­mann and Enzweiler, 2018, pp. 22-23). Empirical research uncovered that au­thentic leadership is positively associated with follower job performance, iden­tification with the leader, and overall firm performance (Anderson and Sun, 2017, p. 8). However, due to the novelty of authentic leadership, research is not fully substantiated and needs further validation (Northouse, 2013, p. 269).

Participative Leadership

Participative leadership was first introduced in the 1930s within the behavioral approach labelled democratic leadership (Rosenstiel, 2014, pp. 9-10), and has recently received attention in light of the growing complexity of the modern workplace. It relegates leadership to the background and focuses on flat hier­archies and rapid distribution of information (Hinkelmann and Enzweiler, 2018, p. 23). This leadership style revolves around gathering followers’ opin­ions, discussing them, and including them in the decision-making process (Northouse, 2016, p. 118). Another important aspect of participative leader­ship is the self-steering of teams and their contribution of expert knowledge, as due to the increasing complexity, leaders cannot possess a holistic knowledge to adequately make decisions. Therefore, the involvement of highly skilled employees is necessary despite the risk of a prolonged decision-making process (Petry, 2016, pp. 40-41). Participative leadership increases employee development and advancement, but also trust and appreciation (Hinkelmann and Enzweiler, 2018, p. 23), and installs a sense of ownership for activities and decisions (Yukl, 2010, pp. 138-139). Therefore, participative leadership leads to follower identification with the company and its mission and increases the willingness to participate even in situations which are encountered with re­sistance (Rosenstiel, 2014, pp. 12-13). Hence, Dorozalla and Klus (2019, p. 93) see the application of participative leadership as an adequate response to dig­italization.

Adaptive Leadership

Adaptive leadership was specifically developed by Heifetz (1994) in response to challenges and change, to encourage followers to face problems and adapt to new circumstances (Northouse, 2016, p. 257). It displays an employee-cen­tric approach, which focuses on follower growth. Adaptive leaders foster ef­fective change by preparing and mobilizing followers and giving them opportunities to learn encountering changes in assumptions, attitudes, beliefs, and behaviors (Northouse, 2016, pp. 258-259). Certain roles are assigned to successful adaptive leadership: leaders need to be aware of the bigger picture, critically analyze the dynamics of the faced challenges, regulate distress among followers, create a holding environment, encourage discipline and fo­cus, provide direction, advise decision-making, and be open for ideas from underrepresented followers (Northouse, 2016, p. 274). Adaptive leaders are willing to take risks, experiment, question the status quo and encourage curi­osity and innovative activities among followers which can result in a competi­tive advantage in a globalized world (Hinkelmann and Enzweiler, 2018, pp. 23­24). Based on the characteristics of adaptive leadership, it seems to display an appropriate leadership style in the digital age. However, owing to its recency, the theoretical conceptualizations remain to be refined and validated through further empirical research (Northouse, 2016, p. 293).

After having outlined the main particularities of the three selected modern leadership styles, various aspects could be identified which show promising applicability in the digital age. Incorporating the analysis of the FRLT per­formed in the previous chapter, authentic, participative, adaptive, as well as the dominant transformational leadership theory appear to contain various aspects which directly relate to the context of digitalization. Hence, to a re­markable extent, they seem to display potentially suitable leadership styles in the digital age. In order to enable an enhanced comparison of these leadership styles with the findings on digital leadership in the primary research of this thesis, the most important particularities of the four leadership styles are out­lined in Table 1, and an x indicates whether the particularities are ascribed importance in the different styles, respectively. A detailed analysis shows var­ious overlaps between the four leadership styles.

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Table 1: Comparison of established leadership styles Source: Own elaboration

2.2 Influencing Factors on Leadership in the Digital Age

As leadership is particularly shaped through evolving circumstances and changing frameworks, technological and societal developments have lasting effects on the evolution of leadership approaches (Lindner and Greff, 2019, p. 629). In order to make sense of the multitude of new leadership styles which have emerged in the last decades, it is necessary to point out factors which affect leadership in the digital age. Therefore, this chapter aims to discuss the key drivers and trends of the digital age which are creating a new context for leadership, while highlighting the resulting challenges and changes for the role of leadership. A holistic examination of all influencing factors is not feasible within the scope of this thesis. Thus, a focus is set on VUCA, digital transfor­mation, technological developments, new work and societal changes. Since the factors influence each other, their interconnection is presented in an overview at the end of this chapter.

2.2.1 VUCA

Today’s age is often described with the term VUCA, which is characterized by high degrees of volatility, uncertainty, complexity and ambiguity. This VUCA environment typifies the digital age and challenges leaders and organizations to cope with instabilities (Ciesielski and Schutz, 2016, p. 4). Petry (2016, pp. 38-39) characterizes the components of VUCA as follows:

- Volatility is an indication of rapid and recurring changes against which or­ganizations sometimes cannot protect themselves. Leaders therefore need to be flexible and preserve multiple options.
- Uncertainty denotes unclear circumstances and changes which prompt leaders to envision different possible scenarios and collect and interpret additional information to achieve more clarity.
- Complexity is characterized by many intertwining factors, which leaders need to simplify through a joint vision, mutual trust, common values, de­fined rules, and the establishment of network mechanisms.
- Ambiguity refers to a contrasting environment requiring leaders to allow experiments in order to learn from errors and predict cause-effect relation­ships.

In the digital era, these four factors tend to come to play in parallel, and as digitalization progresses, the intensity of each of these elements rises, which makes business developments largely unpredictable (Petry, 2016, p. 39). Lead­ers must cope with complexities, accept that agendas cannot longer follow as planned, and supervision and control are non-viable options. Hence, VUCA entails the consequence that leaders are no longer omniscient and unable to exercise central control (Petry, 2016, p. 40). Employees need to be actively in­volved in the transformation process but are also dependent on leadership for guidance and direction (Hinkelmann and Enzweiler, 2018, p. 3). Leaders must utilize the collective intelligence of the organization to reduce complexity and establish a setting in which employees can thrive and participate (Petry, 2016, p. 40).

2.2.2 Digital Transformation

Digitalization is ubiquitous. According to the Global CEO Study by IBM (2012, p. 12), executives indicate that digitalization is the key driver of transfor­mation. Petry (2016, p. 22) defines digitalization as a transformational process of companies or entire industries which is facilitated by technological devel­opments and results in far-reaching strategic, organizational and socio-cul­tural changes. Digital transformation is regarded as a social mega trend which penetrates nearly all areas of life through information and communication technology (ICT) driven designs, applications and infrastructures (Diezemann, 2018, p. 71). Although technology displays the central driver of change, only 20% of digital transformation concern technology and software (Wagner, 2017, pp. 184-185). Rather, digital transformation facilitates a profound alteration of established business models and management approaches (Petry, 2016, p. 22). Leaders are becoming increasingly aware of the significance and impact of digital transformation. According to the CEO Briefing 2014 by Accenture and the Economist Intelligence Unit (2014, p. 22), 52% of CEOs acknowledge that digitalization will completely or significantly transform their industry.

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