Digitalization of the economy presents leadership with a third dilemma

by Philip Boxer

To take advantage of the effects of digitalization, an enterprise needs to move from a two-dimensional to a four-dimensional approach to governance – from a two-dimensional ‘as above, so below’ approach to a four-dimensional dynamic balancing between four directions – vertically between Boards of Directors to the ‘North’ and capabilities ‘on the ground’ to the ‘South’; and horizontally between individuals’ different kinds of know-how to the ‘West’ and the particular demands arising in clients’ situations to the ‘East’. This dynamic balancing can be thought of in terms of how three dilemmas are held open, in which holding all three open becomes an ethical choice.[1] The following two businesses provide examples of what is involved in this dynamic balancing:

  • The first serviced jet engines. The business had to transition from routine servicing of engines in their workshops; to using remote sensors to provide their in-use monitoring and preventive maintenance, based on the unique history of each engine.
  • The second was a chemicals manufacturer. The business went from selling bulk polymers to suppliers of food-and-drinks products; to designing chemical barrier-properties and scalable manufacturing processes unique to each client’s products.

In each case, competition was forcing them to deal with the third of three dilemmas that affect the way a business relates to demand. Digitalization of the economy is making this third dilemma pressing because of the way it accelerates the tempo at which new kinds of demand emerge within the client’s context-of-use, creating new kinds of opportunity to create and capture value:

  • The first dilemma – top-down versus bottom-up – is faced by any business that tries to turn its plans into action. The certainty here is the plan – an espoused theory – but as a Prussian General once said: “no plan survives first contact with an enemy”. The ‘enemy’ here of top-down planning is having to deal with how things in fact work out over time bottom-up!
  • The second dilemma – espoused theory versus theory-in-use – is one that webecome familiar with through working with what is going on ‘below-the-surface’ of individuals’ consciousnesses. The certainty here may be the espoused theory, but given the way the leadership of a business and the individuals working for it actually engage with each other and their environment over time, the business evolves a culture that reflects the way power is being exercised, to which those individuals learn to affiliate themselves – to ‘the way we do things around here’.
  • While these first two dilemmas may be made to work solely along the vertical axis through the exercise of center-driven power, the third dilemma has to work along the horizontal axis. The third dilemma – affiliation to the received culture versus alliance around the challenges presented by the client’s situation – emerges when what the client actually wants doesn’t correspond either to what the business had previously planned to do or to its habitual ways of doing things in practice.  There is no certainty here other than that something new is going to have to be tried if the needs emerging within the client situation are to be met.

So, in each of the two businesses, there was a well-established culture that was being confronted with the need to try something new – re-designing the way it created and captured value around its clients’ situations one-by-one:

  • Each engine was used differently and moved around the world differently;
  • Each food or drink product had different properties, packaging-and-display requirements and volume characteristics, all of which kept changing with changes in the product.

The third dilemma involved bearing with disruption to existing certainties and enabling more edge-driven approaches to creating and capturing value. Doing this required individuals’ affiliations to be to the interests of the larger ecosystem within which their business was competing, not just to the business – enabling aircraft to move around in the sky more safely, or enabling clients’ customers to recycle containers more effectively. Needless to say, speaking up for such edge-driven interests presented individuals with new kinds of challenge.[2]

If we think about providing health or social care, the choice that a leadership faces in choosing to hold all three dilemmas open can be approached in terms of the citizen-client’s safety. Holding open the first two dilemmas is essentially about assuring that work-as-done stays as close as possible to work-as-planned. Referred to as Safety-One, it is about establishing standards, protocols and control mechanisms to ensure things don’t go wrong – the very least we hope for as patients. In choosing to respond horizontally to the specificity and variability in the citizen-client’s situation, however, the focus has to move from the two-dimensional Safety-One approach of ‘as above so below’ to an ethical four-dimensional one: ensuring that things can go as right as possible for the citizen-client – to a focus on Safety-Two[3]. As patients, we all hope for Safety-Two.

For these two businesses, this meant innovating the way they created value for their clients, not just focusing on capturing value for themselves but also on creating value for the ecosystem within which they were competing. This meant putting the safety of the aircraft first or ensuring that the environmental damage caused by waste packaging was minimized.

How does thinking in these terms help leadership in its work? Each dilemma can be shut down by the certainties of top-down power, espoused mission or enforced affiliation.  In facing the effects of digitalization on the economy, however, the choice to hold all three dilemmas open helps leadership to question those certainties in the interests of its sustainability within an ecosystem which is increasingly dynamic.


[1] These three dilemmas appeared as The dilemmas of ignorance in Chris Oakley (ed.), What is a Group? A fresh look at theory in practice (Rebus Press: London 1999). The formulation of the dilemmas was based on an understanding of strategy as the management of ignorance, i.e., what could safely be ignored.  They were first formulated as ‘The dilemmas of the body politic’ in Intent and the future of Identity in Richard Boot, Jean Lawrence and John Morris (eds.), Creating New Futures: A Manager’s Guide to the Unknown (McGraw-Hill 1994).

[2] See, for example David Naylor, 2023: Speaking Up in a Culture of Silence: Changing the Organization Activity from Bullying and Incivility to One of Listening and Productivity (Routledge: New York).

[3] For an example of this in the context of Healthcare, see Suzette Woodward, 2020: Implementing Patient Safety: Addressing Culture, Conditions and Values to Help People Work Safely (Routledge Productivity Press: New York.

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