With Generative AI, Layoffs Increasing Complexity for C-Suites in 2024, What Playbook Should Executives Deploy for the Next Three Quarters?

Deborah L. Ancona, Seley Distinguished Professor of Management, Professor of Organization Studies, founder of the MIT Leadership Center at the MIT Sloan School of Management.

Deborah L. Ancona is the Seley Distinguished Professor of Management, a Professor of Organization Studies, and the founder of the MIT Leadership Center at the MIT Sloan School of Management. Her pioneering research into how successful teams operate has highlighted the critical importance of managing outside, as well as inside, the team’s boundary. This research directly led to the concept of X-Teams as a vehicle for driving innovation within large organizations. Professor Ancona holds a BA and an MS from the University of Pennsylvania and a PhD from Columbia University.

Q. During the past year’s HBSHAA’s Q&A series, generative AI and layoffs were two recurrent themes. As some of your MIT colleagues pointed to, “A recent survey showed that 70% of marketing companies are using generative artificial intelligence for use cases such as personalization, content creation, and market segmentation, while a 2023 Harris Poll found that about 70% of hiring managers use generative AI.”¹ On the downsizing front, in 2023, job cuts reached 270,416—a staggering 396% more than the prior year.² With these two dynamics front and center for C-suites, what is a potential playbook for them to pragmatically deploy in the coming three quarters?

Ancona. If this current quarter’s cost cutting across Fortune 500s is a sign of the continued turmoil that many firms will encounter, executives need to forge a new operating model that addresses the reality of firms introducing emerging technologies and reduced headcounts. As CNBC recently shared, even profitable firms are cutting costs and laying off staff.³ To do more with less, a historical playbook for many C-suites has been to re-examine internal people, process, and technology assets for improvements. But based upon the MIT Leadership Center’s research findings,⁴ the speed of change for global markets and evolving areas like generative AI necessitate a pivot to first looking externally.

One playbook that enables C-suites to make this pivot is an X-team, which does not mean a cross-functional group, but rather a team who is focused externally.⁵ X-teams are built on the concept of “out before in,” with team members externally oriented to learn and discover what is happening in their ecosystem through ambassadorship, sensemaking, and task coordination. Ambassadorship encourages members to meet with senior leadership to secure buy-in, sponsorship, and protection from potential opponents to the team members' ideas.

Sensemaking includes reaching out to external stakeholders to understand their needs and priorities, researching, and learning from outside competitors, and seeking beneficial partnerships internally and externally. Finally, task coordination refers to organizing the internal and external individuals who work for the team and ensuring open lines of communication around responsibilities, timelines, and result goals.⁶

Executing correctly on these three areas, an X-team was able to drive value for a global pharmaceutical firm. Compared to their peers, they recognized that they were behind the innovation curve. Moreover, like many of their peers, they were striving to collaborate with smaller biotech firms to support their sales growth aspirations. So, they assembled colleagues who proactively reached out to external stakeholders including biotech leaders, other pharmcos which were ranked higher on innovation surveys, and industry experts.

Secured insights that challenged the pharmco’s mindsets included biotech legal documents that were a fraction in size compared to their own pharmco documents. Also, streamlined decision making appeared to be a common theme for more innovative pharmcos. Besides benefits like significantly reducing the number of pages in their legal documents’ boiler plates, one leader commented that, “…We’ve learned more in the past 3 weeks by engaging with external stakeholders than the past 10 years by sitting at our desks.”

For your readers, they can learn more about the academic www.youtube.com/watch?v=F6tAx_3L8Gw&t=2401s and application www.xlead.co/products aspects of X-teams via some resources, which I will share.

Q. With Q2 fast approaching and likely only nominal dollars available from 2024 budgets, which were locked down last year; what are your top three recommendations for C-suite leaders?

Ancona. First, identify coaches who can help your teams engage with external stakeholders. Recognize that most pharmco employees will not have the expertise to deal with biotech, investor, and other external stakeholders. Moreover, with the continued ongoing layoffs at many pharmcos, some employees might be afraid to admit that either they don’t know evolving new technologies and or that their roles are going to be disrupted by generative AI. Even if the latter is inevitable, such employees have an opportunity to create value by figuring out how to convert their sensemaking findings into reengineering their department’s daily operations. By creating such value, these employees can position themselves for new roles that have not even been formally created.

Second, leverage distributed leadership as a cost-effective approach to find new sources of value. Distributed leadership refers to having great leaders at all levels of the firm.⁷ You need entrepreneurial leaders coming up with new ideas all the time, enabling leaders to help coach and get ideas through the organization, and architecting leaders who constantly shift the structures and processes of the organization while safeguarding the cultural elements that work.

For example, my daughter was an intern at Li & Fung, where the C-suite was interested in learning about evolving fashion trends and how they could get ahead of the curve regarding potential new buying patterns and other sales themes. The company tapped into their global summer interns, who were not full-time employees, to go on the ground and conduct field research in fashion meccas including New York City, Paris, and Rome. My daughter and her peers took pictures, shared findings, and provided ideas for their leaders to consider.

Third, calibrate expectations of expected norms and upcoming decisions with employees. With employees striving to demonstrate their own unique value propositions, it’s natural to expect that each person will be pushing to explain why their idea should be pursued. Still, with limited existing budgets and likely further cuts for the rest of the year, it’s important for C-suites to explain that most of the collated ideas will not be funded. Still, some ideas will make it through the screening.

Takeda R&D created the “dragon contest” whereby teams could pitch their new ideas. The ideas were then evaluated by both internal and external judges using clear criteria. The top teams got dragon sculptures and time with the head of R&D. This enabled a clear motivator for new ideas, while assuring that the ideas that got through were aligned with the R&D strategy and well vetted.

Finally, I would challenge your C-suite readers to recognize their accountable roles in leading this type of transformational change. Having consulted to pharmcos and other Fortune 500s, these large firms often have established playbooks that have been part of their successful growth stories and it’s challenging for any person, from the CEO to a summer intern like my daughter, to champion an idea and navigate it through the complexity and inertia of such large organizations. Communicate and engage with your X-team ambassadors so that your firm is positioned to have a successful 2024 and beyond.

About the Author

Michael Wong is an emeritus board member of the Harvard Business School Healthcare Alumni Association.

References

1. Eastwood, Brian, It’s time for everyone in your company to understand generative AI, MIT Sloan, December 5, 2023
2. Chan, Goldie, 5 Trends in Layoffs For 2024 And Which Industries Are Recession-Proof? Forbes, February 9, 2024
3. Repko, Melissa, Josephs, Leslie, Companies — profitable or not — make 2024 the year of cost cuts, CNBC, February 18, 2024
4. https://mitsloan.mit.edu/centers-initiatives/mit-leadership-center/leadership-insights
5. https://www.youtube.com/watch?v=F6tAx_3L8Gw&t=2313s
6. Somers, Meredith, A manager’s guide to x-teams, MIT Sloan School of Management, September 7, 2023
7. Somers, Meredith, Why distributed leadership is the future of management, MIT Sloan Management Review, April 19, 2022