Nobody has really recommended command-and-control leadership for a long time. But no fully formed alternative has emerged, either. That’s partly because high-level executives are ambivalent about changing their own behavior. They know perfectly well that their companies need to become more innovative—and they suspect it won’t happen unless they’re willing to push power, decision making, and resource allocation lower in the organization. But they’re terrified that the business will fall into chaos if they loosen the reins.

In our research at MIT we’ve sought to understand how that tension gets resolved in organizations with a strong track record of continuous innovation. Most studies of leadership in fast-changing, uncertain environments have focused either on traditional bureaucracies attempting to become more agile or on very young, entrepreneurial companies. We took a different tack, looking in depth at two organizations that have been around a long time—and therefore have frequently adjusted to changing conditions—and have also maintained an entrepreneurial spirit and a first-class innovation capability: PARC, Xerox’s famous R&D company in Silicon Valley, and W.L. Gore & Associates, the privately held materials science company.

During several rounds of qualitative data collection and follow-up interviews from 2009 to 2011 (with updates in 2019), we found many processes and behaviors commonly associated with agile organizations: multidisciplinary teams, a spirit of experimentation, and so forth. But we saw less familiar patterns of leadership, too.

First, we identified three distinct types of leaders. Entrepreneurial leaders, typically concentrated at lower levels of an organization, create value for customers with new products and services; collectively, they move the organization into unexplored territory. Enabling leaders, in the middle of the organization, make sure the entrepreneurs have the resources and information they need. And architecting leaders, near the top, keep an eye on the whole game board, monitoring culture, high-level strategy, and structure.

Second, both PARC and Gore integrate cultural norms—many dating back to their earliest days—that support innovation and resilience. The most important of these might be a shared belief that “leadership” should rest with whoever is best positioned to exercise it, regardless of title.

The three leadership roles, along with the cultural norms, have allowed the two organizations to become self-managing to a surprising degree. Many employees define and choose their own work assignments. New products and services are dreamed up not by high-level strategists or “innovators” housed in a separate incubator but by teams of employees who are free to walk away if a project loses steam. Early-stage funding goes to the projects that attract staffing; as success escalates, more resources flow in. And because lots of small bets are being made and employees are choosing which ones to back—that is, which project teams to join—the companies themselves become collective prediction markets that pool talent around good ideas and drain it from bad ones.

And here’s the real beauty of the system: The mechanisms that enable self-management also balance freedom and control. The companies function efficiently and exploit new opportunities quickly even as they minimize bureaucratic rules.

Let’s look first at the three types of leaders and the cultural norms they embody.

[Here’s the first type.]

Entrepreneurial Leaders

Much more is expected of frontline leaders at PARC and Gore than of similar employees in more-bureaucratic settings. Entrepreneurial leaders “sense and seize” growth opportunities, lobby for early-stage resources, pull colleagues in with their vision for moving forward, and fully exploit the opportunities that pan out. Most of those we observed exhibited three qualities.

Entrepreneurial leaders build on this high-level understanding of corporate goals with regular ground-level exposure to customers’ needs. Through external outreach they sense new opportunities and refine product ideas. One told us, “We have a lot of people who explore the changing needs of real users….here are the trends, here is where things are shifting.”

Many of these leaders have so fully absorbed their organization’s strategic goals that they are adept at deciding which investments of time meet multiple goals. A senior leader at PARC told us his people aim for “triple word scores” (a phrase borrowed from Scrabble): opportunities that contribute to success on at least three strategic fronts. One team, he said, aimed to “publish, get government funding, produce commercial outcomes, and create synergies with the rest of the organization”—all from one initiative.

Absorbing cultural norms—“how we do things here”—is as much a part of developing a strategic mindset as is understanding the business model. At Gore the expectation is that every innovation will build on the company’s core materials technology, and business dealings must be fair to all stakeholders. At PARC “good taste” is a mantra, and technologies are expected to be best-in-class.

An ability to attract others.

Leaders at PARC and Gore aren’t handed followers; they must earn them. Many new product-development projects aren’t started at the behest of a high-level manager; they happen because an individual or a group gets interested in an opportunity, does some digging, and figures out whether it’s worth further investment. At that point the initiators must be able to pull people (and financial resources) onto a team. That takes persuasiveness, confidence, and (often) a good product-innovation track record.

Once volunteers have formed a team, the entrepreneurial leader initially takes the reins—but that doesn’t mean people follow blindly. Both firms we studied are committed to collective decision making. This was instilled at PARC in its early days. The first head of its computer lab, for instance, famously “never made technical decisions; the group as a whole did.” A manager at Gore said, “People in this culture will often push back and say, ‘I don’t agree with that, and here’s why I think it won’t work.’” A good team leader, he added, might respond, “OK, that’s interesting, and it’s new information.” So entrepreneurial leaders need to be confident enough to pull people in but open to changing course if presented with an evidence-based argument. (On some teams decisions require a consensus; on others the leader makes the call once the pros and cons have been discussed.) People join and leave teams in a somewhat organic fashion dictated by the project’s needs and their own interests.

Taken together, these qualities—self-confidence, a strategic mindset, and the ability to attract others—allow new product-development ideas that are aligned with strategic goals to emerge and grow in a free-flowing, bottom-up fashion. And those qualities thrive in part because of three long-standing cultural touchstones. The first is job autonomy. Gore and to a lesser extent PARC were created with the idea that employees would have significant choice in their work assignments and teams. The freedom to shift work commitments enables the rapid, voluntary redeployment of people to new projects as needs arise.

The second touchstone is the practice of making many small bets and providing just-in-time resources. It’s impossible to know which ideas will work out, so many bets are needed. At both organizations a collective review process is in place to determine which ideas will move forward, ensuring that the best ones are chosen and that funds are provided without a long wait for senior team approval. The third touchstone is stepping-up and stepping-down leadership. Both companies embrace the idea that everyone, not just those in formal positions of power, can lead. A manager at Gore told us that all new product development participants need “a willingness to know when they should be leading”—which implies also being able to discern when they should be following. The process demands humility, respect, and putting the success of the team and the company above one’s own achievements.