A Challenge of Leadership Capacity: We Are Not in a Normal Cycle

For much of modern business history, leadership has been shaped by a fairly stable mental model of how change unfolds: a model deeply intertwined with the logic of industrial capitalism and its enduring focus on growth. Periods of expansion are followed by downturns. Disruption gives way to recovery. Crises are managed, lessons are learned, and the system is expected to stabilise and continue its forward trajectory. Within this logic, leadership beyond the quarterly economy is largely about navigating cycles — responding skillfully, optimising performance, and restoring momentum.

Many leaders have built successful careers within this logic or worldview. It has rewarded decisiveness, analytical clarity, speed, and the ability to mobilise organisations toward ever-greater scale, efficiency, and output. Growth — economic, organisational, personal — has functioned as both compass and confirmation: a signal that the system is working, that leadership is effective, that progress is being made.

What we are living through now does not comfortably fit that pattern.

Not because capitalism has suddenly ceased to function, nor because growth has become irrelevant, but because the conditions under which growth once reliably delivered renewal have fundamentally changed. What increasingly confronts leaders today is not a temporary disruption to an otherwise stable system, but a set of enduring conditions that reshape the very context in which capitalism, business, and leadership operate.

Understanding this distinction matters. When leaders continue to treat today’s structural conditions as cyclical interruptions, they may intensify the very tensions they are trying to resolve. What is increasingly required instead is a deeper form of orientation: the capacity to discern when growth contributes to coherence and when it undermines it.

From cycles to conditions

Once we begin to see the present moment not as a temporary deviation from an otherwise stable trajectory, but as a shift in underlying conditions, a different picture starts to emerge.

Several such conditions now overlap and interact in ways that fundamentally reshape the context in which business and leadership operate.

One of these conditions is the growing recognition of planetary boundaries. Human economic activity now unfolds at a scale where it materially affects the Earth-systems that make life possible. Climate, biodiversity, land use, and water systems are no longer distant externalities that can be managed at the margins; they are becoming active constraints that shape markets, regulation, risk, and legitimacy.

This does not require a moral stance to acknowledge. It is a biophysical reality. Whether leaders choose to engage with it consciously or not, it already influences supply chains, cost structures, insurance markets, geopolitical stability, and long-term value creation. The long-held assumption that growth can be pursued first and its consequences addressed later is broken and becoming increasingly difficult to sustain.

Alongside these physical constraints, we are navigating what is often described as a polycrisis. This term does not simply mean that many crises are occurring at once, but that they interact and amplify one another. Climate stress intersects with geopolitics and migration. Technological acceleration reshapes labour markets while simultaneously eroding trust in institutions and expertise. Financial volatility feeds inequality, which in turn fuels political polarisation and weakens collective decision-making.

In such a context, linear problem-solving becomes less effective. Fixing one issue in isolation often destabilises another. Leadership, therefore, shifts from optimisation within silos toward the far more demanding task of maintaining coherence across interdependent systems under pressure.

A third condition, which many leaders experience directly in their organisations, is a crisis of trust. Trust in institutions, in leadership, and in shared narratives of progress has been eroding for some time. This erosion does not always manifest as open resistance. More often, it appears quietly: in scepticism toward change initiatives that make sense on paper, in fatigue disguised as pragmatism, in compliance without genuine commitment.

Trust matters because it determines how much uncertainty people are willing to carry. When trust is low, even well-founded strategies and initiatives are experienced as imposed. Legitimacy weakens, and the relational fabric that allows organisations and societies to move together begins to fray.

Beneath these more visible dynamics lies a fourth, more existential layer: a crisis of meaning made visible in some of the reports published in the Human Development Reports by the UN over the past years. Many of the stories that once oriented ambition and effort—about progress, success, and the future—no longer hold with the same force. We may still perform, deliver results, and meet expectations, yet sense that something essential is missing. Burnout increasingly has less to do with workload and more to do with a loss of orientation: uncertainty about what the effort is ultimately for.

These four conditions—planetary limits, interacting crises, eroding trust, and loss of meaning—are not separate. They reinforce one another. And together they alter the nature of business and leadership itself.

When creative destruction outpaces our capacity for renewal

If you have followed my writing for a while, you already know that economic history is part of how I make sense of today’s reality. Looking at the unfolding development from a chosen theoretical lens can also be very fruitful. Here, I have played around with the concept of creative destruction.

Joseph Schumpeter’s economic theory describes capitalism as an evolutionary process driven by innovation and competition, in which old structures are continuously replaced by new ones through what Schumpeter called creative destruction. For much of the twentieth century, this mechanism appeared to function reasonably well. Disruption, while painful, tended over time to give rise to renewal, new industries, and rising prosperity.

That mechanism has not disappeared. Innovation continues to transform industries, organisations, and roles at an extraordinary speed.

Creative destruction might, however, be outpacing our collective capacity to recombine capabilities into new, functioning systems; to rebuild trust during periods of transition; to adapt institutions at the speed required; and to restore meaning and legitimacy along the way. When this happens, disruption accumulates without integration.

A framework for orientation

To make these dynamics more visible, let’s use a simple two-axis framework. It is not intended as a diagnostic tool in the narrow sense, nor as a model to be applied mechanically. Rather, it functions as a lens for orientation—a way of seeing where renewal is possible and where breakdown becomes more likely.

The first axis is recombination capacity. It asks whether innovation actually diffuses and integrates into everyday practice, generating productivity, usefulness, or broader societal benefit. High recombination capacity means that new ideas do not remain isolated in laboratories, startups, or elite pockets, but are woven into functioning value systems. Low recombination capacity shows up as churn without payoff, innovation silos, productivity paradoxes, and growing fatigue rather than renewal.

The second axis is legitimacy capacity. This concerns trust, protection, and institutional adaptation. High legitimacy capacity means that people trust the direction of change enough to tolerate uncertainty, that transitional protections exist, and that institutions adapt their rules, norms, and governance to new realities. Low legitimacy capacity manifests as resistance, backlash, polarisation, and paralysis—change experienced as something done to people rather than with them.

When we place systems or organisations along these two axes, four patterns appear:

1. Regenerative transition
   High recombination and high legitimacy. Innovation translates into renewal, and trust is maintained.

2. Extractive disruption
   High recombination, low legitimacy. Innovation works technically, but undermines its own social licence.

3. Stagnant protection
   Low recombination, high legitimacy. Stability is preserved, but renewal is delayed or blocked.

4. Degenerative breakdown
   Low recombination and low legitimacy. Disruption accumulates without integration or consent

Many of today’s global systems — and organisations — hover uncomfortably between these quadrants.

Let’s take the example of AI. It has an extremely high innovation velocity, rapid diffusion into knowledge work, media, education and coding. However, governance is still reactive and fragmented. Also, social protection systems (e.g., workforce reskilling) don’t exactly move at the speed of light, and trust is eroding. Hence, AI may be outpacing our society’s ability to decide what kind of intelligence we want to live with and what type of society we want to live in. In our four-field model above, it may in fact be interpreted as a case of extractive disruption. 

The demands this places on leadership

You may think this is a government challenge. I prefer to think of it as a leadership capacity challenge.

Seen through this lens, the central leadership challenge of our time is no longer primarily about growth, efficiency, or even innovation. It is about whether we can steward transformation – in an increasingly fragmented society – without losing trust, meaning, or legitimacy along the way.

This places new demands on leadership.

It calls for a shift from acceleration to stewardship—from defaulting to speed toward discerning when speed supports integration and when it undermines it. It requires moving beyond optimisation toward coherence, holding together economic, social, ecological, and human considerations rather than trading them off sequentially.

It also brings the inner dimension of leadership to the foreground. As complexity increases, the leader’s capacity to remain present, regulated, and reflective under pressure becomes a strategic asset. Control gives way to presence. Certainty gives way to orientation.

Perhaps most importantly, leadership increasingly becomes less about heroic action and more about cultivating legitimacy—creating the conditions under which people are willing to participate in change, even when outcomes are uncertain and trade-offs are real.

We are not short of intelligence, technology, or ambition. What we are short of is integration—across systems, across time horizons, and between the inner and outer dimensions of leadership.

The inner and outer dimensions of leadership are what the Leadership Evolution Lab is designed to explore. Not to promise clarity or quick answers, but to support leaders in developing the capacity to hold transformation and transformative change—and, in doing so, to make renewal possible again. It is just taking its first steps and will evolve over time. Check it out yourself.

Elisabet Lagerstedt

Elisabet Lagerstedt is the founder and director of Future Navigators. As a trusted advisor, consultant, and Executive Coach, she helps business leaders navigate beyond business as usual to build Better Business and co-create a better future - through insight, strategy, innovation, and transformation. Elisabet is also the author of Better Business, Better Future (2022) and Navigera in i Framtiden (2018).