When checking news streams or picking up any major publication, you will likely find a discussion of the continued “digitization” of business and society. You don’t need to flip far from page 1A of the WSJ, Financial Times, or major publication to see another industry being disrupted due to technological discontinuities or companies hoping to increase revenue or decrease costs through the introduction of an internet connected product and related sets of services. We live in an increasingly connected and digital society.
We are a digital society
Over 50% of North Americans admit to checking a mobile device before they kiss their loved ones, brush their teeth, or use the restroom in the morning. There are more mobile phones on this planet than there are tooth brushes. It is predicted that in the next two years, people will have more conversation with bots than they do with a spouse. There is no arguing that we are pressing deeply into living in a digitally Connected World. Businesses need to keep up or likely lose relevancy with their customers.
Companies in most industries have either launched, or announced plans to launch, digitally connected products. Some companies have chosen to partner or be part of a supply chain ecosystem that offers the connected service, while others have decided to position their entire brand towards this new “digital light.” Regardless, digital is all the rage, and appropriately so.
The interesting thing to business leaders is less about the world getting more digital, or of their firm’s need to participate in the space, and more about how they should go about getting in the new game.
What’s New is Old Again
In the mid-1990s, internet-based commerce and transactions were on the rise. Every company was starting to launch a website and attempting to understand how it could find value in exploiting internet-based technologies. New entrants built around direct sales models or direct information exchange could rapidly embrace the trend and enhance their offerings. Legacy firms were seeking to better understand the trend as well as capture a share to defend their current market position. (My colleague, Dr Warren Ritchie and I explore this industry disruption caused by a technological discontinuity with colorful examples from the PC market in “Competing in the Connecting World”.)
At this time, most leading companies established a special “e-business” division responsible for this early “digitization.” This was done to allow for traditional firms to safely explore the power of an internet-based business. By walling off this group from day to day operations, senior leadership was protecting it from cultural antibodies that would slow progress and pit these new business models against the traditional. This potential tension is more easily managed in upper management circles vs. leaving it to middle management to make it work.
As the internet now is connecting things (IoT) beyond consumers or businesses, many companies are feeling these same pressures again. The trend is repeating itself at a much larger scale this time around. Where internet technologies were once only affecting key processes (e.g. sales channels, supply chain, etc.) they are now affecting the product, service, and experience itself. The core of what is being offered and how it is being offered is now the target.
This is resulting in a new round of protective structural logic. Chief Digital Officers are rising, indicating a different set of goals than those entrusted to Chief Information Officers. Digital Business offices are being developed that resemble the E-Business (electronic business) offices that rose in the 1990s in response to the original internet patterns. These are sound decisions meant to invest in, and protect, the future. It is also very predictable that these structures are only temporary and part of a transformation logic, likely not an operating logic.
What’s Different This Time?
As the transformation pattern repeats, is it just the “connected” version of “e-business?” Although similar, there are some critical differences. Fighting to ensure the transformation of the firm, senior leaders must appreciate significant contextual changes related to technology that have occurred over the last few decades:
- Barriers to entry have shifted – In the recent past, technological solutions required significant capital expenditures to enter a market. It locked out new entrants or firms with low access to capital. This is no longer the case. Technology infrastructure companies have pre-built high availability networks that cover the globe and networked data centers that make up “the cloud.” Technology access tied to capital access is no longer a defendable barrier. Access to ecosystems are now the larger barrier.
- Technology Architecture cannot be an afterthought – The fundamental business model of a firm must be tightly linked to the architecture. Chief Information Officers (CIOs) and Chief Technology Officers (CTOs) need to be included in corporate and business strategy discussions to ensure technology is a constant enabler and not a constraint.
Recent advancements have allowed for complex technology to be made available at a much lower cost than a decade ago. Always available high-speed, high availability, high coverage networks coupled with hyper converged infrastructure enabled clouds provide progressive background processing. When matched to saturated sensors and near edge computing, they provide potential for technology to enable business models in ways that never existed even just a decade ago. It is crucial that the IT function is not simply an enabler but a critical capability for most firms. The cycle will continue from differentiating to standard, but it will remain critical for the future.
Business as Usual, Not more of the same
Not so long from now, “connected products” will simply become products. All products will be internet connected. Value will be defined with how well they mesh with the ecosystem of its users and produce “Product in Use” data, fueling business models that derive value from information. It won’t be long before “Big Data” becomes just typical data that needs to be managed, as all data will be high volume and “big.” Maybe most importantly, “connected” business or “digital” business will no longer need to be protected in special units. Digital or Connected business teams that safely guarded these “new business” techniques will simply mesh back into the core functions of a company. This does not mean that companies will no longer be digital, it just means digital will be the way of the company. Digital Business will be The Business.
Special roles to manage these groups exist in times of transformation but are not necessary when the future arrives. Furthermore, Digital and Information Technology will likely once again meet. CDOs and CIOs and their accompanying organizations will likely need to find new paradigms of partnership or integration. The phase of transformation will likely be over. Business will return to usual – until the next discontinuity emerges, of course!
Gregg Garrett is the CEO and Managing Director of CGS Advisors LLC, a boutique strategy and innovation advisory firm. As such he pushes the limits of corporate cultures by developing and implementing unique strategies that capitalize on technology-oriented disruptions to industries and markets. Previously, Gregg served as chief strategy roles in the Volkswagen Group and Deutsche Telekom and was part of Ernst & Young’s Management Consulting Practice. Gregg is an experienced international keynote speaker & lecturer, and he has recently authored a best-selling business leadership book titled Competing in the Connecting World. He can be reached at firstname.lastname@example.org