Monday, February 19, 2018

Leadership: The Plan for Winning in Digital Transformation

Last year the World Economic Forum labeled 2017 as the beginning of the Fourth Industrial Revolution. What value do we gain from defining industrial revolutions? I believe it is to define new sets of rules for winning in business. Let’s review the three previous industrial revolutions.

  • Industrial Revolution #1. We move from reliance on animals, human muscles and biomass to the use of fossil fuels and mechanical power. A caveman/businessman wishing for a competitive advantage might be the first to use mechanical power fueled by fossil fuels to build cave-condos faster and cheaper than other Neanderthals.
  • Industrial Revolution #2. Electricity is harnessed and distributed, both wireless and wired communication is developed, the synthesis of ammonia provides new fertilizers and harvests increase, and new forms of power generation are developed. A farmer wishing for competitive advantages could adopt mobile phones to communicate wirelessly with their workers, use lights around the farm to extend hours of operation, fertilizers could increase their production.
  • Industrial Revolution #3. Digital systems are developed, communication and rapid advances in computing power achieved, which enable new ways of generating, processing and sharing information. A businessman operating a disco and seeking competitive advantages installs a digital cash register for more accurate cash management, buys an Apple Computer with the VisiCalc spreadsheet to better manage the business, and installs a heavy printer to print disco-oriented newsletters and other business documents from the office.
  • Industrial Revolution #4. Billions of humans are connected by mobile devices and networks, surrounded by sensors, wearing wearables, supported by unprecedented processing power, storage capacity, and access to knowledge, which serves as the springboard for developments in artificial intelligence, robotics, the Internet of Things, autonomous vehicles, 3-D printing, nanotechnology, biotechnology, materials science, energy storage, and quantum computing. A business woman seeking a competitive advantage decides to develop and rent out genetically-altered and custom-designed farm animals with embedded GPS sensors to urban dwellers by developing a mobile app connected to the internet where chatbots take your reservation and deliver the beasts in autonomous self-driving trucks pulling cattle trailers.

Labeling Industrial Revolutions is a way to identify when the rules of competition have changed. Why is this important? Competitors can’t compete and leaders can’t lead if they don’t know the rules of the game. In the 4th Industrial Revolution, like all the other industrial revolutions, the rules have changed:
  1. Data is the modern commercial battlefield. Operational blind spots must be removed by gaining visibility through data capture and sensors.
  2. Information dominance is the strategic goal. Gain insights from data your competition does not yet have. Early adopters gain data and insights that laggards do not have access to.
  3. It takes an “Optimized Information Logistics Systems” (OILS) to compete. Friction in data movement must be removed so data flows fast enough through the information logistics system to support real-time digital and mobile interactions.
  4. Advantages in speed, analytics, operational tempos, process automation and information logistics tied to business and customer value will determine who will win in the 4th Industrial Revolution.
  5. Businesses that can “analyze data, uncover insights, automate decision-making and execute with speed” will soon dominate those which are slower.
  6. Digital time (a.k.a. real-time) and future time operational tempos are required to compete successfully. Future times are when your system can predict future actions, events, needs, preferences and requirements and make recommendations and take actions today.
  7. Advantages lead to more advantages (Ax2). When you have the advantage of being out front, you see data not yet visible to trailing followers. That data allows you to make decisions and take actions that followers do not yet understand.
  8. Having situational awareness is an important advantage. It enables organizations to eliminate inefficiencies and operate at a lower cost and with increased productivity. Visibility enables actions to be taken based on knowledge rather than guesswork, incorrect assumptions and conjecture, saving both time and money.
  9. As digital interaction points with customers, vendors, suppliers and partners increase, so will demand for better UI/UXs, additional APIs, speed, clean data, automation and digital transformation across the entire business.
  10. Digital experiences are only as good and as fast as the systems behind them and their alignment with customers’ desires.
  11. Processes and decision-making are only as good as the people, data and/or algorithms involved.
  12. The more data that is captured, analyzed and used, the greater the accuracy of analysis, economic value and innovation opportunities it makes possible.
  13. Data has a shelf life, and the economic value of data diminishes quickly over time, so organizations must be agile and nimble enough to react and take advantage of new information to capture the value.
  14. The economic value of information multiplies when combined with real-time context, analysis, right-time delivery and the capability to respond.
  15. Ultimately winners in the 4th Industrial Revolution will be those that can innovate by offering personalized and frictionless business where friction previously existed. They will deliver incredible user experiences; automate decision-making based on capturing the right data, and executing better and faster than competitors through the implementation of artificial intelligence, machine learning and automation.
  16. Winners will operate an agile business that can align with quickly-changing customer behaviors and desires faster than their competitors. They will have the leadership, organization, culture and technology platforms that allow them to respond to new data with speed.
These rules not only help us to understand how to compete and win, but they should also help enterprises develop their digital transformation doctrine. Why is this important? In a large survey we conducted, the participants identified the need for a clear digital transformation strategy as being critical to a company’s future success. Digital transformation strategies grow out of and are shaped by a digital transformation doctrine (DTD). We define doctrine as a documented way of thinking, a common frame of reference across an organization, which provides an authoritative body of statements on how the business should approach digital transformation. It provides a common lexicon for use and a framework for developing strategies. The DTD is a necessary first step before digital transformation strategies and tactics can be developed and implemented.

Digital technologies do not just enhance and extend existing processes and models, but they open doors to all kinds of new innovations, opportunities, businesses processes, business models, strategies and even new industries. An organization’s DTD must be capable of leading them successfully through these massive and accelerating changes.

An organization’s DTD should influence all their strategies, how they operate, and the tactics they employee to compete. In our research, we found most companies recognize digital transformation is happening, but few have a guiding doctrine to lead them on this chaotic journey. Without a DTD, organizations lack a unified understanding of why they are engaged in digital transformation and the role transformation plays in helping them compete successfully.

Executive teams must define how their organization should think about digital transformation. The DTD should be obvious in every program, project, campaign, product and service within the company. An example of a DTD follows:

The digital transformation of our marketplace is changing the behaviors of our customers and the nature of our competition. We must anticipate and embrace permanent flux by employing digital technologies and strategies, and by creating an agile business and a digitally-transformed enterprise. We will achieve information dominance by investing appropriately to develop and maintain an optimized information logistics system. We will restructure our organizations for business agility, speed and real-time decision-making. We will develop a culture that encourages collaboration, innovation, speed and creativity. We will embrace the concept that no matter what products and services we offer, our customers’ experience is our true product.
Kevin Benedict
Senior Vice President Solutions Strategy, Regalix Inc.
Website Regalix Inc.
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***Full Disclosure: These are my personal opinions. No company is silly enough to claim them. I work with and have worked with many of the companies mentioned in my articles.