Living through a digital revolution — what’s next for large established organisations?
Written by Alan W. Brown, Professor in Digital Economy at the University of Exeter Business School and Fellow of the Alan Turing Institute
The world will never be the same again — it cannot go back to the way it was only a few weeks ago. We’ve taken a major step into a world that is digital, decentralized, dynamic, and, most of all, disrupted. And there is no turning back.
It has been widely recognized for some time that we are in the early stages of a digital revolution. Emerging digital technologies have not only enabled the “digitization” of existing business artifacts and processes, they have introduced new ways to see the world in terms of a new digital economy that challenges the basis of economic thinking:”who does what, who gets what”. This has resulted in both the digitization of a firm’s operating model (how the firm is organized to deliver value to stakeholders, clients, and employees) and a firm’s business model (how value is captured, shared, and maintained).
For large established organizations (LEOs) the impact of moving to digital ways of working is a complex journey. As incumbents in their respective sectors, LEOs have undergone major digital change initiatives to streamline back office functions, improve customer service, optimize billing, and much more. All these activities have had significant impact on their operating model to create efficiency and improve services. At the same time, they are looking to gain greater insights through the use of Machine Learning algorithms fuelled by a wide variety of data sources. In the case of large utility companies, for example, they are engaged in efforts to embed sensors in a variety of devices in and around the home, office, and factory floor. Using smart meters, internet-connected thermostats and boilers, and a host of other digital data sources, utility companies now are experimenting with new ways to understand the needs of their customers and to offer them services to keep them safe, warm, and connected. Similar approaches are being used across many different industries.
With all such change, major barriers must be addressed, especially for LEOs. Overcoming inertia, dealing with bureaucracy, aligning with existing investments, and addressing legal concerns can all make change painfully slow. However as change management experts remind us, the primary cause of inaction is not having a compelling reason to act. The last few weeks have provided the jolt many organizations needed. We now have no choice but to act, and act quickly. The immediate concerns of business continuity are, of course, the priority. But underneath we may be seeing a much more profound change taking place as LEOs are forced to view the world in a completely different way, through the lens of a digital economy.
One of the most visible immediate responses to the current crisis in most LEOs has been a rapid switch to a digital-by-default approach to how they operate. Revised strategies and accelerated decision making supporting digitized processes have enabled remote and distributed services to be widely deployed, new working practices to be shared, and digital forms of collaboration to be accepted in ways unthinkable before now. Many of these will undoubtedly become the new normal way of operating for many organisations.
Even more substantially, the current crisis has shown that strategies underpinned by previous notions of what is stable and what can be relied upon are now broken. Our existing organisational structures are not designed to cope with such uncertainty. Support for a much more dynamic operating environment is seen to be essential. Consequently, many of the objections and misunderstandings blocking digital transformation from a few weeks ago are now forgotten. Digital transformation initiatives have been accelerated to not only ensure business continuity, keep employees and clients connected, and manage distributed, diverse activities without being able to travel. They are seen as essential to maintain flexibility for the uncertain times ahead.
Beyond the critical surface issues being addressed, where are we likely to see the most profound changes in attitude and approaches in LEOs newly sensitized to the digital reality in which they must now compete? The answer may well be in three key areas:
- Risk. Remote, internet-connected technologies were seen as unproven and a major source of risk in many monitoring and assessment activities. Not anymore. They are viewed now as an essential part of a broader risk mitigation strategy in times of turbulence. For example, in considering care for the elderly, anyone considering a carehome, longstay residence, or home help will ask about digital remote sensing support and automated interventions. It won’t be a nice to have. It will be essential. For many industries, the risk of not moving to a less familiar digital-first approach will be much higher than sticking to more common non-digital alternatives.
- Trust. Not only do we now see that our trust in various norms and institutions has been misplaced, people are questioning who to trust with the things they most care about: health, family, businesses and the economy. Many more people now also see that such trust is being manipulated at an individual, group, and societal level. Confusingly, the digital world both increases the ease and speed with which this happens, while at the same time helping us to see through it by democratising our ability to find out more for ourselves. For many people this has been a wake-up call. It means business leaders need to build their skills and knowledge in how to find, assess, and act quickly on volatile, conflicting digital data. Far beyond the previous focus on the mechanics of GDPR and other regulations, businesses are getting a crash course in business ethics and their role in decision making.
- Value. A critical question to be faced as this pandemic declines is: what will people value when this is all over? One key issue concerns the vast amount of data being collected, and how we use it to make better decisions. Many for the first time are coming to grips with the deep impact of digital technology in reshaping the role and influence of up-to-date, accurate information consolidated from multiple sources. Never has the phrase “data is power” been clearer to people than it is today. To say nothing of the thorny challenge of deciding who is allowed to monetise that data, and with what consequences. Fears about exploitation of extensive personal data stores by large companies had been growing. Will these now be subsumed by increased pressures to use digital data to support personalisation of services, allow agile redesign processes on the fly, and increase accountability for each individual’s behaviour? The implications for personal privacy, accountability, and business continuity are huge.
It is far too easy to declare the “before-and-after” for digital transformation as a result of the current pandemic in pure technological terms. Large organisations may be tempted to install some online collaboration tools, push some services to the cloud, and declare success. That would be short sighted and a fundamental mistake.
Profound changes are taking place that require a deeper analysis. More substantial insight will be gained by considering the role of digital technology now that fundamental elements underlying digital transformation have been reset. New strategies and approaches will be needed to reshape organisations in a post-crisis world. Leaders need to take time to lead their teams in conversations about the digital future. Risk, trust, and value are three good places to start.
Originally published at https://digileaders.com on April 20, 2020.