The Challenges of Going Digital

I have been reading a lot lately about the evolution (revolution) of digital business. I‘ve even had several clients ask me what they should be doing to “become digital”, what a “digital strategy” should look like and how they should manage this transformation. Now, the steady digitation of life and business has been going on for quite some time (certainly since the advent of the consumer Internet and arguably long before that) and the replacement of analog items (and related information) with a digital version has been pretty visible as mobile devices have proliferated. More people still check in for a flight with a paper boarding pass than use the electronic version on their phone, but the trend is clear.

In fact, this continuing shift to “digital” mirrors in many ways the shift to, first, online commerce and second mobility.

Online commerce arguably really started with Amazon’s launch in 1997 and is still underway – with a ways to go to become even a majority of readily addressable commercial activity. Low cost PC deployments (at work and at home) and broadband Internet were the enablers, along with there actually being something to buy, a way to (safely) pay and an effective delivery system. The
“surprise” that Amazon’s success depended on was a willingness of consumers to buy things they had never seen – an extension of the well-established process of “catalog” shopping with radically different economics. Nearly 20 years later, these are still the primary elements driving online commerce, but mobility is changing the landscape.

The “year of mobile” was proclaimed annually for most of a decade as 2G and 3G networks were built out; limited, low bandwidth data capabilities were added to early cellphones and simple email and text services were deployed by carriers, juggling the desire for additional service revenues with the scarcity of available spectrum where users wanted it most (in and around major cities). Then came the iPhone (2007), Android (2008), 4G (2010 in the US) LTE (2011 in the US, somewhat earlier in Europe) data services (which are much more spectrum and infrastructure capacity efficient) and the result was an explosion in consumer and business demand for mobile access to data of all kinds. It wasn’t really any one thing that triggered this – but the confluence of enhanced device capability, attractive and easy to use user interface software, spectrum growth, improved platform efficiency and carrier competition combined to trigger a rapid change in consumer behavior. LTE-A (2015 in the US) and 5G (probably around 2018) are likely to continue the mobility evolution.

So it is with going “digital”. “Being Digital” – Nicholas Negroponte’s excellent summary of how we got to the start of the digital era was published in January 1995 and while not focused on predictions, did point out many of the trends that have shaped the ensuing decades. Consumer products started setting the standard for user expectations and the environment and tools used in the workplace were forced to evolve in response. People wanted that same ease of use and richness of function they could get at home while they were at work. The start of “consumerization” would inevitably change many things beyond the consumer and continues to do so.

Large scale automation of core business processes really got started in the “reengineering” wave of the mid 1990s, powered by the need for significant employee productivity gains, an “always on” business operating capability, the need to recoup the cost of rapidly evolving technology and the globalization of commerce. Initially an internally focused (and expensive and disruptive) effort, the parallel growth of the Internet, online commerce, self-service models and globally integrated supply chains soon forced an inter- rather than just intra-corporate perspective. A direct byproduct of process automation was the accumulation of very granular data about every aspect of business operations and customer activity, driving further product and service optimization opportunities. The more you know about your customers, your products and your people, the better you can serve those customers, evolve those products and engage with those people.

Then came social media and the real digital data flood started. Although social media goes back a long way (to before the consumer Internet) the launch of LinkedIn in 2003 and Facebook (to the public) in 2006 opened up the digital world to hundreds of millions (now billions) of “ordinary” people – who are also consumers, investors, commentators and employees.

So going digital is not just about doing any one particular thing differently – it’s about doing many things (in some cases everything) differently, which is always hard. But today, a business that isn’t going digital risks analog isolation in a digital universe. No one wants that.

You’d think that all of the hundreds of billions spent on technology, process automation, connectivity and software over the past 30 or so years would have already moved everyone to the evolving digital world, but it hasn’t – that’s why we are still talking about it and about what it means. An evolution that seems like it should be straightforward, hasn’t been and still isn’t. Here’s some reasons why:

We have “analog habits” that are hard to break, especially at senior and middle management levels. Digital assets are qualitatively and quantitatively different from analog assets and need new and unfamiliar management approaches to their creation, management, protection, ownership and use

  • Effectively collecting, managing, protecting and using all that digital data is technically challenging and expensive
  • Information based decisions can be harder to accept than intuition or “experience” driven decisions (more habits that are hard to break)
  • Going digital effectively blurs the edges of the business you are supposed to manage and requires cooperation and collaboration as much as it does direction and control
  • Many of the things that are technically possible (and often popular) have little or no economic justification
  • Corporate information systems haven’t kept up with the rapid evolution of hardware and software capabilities and can’t easily adapt to new requirements of a digital world

These are significant challenges to overcome, but they are less important than what I see as the real impediment to going digital – virtually all large enterprises have become efficiency-driven machine bureaucracies where you don’t get rewarded for taking risks, trying new things or by being different. Reward and recognition systems get in the way of the changes and innovations that are needed to rapidly move digital forward. It doesn’t matter what the executives and managers say – what matters is what they do – and what they generally do is try to apply familiar machine bureaucracy patterns to a dynamic, fluid, evolving environment. It’s as if a failure you understand is better than a success that you don’t.

What’s needed (somehow) is a way to become a smart experimenter; to perpetually try out a range of new digitally-focused ideas (preferably with credible value propositions attached – but be prepared to take a flyer now and again) in partnership with your employees, suppliers and customers; select those that work; and then adopt and scale them quickly. Think big; start small; learn fast.

You can try to do this in-house (which has turned out to be very tough for most large businesses) or via the market, which has often been easier, but successes generally cost more to buy than build and you need a way to track what’s being tried and identify what’s succeeding. However, if you can’t successfully build internally, buying others who have managed to do so may be your only option.

And whatever route you choose, you’ll still need to be good at integrating the new into a consistent framework. Getting to digital is a journey, already decades long and probably never completely over. But it’s going to happen to everyone, everywhere to some degree sooner or later. Better get ready. So you do need a strategy, but not one that assumes that anyone knows what the outcome will finally look like.

How’s your evolution to digital going?