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The future competitive landscape will be shaped by agile entrepreneurs and incumbents who have managed to adapt
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Is your clock speed aligned with your digital future?
Speed is the essence of transformation. You may feel you have already been accelerating, achieving faster time-to-market and speedier customer response times. But digital transformation fundamentally shifts the reference points for time and speed. Customers’ expectations of speed are no longer defined by your industry, but by what they have experienced in other settings. Being the ‘first mover’ can confer advantages, but it is not always the case. In many situations, it is the ‘fast mover’ who wins – the one who can take an innovation in a specific industry, customer segment, or geography, and scale up fastest. This creates opportunities: you may not be a leader in drone design but, once drones are commercially available, you could be the fastest to deploy them at scale. Data is critical to speed. Uber can analyse data from over 12 billion rides in more than 700 cities, developing insights far faster than either the traditional car companies or competitors like Lyft and Ola. Incumbents often calibrate their clock speed against historical internal benchmarks about product launches or process improvements, or in comparison to other traditional competitors, but digital transformation means resetting the clock. As one executive told me: “You may be fast in your little pond, but soon you will see faster species. We have to be prepared for it.”
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Are you organizing with smart humans and powerful machines?
Your organization is in all likelihood designed using structures, processes, roles, skills and team relationships based on theories from organizational and social psychology. To succeed in the digital future, you must start to think like born-digital companies, which rely on computer science for organizing. That includes thinking beyond human talent and skills to look at how humans and machines can work together to create the capabilities to win. Delve deeply into how your business is organized. You are likely to find activities that should be fully automated with humans involved in activities where they do not have comparative
advantage. You must develop an aggressive plan for automation to take advantage of the impressive developments in digital technologies and minimize the role of humans where possible. The first step is to define the zone of automation, where machines do both the heavy lifting and make decisions. Second comes the augmentation zone, where machines do the heavy lifting, but humans ultimately evaluate and make decisions. Machines such as IBM Watson or Google DeepMind, for example, can make fast work of previously cumbersome analysis and present alternative options for action. For example, software could present a doctor with two or three plausible treatment options, with supportive arguments for each – but the doctor would make the final decision. Similarly, marketing managers may be given a set of alternatives for pricing and promotion. Finally, there’s the amplification zone, for thorny problems facing customers or consumers which cannot be solved easily by either humans or machines independently. Examples might be personalized medicine for individuals, or the dynamic customization of advice for farmers based on realtime analysis of disparate datasets. This is where your differentiation exists and where your ability to create and capture a disproportionate share of business value lies. Using machines to do routine and semiroutine activities frees up people to define unsolved problems and identify new areas for using technology. This is where human talent should be directed. Systematically thinking through the three zones will yield insights about the talent profile you need as you transform. Your future is not a linear extrapolation from the past to the present and onwards. Business is becoming digital at a rate faster than could have been imagined just a few years ago. Too many companies have so far responded to digital with symbolic moves like appointing chief digital officers, creating incubation units or forming joint ventures with well-known digital companies. These one-off, piecemeal moves are not enough. The effects of digital’s first wave are still being felt, but there is no time to pause. Leaders must confront the implications of the fast-approaching second wave, which will profoundly change the strategic landscape. Digital is a tailwind, and it will create untold changes across your business. Well-reasoned and timely responses will be needed for any firm that wants to win in 2025 and beyond. — N Venkat Venkatraman is the David J McGrath Jr professor of management at the Boston University business school and author of The Digital Matrix: New Rules for Business Transformation through Technology. He teaches on Duke Corporate Education’s Building Strategic Agility programme Q1 2020 Dialogue