By Professor Alan W Brown
2016 was a turbulent, confusing year. Instability, unpredictability, and disruption were the bywords, pushing individuals and businesses towards an exhausting end to an eventful year. For many it seemed like the very cornerstones of business and society have been turned upside down in a post-truth world where the concept of the “death of expertise” is seriously being debated. The only sure bet appears to be the prospect of continued uncertainty long into the New Year.
How can business strategy adapt to drive success in a digital economy experiencing such turbulence? Only a few days into 2017, and already a clear pattern is beginning to emerge in my conversations with businesses in the public and private sectors. Aside from their near-term domain-specific priorities, organizations are talking about three key themes for 2017.
A new approach to organizational learning
If nothing else, 2016 has emphasized for most organizations that they are not as smart as they’d like to believe about their markets, their customers, and their operating environment. Andy Haldane, the Chief Economist for the Bank of England described their misunderstanding of the impact of Brexit as “a Michael Fish moment”. Their models and predictions work well in time of stability, but are almost meaningless in times of turmoil.
The strategy, then, is to encourage organizations to adopt a new approach to learning based on two fundamental ideas:
- Traditional orthodoxy must be challenged. Long-term statistical models need to be augmented with additional data sources that look more effectively at non-traditional sources of information, techniques for detecting weak signals must be developed, and the dominance of curated sources of information should be questioned;
- Many more short non-traditional learning cycles should be encouraged for individuals, teams, and organizations. Rather than formal education and skills training, we must evolve by taking advantage of the flexibility of quickly learning from our peers, rapidly replicating successful activities in teams across the organization, and constantly engaging with colleagues and competitors to find what works.
Driving the innovation culture
One of the most important words in business for 2017 will be “pace”. The speed of change in organizations will become more of a dominant theme as businesses question their capacity to adopt and adapt in a world that is changing around them. For many organizations, success will be directly linked to identifying what slows down their ability to move into new markets, to support new business models, to open up their supply chain – and then to whether they are prepared to do something about it. Key bottlenecks will be overly bureaucratic processes, inability to adapt to competitive threats, poor understanding of production costs, lack of skills in employees, and so on; these bottlenecks must be ruthlessly eliminated. More positively, many businesses recognize that the solutions already lie somewhere within their organization. Those with answers urgently need to share them across adjacent teams and business units where such innovation is supported and celebrated rather than discouraged and ultimately choked.
A mature approach to digital transformation
The promise and pitfalls of digital technology have been widely discussed for some time; it is over 20 years ago that Dan Tapscott introduced the term “digital economy” and began to explore its implications for business and society.
More than two decades later, too many organizations still see digital transformation as solely a technology issue to be figured out by the IT team, or perhaps worse, to be sidelined for sorting out by a separate “chief digital officer”. More advanced organizations are only just beginning to see digital transformation as not just an internal technology infrastructure upgrade, and more than an opportunity for channel shift to multi-or omni-channel service provision. This is progress, of course – but genuine digital transformation requires a fundamental review of business practices, realignment of operations toward core value, and a stronger relationship between creators and consumers of services.
The excitement gathering around ideas such as co-creation of value, platform business models, and circular economy solutions is really about how digital transformation brings new ways to drive business success that recognize changes in what consumers want and how they want to receive it. The recent explosion of interest in Artificial Intelligence and cognitive computing is another indication that the economics of business are changing such that many existing business models will very quickly fail, and be replaced by new value propositions.
Welcome to the exciting, head-spinning maelstrom that is the digital economy. Looks like 2017 will be a wild ride. Happy New Year!