“Digitalization” describes the integration of computerized technology into virtually every aspect of life. Technology is transforming how we shop, travel, work and even build social relationships. Digitalization is also enabling companies to execute business strategies that were impossible just a few years previously. These changes are creating new markets while destroying others, reshaping labor economics and fundamentally altering the nature of work itself.
To survive digitalization, companies must learn to compete in a world where technology constantly transforms what organizations do and how they do it. This starts with understanding and embracing three truths about business in the digital economy.
#1. Whatever the company is doing now, it is the wrong thing to be doing two years from now. In a digital world, technological innovations create constant market disruptions, process transformations, and shifting business conditions. Regardless of a company’s industry or market, something is going to happen within the next 2 years that will significantly alter its business landscape. This could involve technological innovation, factors impacting supply chain or manufacturing methods, entrance of new competitors, shifts in consumer preferences, new regulations, or any number of other disruptive changes. The challenge is companies will not know what these changes or their impact until they start to happen. And when these changes happen, they are likely to happen quickly. Leaders who fail to quickly act on these changes will find their companies losing ground in a business market that is only becoming more competitive. To paraphrase Charles Darwin, the law of business survival in a digitalized world is “adapt or die.”
Truth #2. The success of the company requires getting people to do things in the future that are different from what they did in the past. Succeeding in a world of ever-accelerating change requires mastering the one thing about companies that is not changing: businesses depend on people working together to accomplish shared goals. Companies will always employ people, even if all these people do is take care of robots. Not only are people the only constant about companies, people are also the best resource companies have for dealing with change. But only if they are managed effectively. Under the right conditions, people have a phenomenal aptitude for learning, growing and adapting to changing situations and environments. But under the wrong conditions, change can be extremely stressful and punishing. The challenge companies face is how to create a work environment that fosters a growth- and change-oriented mindset among employees. Becoming “digital ready” requires understanding and leveraging the psychology of people to ensure change is viewed as an opportunity instead of a threat.
Truth #3. Any business process designed more than three years ago, is out of date. Technology enables and constrains process design. All processes are a function of the technology available when they were created. Older processes inevitably include elements that would not have been used if the process designers had access to modern technology. Three years is an eternity in the world of technology. Requiring employees to use processes built using outdated technology forces people to live under the constraints of the past. People are a valuable resource, but they are also an expensive resource. Money spent on people will not generate a return on investment unless people have access to tools, knowledge, and technology that support their productivity and efficiency. People also don’t want to work for a company that forces them to use outdated tools and inefficient methods. This is particularly true for high-skilled employees who are used to state-of-art, consumer-grade technology solutions. What may have been an acceptable work experience a few years ago, may now be considered outdated, inefficient, and impersonal. This doesn’t mean every process needs to be updated every three years. But companies should critically review older processes and ask, “Is this still the right way to do this given the shifting needs of the organization and the expanding capabilities of technology?”
These truths are not challenges to be solved. They are realities that need to be factored into everyday operations of digital ready companies. To use an analogy, the truths of digitalization should not be thought of as being “major storms we need to survive.” They must be accepted as changes to the overall climate of where we live. It is one thing to prepare for an occasional heat wave. It is another to adapt to living in a world where it is hot every day.
For a comprehensive discussion of digitalization and its impact on work, including a questionnaire to assess the digital readiness of your company, check out the paper Creating Digital-Ready Organizations: Growing Companies That Thrive on Change.