Digital Economy Dispatch #052

5th September 2021

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The Long and Winding Road to Digital Transformation

It’s been an extraordinary two years. By any standards, what we have seen in 2020 and 2021 has been unprecedented. Our lives have been forever changed by the Covid pandemic and its on-going challenge to society. Its deep personal impact on so many people can neither be underestimated nor trivialised. It’s been tough. And for many the pain is substantial and long lasting.

Yet alongside this enormous challenge we have seen invention, innovation, and ingenuity in abundance. Massive shifts have been required to ensure continued operation and to enable rapid adaptation of major elements of business and society. Across all domains and services, we have seen evidence of resilience in supply chains and IT service provision, adoption of new processes to accelerate critical activity such as vaccine approvals, moves to exciting virtual forms of collaboration to facilitate distributed interactions, wide acceptance of more diverse approaches to leadership and decision making across dispersed teams, and so much more.

Underlying the success of all of these advances has been one essential thread: The effective digital transformation of the large established organizations (LEOs) that are central to business and society. Without doubt, their expanding use of digital technologies has been a cornerstone of gaining control and building flexibility amidst the chaos. Furthermore, adopting a digital-first mindset and enhancing everyday activities to operate digitally are seen as essential to any meaningful recovery.

However, these recent experiences are significantly at odds with the slow pace of digital skills adoption over the past few years, particularly within LEOs.  Typically, they have reported rather mixed success with digital transformation. Hence, while underway for several years, the pre-pandemic response across most organizations to the increasingly pervasive deployment of digital technologies over the past 2 decades can probably best be described as “uneven”.

While some organizations have been rushing head-first into the new digital age, many have not. For example, in reviewing the UK’s Nation Health Service (NHS) a rather damning National Audit Office (NAO) study completed just before the pandemic concluded that digital transformation at the NHS was not only much slower than expected, but also that it’s strategy was confused, the planning was ineffective, its priorities were inappropriate, and the funding provided was inadequate. In the private sector, detailed studies in 2019 made similar comments about the state of digital transformation at major financial institutions, insurance companies, manufacturing conglomerates, aerospace and defence firms, and many others.

This is no real surprise. The poor state of digital transformation has been recognized by senior leaders in LEOs for some time. Substantial surveys and analysis by the top consulting companies have highlighted the barriers to digital adoption in LEOs, the readiness gap facing leaders promoting digital innovation, the high failure rate of digital strategies, a disparity in digital adoption across different industries, the difficulty aligning digital maturity to financial performance, and so on. Consequently, accelerating the pace of digital change across major parts of these organizations has been difficult and slow.

The shockwave caused by the pandemic changed all that. As Microsoft CEO Satya Nadella said in April 2020:

“We’ve seen two years’ worth of digital transformation in two months. From remote teamwork and learning to sales and customer service, to critical cloud infrastructure and security—we are working alongside customers every day to help them adapt and stay open for business in a world of remote everything.”

Facing significant disruption, a focus on digital transformation has been seen as the only effective way to survive and thrive in an extended period of volatility, uncertainty, complexity, and ambiguity (VUCA). Forced into rapid response with a disconnected workforce and wildly changing client demand, reliance on digital technologies has been essential for managing business operations, exchanging essential information quickly, collaborating on joint tasks, and maintaining any semblance of shared corporate culture across the organization.

The resulting digitally-powered response from many organizations has been nothing short of miraculous. With IT and digital services staff stepping up to the challenge, a high level of operational resilience was achieved. Furthermore, despite the disruption, digitally-savvy leaders have found ways to deploy digital technologies to overcome barriers to physical engagement and replace broken manual practices, in many cases they have also substantially redesigned products, services, and working practices to adjust their cost base and offer new forms of value to their clients.

Yet as always, there is no time to dwell. The world moves on and we have a lot to consider. How do we view digital transformation in light of recent experiences? Two aspects of delivering digital transformation are critical.

First, from a practical perspective, industry commentators such as McKinsey see this as a major digital tipping point that has moved businesses toward a different level of digital maturity. They now operate using much more explicit digital-first processes on a technology infrastructure that has been proven sufficiently robust for delivery of large-scale transformation. For instance, a McKinsey survey published in October 2020 found that due to their Covid-related experiences, companies are now three times likelier than they were before the crisis to conduct at least 80 percent of their customer interactions digitally.

Additionally, the sustainability of digital transformation efforts has been reinforced. Supporting activities are now often much more aligned to the digital transformation taking place. Although a little way behind, a base of digital skills is being formed to ensure the transformation has the support it needs to overcome the many barriers in its way.

Second, there are growing expectations for to maintain the increased speed at which businesses will continue to digitally transform. In terms of leadership, this pressure has caused a significant shift in the attitudes and mentality of senior executives and decision makers. These business leaders have recognized their role in the digital transformation journey is not only essential, but also offers them the career opportunities and rewards they seek.

In the 3rd annual digital transformation survey conducted by Harvard Business Review Analytic Services, they talked with over 500 executives from several business sectors around the world about their changing views as a result of the pandemic. More than 90% of this group say that their digital transformation timeframes have been accelerated and 76% of them also say transformation has become significantly more important to their business’s success.

Of course, adjusting to the massive disruption of the past 2 years will take time. Whether it is “the great economic reset”, the “the great dispersion”, or some other key aspect that will drive the biggest impacts remains to be seen. With so much turmoil, there is significant doubt and debate about what comes next as the world adjusts to the changes we’re experiencing. In spite of this uncertainty, perhaps one thing is clear: We have all gained a deeper appreciation of the role and impact of digital transformation in whatever “new normal” awaits us.

Digital Economy Tidbits

Be Afraid: Executives warn about the harvesting and use of personal data. Link.

This is a very worrying article based on a recent KPMG survey about data privacy. If directors of companies are concerned about what their companies are doing with your personal data, then we really need to be worried.

That’s the shocking finding of a recent survey by consulting firm KPMG that asked 250 “director-level or higher” executives at companies with more than 1,000 employees about data privacy. Remarkably, 29% of them admitted how their own companies collect personal information is “sometimes unethical.” What’s more, 33% said that consumers should be concerned about how their company uses personal data.

 

A Decade and a Half of Instability: The history of Google messaging apps Link.

Anyone who thinks that Big Tech companies such as Google have it all sewn up need to think again. Here is a very long sad story of how badly Google has messed up its messaging product strategy over the past 15 years.

Because no single company has ever failed at something this badly, for this long, with this many different products (and because it has barely been a month since the rollout of Google Chat), the time has come to outline the history of Google messaging. Prepare yourselves, dear readers, for a non-stop rollercoaster of new product launches, neglected established products, unexpected shut-downs, and legions of confused, frustrated, and exiled users.

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