Digital Economy Dispatch #073

30th January 2022

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Where to Focus the Search for Value in Your Digital Transformation

Another day, another set of Zoom calls. And Teams meetings. Plus a whole bunch more online interactions where I seem to be spending more and more of my time in the same uncomfortable chair. Is this something that has been happening to you too? It was sitting in front of my computer screen on one of these calls recently that I realized I hadn’t been outside of the house for more than 3 days. Not one step. I’m sure that can’t be good? Can it?

Lots of people have been experiencing changes to their lives. In reaction to the challenges of the pandemic, work and home lives have been redefined, digital technology adoption has accelerated, and the ways we interact have changed. In some cases, these adjustments have been positive (I no longer spend 3 hours a day travelling to and from my office). However, others such as the blurring between home and work life are causing concern. And that has led many of us to ask an important question: What is it we want? Individuals, communities, and organizations are all searching for answers.

What Doesn’t Kill Us, Makes Us Stronger

The focus today in response to the business challenges induced by the global pandemic is a more fundamental revamp of business practices, a realignment of operations toward increased resilience, and a stronger relationship between stakeholders, partners, and consumers of services. Beyond technology replacement activities, many organizations are rethinking their approach to all aspects of their business models: which customers they serve, what those customers want, which channels are most appropriate to reach them, how costs can be managed more effectively, where to compete and who to partner.

Digital technology has been both a foundation for sustaining business through times of massive disruption, and a mechanism for transformation in business strategy as organizations plan for growth. The challenges we have seen in many organizations have highlighted 3 areas where today’s leaders, managers, and practitioners are focused to ensure success: Agility, Innovation, and Disciplined Management.

  • Agility: Faced with massive uncertainty, organizations must be able to design, test, and deliver new products and services more quickly than ever before. This requires new technologies that support rapid user-centered design, constant field testing, and instant deployment on a very broad scale. More fundamentally however, the experiences of the last year have emphasized that such change requires a different mindset. Today, the maniacal focus on business continuity has shifted toward looking to the future. Digitally-savvy leaders must direct the organizations’ engagement and delivery toward short delivery cycles where Minimum Viable Products (MVPs) trialed with consumers drive feedback to help the organization discover winning business models through multiple “pivots” in market strategy, capabilities, and positioning.
  • Innovation: Coming out of the difficulties of the last year, meaningful growth requires the collaborative process from idea generation to solution delivery to be optimized for rapid impact. Innovation practices must be flexible and repeatable. But also aligned with business goals to support the emerging business reality. Leaders must be ready, willing, and able to guide teams in an innovation-focused interactive environment. In the past, management had a tendency to separate innovation from operation. Innovation was perceived by many leaders as high risk, and largely left to the experts in the R&D department. Today, establishing practices that increase innovation speed to delivery is seen as a measure of successful leadership.
  • Disciplined Management: The past year has emphasized that sustainability of our businesses requires management approaches that balance flexibility with rigor. The increased stress and inefficiency that surrounded the somewhat chaotic approaches to sustain operations must be replaced by more responsive techniques that guide and support workers. Effective management post-covid requires that we adapt our working environment to remote collaboration, shorter planning cycles, and flexible partnering styles. However, this speed and flexibility must be wrapped in an appropriate set of techniques that improve visibility across the whole lifecycle to inform decision making and improve collaboration.

Even though these 3 areas are important, the search for meaning can also take us even deeper to consider the value and values on which to base our future plans and strategies.

Moving Toward a Deeper Understanding

Undoubtedly, as the impacts of digital transformation are becoming more widely felt, it is forcing a fundamental reassessment in many areas of our lives. Alongside the shift to digitized assets and resources, there is a parallel change in demand for the kinds of products and services clients want to consume and the associated costs they must pay to access them. While there are many different threads that could be highlighted, underlying this debate is a more fundamental question: What do we value?

At a fundamental level, there has been significant shift in thinking that challenges our understanding of what we value and what we pay for that value. Perhaps the most obvious initial impact concerns the pricing of digital goods and services. In conducting digital commerce, consumers are raising concerns about what they pay for and what they receive. For example, clients often question the impact on pricing in moving to a digitized online experience from a face-to-face one, they discount the importance of well-curated data when access to a wide variety of information is available at the click of a mouse, and they dispute the price of insights from experts when automated recommendation systems provide advice for free.

These questions on pricing are further complicated by the introduction of new digitally-powered business models. The digitization of products and services enables approaches that move beyond direct product sales and subscriptions for services toward usage-based models, shared ownership of assets, surge pricing based on dynamic demand management, and a variety outcome-based pricing schemes. Consequently, we now have many more ways to interact with clients to create value, complicating the decision about who pays what and when.

Yet, driven by digital transformation more fundamental discussions are also taking place about what we value and why. Mariana Mazzucato’s well-cited book, “The Value of Everything”, captures much of this thinking by addressing the challenge of understanding what we value and why that matters. She offers a passionate appeal to open a fresh debate on value creation and whether value is being placed on the right things in a society that is increasingly disaffected with the polarizing of wealth, the rising gap between the highest and lowest paid workers, and the perceived tax inequalities when large, high turnover companies pay negligible amounts on those sales.

Although such questions may seem rather abstract, their practical impact is being seen very clearly in many business domains and large parts of our society. This is evident in changing trends in advertising, fluctuating valuations of companies, revised choices by consumers, disputes over salary levels for company executives, support for organizational structures that promote transparency, and much more. At both an organizational and individual level, explicit consideration for questions about what we value and how those values are transmitted to stakeholders has become a high priority item on the agenda. In particular, the values emerging in our post-Covid world are forcing a reassessment of who benefits and who pays for services in a society struggling to address the consequences of balancing strategies across the triple bottom line of People, Planet, Profit.

Taking the Next Step

How does a search for value impact your digital strategy? In practice, such thinking gives rise to a considerable dilemma: Whether an organization focuses on the use of digital technologies to deliver value to existing clients within existing value models, or looks to realign its activities toward alternative approaches where value is reconsidered in light of new value models that are emerging. Understanding and balancing your approach to face this dilemma is critical.

It requires that your organization turns its attention to several key questions: What are our values? How do we represent our values in what we do?  What do our clients see as value? How do we reflect new ways to provide value through our business models?

Something to consider on your next online conference call.

Digital Economy Tidbits

The Semi-Conductor Ecosystem Explained. Link.

This full explanation from Steve Blank of the background and complexity of the semi-conductor supply chain brings a little light into why the manufacture and assembly of computer-based devices is so challenging.

(Sidenote: I never felt more out of my depth than when working for Texas Instruments in Dallas many years ago and the first thing they did was to send me on a course to learn about the fundamentals of photolithography. Mind blowing stuff.)

 

The Future of Defence Technology. Link.

Definitely worth a read is the latest Technology Quarterly report from The Economist on “Defence Technology”. The digitization of warfare has been happening for some time. Like other domains, its effects are transformational on strategy, leadership, and organizational structures.

War among the sensors poses new challenges:

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