Digital Transformation, survival in a fast-changing economy!

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In complex systems, if speed of change is faster than learning of your workforce, you face business transformation.

Digital was introduced in the 50’s (computer systems), industrialized in the 80’s (CIM – Computer Integrated Manufacturing) promises with AI and Robots were premature, failed fast with e-Business with the IT Bubble (Nasdaq Crash) in 2000, reinvented IT Systems (Cloud based) in 2010 with Data driven (i.e. Google, Facebook, Apple, Amazon) business models – therefore digital change is not a surprise, it will change business faster (now in < 1 year) than the speed of corporate learning (< 6 month).

Transformation changes Innovation, Culture and Society
Most companies see digital transformation solely as technology and economic improvements. Innovation in the digital economy changes cultures and societies.
Companies continuing to invest in technologies and not in people, improving their processes and not changing their leadership (culture), leveraging assets and concentrating on complicated problems end up in Crisis Management.
In digital economies with internet, everyone is ONline and connected, has access to knowledge, almost free of charge and everywhere. Smart devices allow to interact worldwide, using highly scalable e-Commerce platforms (Amazon, eBay) to provide digital business solutions. Exponential growth opportunities (“Singularity is near”) requires transformation to billion-dollar business models (disruptive), Systems Thinking allows to manage complexity and consumer behaviors with cross industry supply chains (digital ecosystems), approaching unlimited compute power (neural networks), unlimited resources in real time and infinite access to worldwide customers.

Change vs. Agility Management:
Consumers gain more power: Leading companies struggle to adapt to transformation, still using Change Management methodologies to execute their strategies. Governments have failed to adapt their infrastructures to digital opportunities (5G, e-Government): revolutionary mobility solutions with green energy and consumer markets shift rapidly; many workers will lose employability and incomes. This is Transformation not Change, Problem Solving replaced by Systems Thinking becomes the key differentiator in business strategies.

Innovation: Digital is nothing new, it exists for more than 50 years – transformation is nothing new, in the last 1000 years we globalized, mobilized, industrialized and now we digitize. The only difference is the speed of change to adapt with innovation, culture and society. There is no option, there is no choice, face reality and react (innovate).

Culture: If companies had a life time of 50 to 100 years (replacement in Indexes ie DJI, DAX) in a specific market, now the life time is down to 20 – 30 years in classic business systems and more than 80% startups exit in 3-5 years. Change Management is no more appropriate, companies have to reinvent themselves at high speed.

Society: Societies and Cultures were homogeneous, now they become heterogenous mixing values and beliefs. Political systems struggle to set policies and governments, building Trade Zones and leaving companies in uncertainty entering a a share economy.

Digital transformation is not evolutionary or incremental, therefore optimization with Change Management will produce high cost, slow improvements and high competition – transformation is revolutionary and agile, companies have to master the coordination of micro projects (scalable), fast execution (startup mentality), new leadership (engagement) and open-ended solutions (fail fast).

Digital Transformation: The second industrial revolution:
The first industrial revolution was the change from agriculture to industrial. Daniel Ricardo claimed that industrial will replace the workspace and lead to more wealth for workers. With digital transformation, we will not only change the workspace (labour), we change the work content (education). Daniel Ricardo has corrected his economic adaption theory, change in workspace will only produce more wealth if education improves. We move from a doing (get work done) to a learning (learn how to work smarter not harder) industry, where robots do the work and workers train the robots. Digital scenarios predict, a more than 50% replacement of existing workplaces in the next 5 years, with less than 20% new work opportunities, resulting in poverty for lost jobs and wealth for new jobs. The other half of (non digitable) jobs has to fight to protect their income level and move to service jobs.

This industrial revolution will have a huge impact on culture and society, social systems are not prepared for the changes and education is not prepared to improve “speed of learning” and industrial companies are “locked in” with their vertical organizations (supply chain) to change their business model horizontally (cross industry) to address the new competition (Platform economies). Some industrial populations are moving to an aging society, some emerging market populations are growing so fast, that they have to move to places with work, food and housing (migration). The financial systems are collapsing, feeding the wrong industries and supporting inequality (less rich more poor people).

Consumers shift from ownership to share economies, companies move to low tax countries, governments have to protect the environment (global warming) all at the same time.

Digital will move wealth from land, money and resources to data! AI is the new buzzword, to increase power (Machine Learning, Neuro-Networks, Robots, …), wealth (see Google, Amazon, Facebook, UBER, Airbnb) and control (AR/VR, Cyber Security, i.e. Social points in China). With digital, productivity can improve dramatically – only if business transforms!

Leading companies are struggling!
Looking at some former participants in the Global Forum and comparing with the 2019 attendees, we see the transformation:

GE was considered “too Big to Fail”, now GE is in the biggest transformation in history – GE was the highest valued company in 1990, now it fights to survive. GE was one of the fastest learning companies, highly innovative, financially profitable and fast growing – with the digital transformation GE is cutting business lines, laying off their workers, changing to become a software company and in the last 5 years facing the biggest financial losses in GE’s history.

Boeing another Global Forum supporter is facing a dramatic failure with the new 737 Max line, due to Software system failures impacting the whole business – partners change orders (Airlines), consumers cancel flights for security reasons, airports are stopping landings and the regulators stop production.

Another Industry is Automotive. Daimler, BMW, VW is challenged by environmental issues (reduce CO2, Diesel), innovation (electrical cars, TESLA) and consumer preferences (Car sharing, UBER) and mobility issues (autonomous driving). None of the mentioned companies send their leaders to learn about new business opportunities and challenges.

Banks or IBM, HP. Even IT industry is driving the change, high competition, new players, workplaces shifting to digital Unicorns. Are they in action learning mode?

New attendees are from Business Schools, NGOs, Political Parties, Logistics, Asian-participants, showing the shift to new economies.

Digital Wakeup call
Only 2 out of 10 companies are truly digitally transformed, most of them are startups (Unicorns). Markets shift faster: >40% of commerce is internet based, >80% products and services are digitally driven. That leaves 80% of companies still living in their classic business structures and processes.
If they fail to transform or transform to late, to slow or not at all, will lock them out from new business opportunities. The time window for digital transformation is closing fast!

Improve leadership (engagement), involve clients (business model), build new partnerships (co-create), educate (work 4.0), innovate (startup) use platforms (scaling), safe energy (sustainable) and transform your organization (processes and culture).

Business Driven Action Learning:

Outside-In not Inside-Out: Be it new ideas, or new competitors, future trends, etc., everything that matters starts outside of your organization.

Arenas not Industries: If you are a hostage to a legacy view of industry, you are making yourself vulnerable to disruptive surprise.

Together not Alone: Because the world is too complicated for any one organization to have sufficient range of expertise domains, co-creating with others is no longer an option, it is a necessity.