This is a fairly lengthy and comprehensive report put out by the World Economic Forum, with Accenture, on the coming digital transformation of industries. The work (surveys, etc.) was done in 2015 and the report was published in January 2016, but it is still highly relevant.
The report looks at the nature of digital transformation, what it is and what is causing it, as well as makes specific recommendations regarding everything from the nature of the new workforce to the necessity to change business models. These recommendations are typically abstract and general but can serve as a useful guide to a company starting on its digital transformation journey. There are several key insights that every company executive and other stakeholder in an ‘analog incumbent’ business should take note of:
- Degree of Disruption – The role of digital technology is rapidly shifting from being a driver of marginal efficiency to an enabler of fundamental innovation and disruption. Digitalization is the cause of large-scale and sweeping transformations across multiple aspects of business, providing unparalleled opportunities for value creation and capture, while also representing a major source of risk. The economic and societal implications of digitalization are contested and raising serious questions about the wide impact of digital transformation.
- Clear Potential, Certain Costs – In this new world, analog incumbents – large successful companies that predate the digital revolution – can feel like they are being ‘hunted’ from all sides. It is not too late for incumbents to adapt, especially as they have considerable resources to fight off the attacks of leaner challengers, but they face two main challenges. First, the business model that served them well for decades has been disrupted by digital innovation and no longer works as desired. Second, attempts to create a new, viable business model for the digital age will flounder unless a company is willing to disrupt itself. Some analog companies are being held back from competing against digital disruptors both by an operating model that is unsuited to the digital economy and an outdated attitude to technology.
- Experimental Mindset from the Top – Digital transformation needs to be owned by the CEO, who must be accountable for its success. Today’s leaders need to be well-versed in the emerging digital world and how it’s disrupting their business. The biggest challenge businesses face in response to digital disruption is a lack of vision. To overcome this companies may need to rethink their approach to strategy development. CEOs should consider moving to an experimentation-oriented focus that uses real-time data to give instant feedback about the effectiveness of their strategic initiatives. A culture of constant, iterative experimentation is more effective.
- De-Centralize for Speed – Organizations need to speed up their decision making by moving away from a centralized, control-oriented decision-making body with decisions being made by a few, to a new ‘edge-centricity’ model where employees across the organization are empowered to make decisions, leading to increased self-management.
There is much more analysis and recommendation in this report and it is well worth reading as background material to support digital transformation initiatives.