Decoding Digital Transformation

Digital Transformation. Today it’s everywhere. It’s one of the biggest buzzwords of the past few years. If you google “digital transformation” you will see millions of results. I just got 535 million….it was 253 million in 2019. Digital Transformation is being talked about everywhere and by everyone including C-suite executives, governments, policymakers and academia. It goes by different names too. Some call it the “Fourth Industrial Revolution” while others call it the “Second Machine Age”.

It is one of the largest risks and greatest opportunities facing both public and private sector organisation globally. It is also the biggest concerns and top priorities of CEOs, business and government leaders around the globe.

On one hand it is causing mass extinction event in the industry after industry wherein companies are either ceasing to exist or becoming irrelevant. On the other hand, new species of organisations are rapidly emerging with a different DNA structure suited to digital age (What we refer to as "Speciation" - more on this later). In order for people to survive and thrive in these new ‘species’ of organisations they would also need be structured differently with different set of DNA structure in terms of skills, knowledge and mindset.

Isn't it obvious that Digital Transformation appears important? Indeed, it is, but the irony about this hugely important and widely discussed topic is that it remains poorly understood by society at large. I therefore decided to deep dive into this subject during 2020 lockdown to further my knowledge and understanding of this new essential knowledge tool that every professional should have in their quiver. For it will impact all facets of life forms if not already doing so.

Therefore, I will be writing various articles over coming weeks & months on this topic to share my learnings, takeaways and thoughts. Hope you find this interesting to read, I certainly have.

Here we go with the First one…..Decoding Digital Transformation

Before we dwell into the technicalities and details of what Digital Transformation entails and how this can be embraced by leaders, organizations etc. let us first look at something rather interesting to understand about change and evolution i.e., Evolution of Life and Speciation.

1.    Evolution of Life - Gradual Evolution vs Punctuated Evolution

Evidence for the first form of life (single cell organisms) on planet Earth dates back to about 3.5 billion years. Out of which 1.5 billon (about third) were ruled by these bacteria-like cells. The constant evolution of this simple life form over 1.5 billion years resulted in the emergence of three different cell types that laid the foundation of three domains of life in the form of animals, plants, fungi, and algae. This new form of life survived for another 1.5 billion years before it experienced further evolution which resulted in the life form as we know it about 541 million years ago. The point I want you to note here is the constant evolution of life forms albeit slow. Change is inevitable. As cliché as it may sound, never has this been more relevant.

Now let’s look at the process of evolution.

Though it is evident that the evolution of early life has been very slow but there are two different theories about this process of evolution. According to Charles Darwin, organisms morph gradually and slowly from one species into another i.e. Gradual Evolution. Contrary to Darwinian view, Stephen Jay Gould's work on Punctuated Equilibrium suggests that evolution occurs as a result of a series of bursts of evolutionary changes which often occur in response to environmental triggers. This equilibrium changes constantly due to the rapid explosion of diversity, creating countless new species that then settle into the new standard of life form. Evolutionary triggers and consequential changes are responsible for the cyclic process of species (inception, diversification, extinction and repeat) called Speciation.

You may be wondering how this is relevant to understand Digital Transformation. The reason this is relevant is becuase this idea is so compelling in due to its parallel to the business world as today, we are seeing a series of evolutionary changes - triggered by digital transformation, mass extinction of corporations and mass speciation of new companies. 

2.    Speciation – Over and over again

In the past 500 million years, there have been five global mass extinction events. A minority species survived every time who rapidly adapted to the new normal.

The first known mass extinction in the Earth’s history took place about 2.45 billion years ago, the Great Oxidation Event. It is said that in the first half of the planet, there was no oxygen in the atmosphere. In fact, oxygen was poisonous to all forms of life. The dominant species at that time were cyanobacteria also known as blue-green algae. They were photosynthetic i.e., using sunlight to produce fuel and releasing oxygen as a waste product. As Cyanobacteria flourish, the atmosphere was ultimately filled with oxygen. The cyanobacteria literally poisoned themselves and threatened themselves as species. Most perished but a minority survived by perishing at the bottom of the ocean – where oxygen was minimal. Those who survived the Great Oxidation started using oxygen as fuel and started producing energy remarkably efficiently – 16 times more efficiently than previous species. Life had reinvented itself. The very element which caused life to disappear became the foundation of new life form. New life bred faster, grew faster and lived faster. Survivors exploded into an array of new species that survived on oxygen and finally ventured out of the ocean. Speciation occurred for the first time (possibly the greatest) and continued thereafter.

This process is known as Speciation. Every mass extinction is a new beginning.

Again, why is this relevant?

Because change is inevitable. It is ingrained in the very ecosystem we breathe in. Because species always go through biological and environmental evolution. Because evolutionary and disruptive changes are on the rise. In the past million years alone, the world has experienced disruptive & evolutionary changes on an average of every 100,000 years as compared to five mass extinctions in 400 million years.

If the rate and magnitude of speciation will be slower than the rate and magnitude of evolutionary and disruptive changes, many life forms will be under threat. Those who won’t adapt or change would risk marginalization or extinction. Diversify or Die.

Now let us look at this in the context of the corporate world. Evidence suggests;

We are in the midst of an evolutionary punctuation.

We are witnessing a mass extinction wave in the corporate world in the early decade of the 21st century.

A significant difference with this wave is the speed with which change is happening.

Since 2000, 52% of the Fortune 500 companies have either been acquired, merged or have declared bankruptcy.

Estimated 40% of the companies in existence today will shut their operations in the next 10 years

In 1958, average tenure of companies in S&P 500 was over 60 years. By 2012 it had fallen to under 20 years

The above facts and history of life evolution (discussed earlier) suggest that established species (in their stasis) who operate using perfectly functioning or tried and tested processes have no room for error/failure and therefore have no room for innovation. This prohibits them from Speciation or personal punctuation. Species that only survive on a finite set of resources around them, risk losing those resources when the world around them changes (Reminiscence of the story ‘Who moved my Cheese’).

Now, let’s look at what Digital Transformation is (or What it is not).

In technical terms, Digital Transformation is a confluence of four major technology forces i.e. Cloud Computing, Artificial Intelligence (AI), Big Data, and the Internet of Things (IoT). But is much more than that….

It is just…

NOT about automation or changes in information technology.

NOT about migrating processes, data and information into a digital platform

NOT about digitizing certain processes or systems.

NOT about implementing some latest technologies.

Investing in technology isn’t the same as digital transformation.

Rather it is about…

Creating a digital CULTURE led from the VERY TOP

Creating a DIGITAL CORE strategy at the very heart of the organisation covering all three elements PEOPLE, PLANT and PROCESS.

Creating digital MINDSET where people and processes constantly and automatically Learn, Unlearn and Re-learn.

Creating CULTURE of innovation within the organisation & the teams.

Creating CULTURE of ‘Leadership by Design’ - system that discovers.

In short, Digital Transformation is about creating an ambidextrous organization, which on one hand, is utilizing existing resources to preserve and protect its existing competitive advantages. On the other hand, it is exploring and experimenting with new technologies for creating organizational readiness to pivot when business models and competitive advantages are punctuated by changing landscape.

Challenges

The biggest challenge of digital transformation is its inherent nature of constant change. It is not a process that will ever be complete, at least not in near future. By the time you adopt and align with today’s digital environment, the environment will have likely changed significantly. The point here is digital transformation will have profound effects, but not necessarily the effects we can predict or even measure now.

Advantages

It is believed that these new technologies and their possibilities will boost economic growth, promote inclusiveness, improve the environment, improve quality of life, and extend the length of human life. However, before the benefits can be reaped there will be some societal, economic, and environmental adjustments but in the long run, the benefits will outweigh the short-term costs.

Fear

Job losses. Machines are replacing humans. While it is true that some jobs will be lost to automation but in the long run it will balance out as new jobs will be created and lost jobs will rebound once workers adjust their skills and learn how to work with new technologies. It is believed that in 5-10 years times, 35-40% of important workforce skills will have changed.

Society would need to understand how to reconceptualize the current education system – which is too backward looking. Governments will have to provide more flexible and agile workforce training programs that matches the skills needed for the digital economy.

Concluding statement

The first industrial revolution allowed humans to master mechanical power. In the last one, we harnessed electronic power. In the era of digital transformation, we will master mental power.

Digital Transformation will further accelerate the pace of disruption.

The speed of change will never be this slow again.

Get ready, or else you will miss the Boat and once you miss it, it will be harder to catch.

“Change with the Change, else Change will ‘Change’ you” – AG

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Future articles on a related topic are expected to cover the following:

-         Ambidexterity – Supporting a culture of innovation

-         Leadership by Design – Creating a system that discovers.

-         Digital Transformation in Finance.

-         Process of Digital Transformation.

Disclosure: Above article is a culmination of thoughts influenced by and notes collected from the books I am reading, courses I have done/doing, independent study/research on digital transformation and leadership, and my own thoughts/conclusions.