Continuous change without any periods of stability!

During the last couple of years, the concept of digitalization has changed in meaning and scope. Digitalization was defined as the "Nexus of Forces" by Gartner in 2012 when I first heard of the concept. It meant focus on social, mobility, information and cloud services that was changing business at that time. Even though these four topics still are valid for a discussion 2018, the concept of digitalization has evolved significantly and been complemented by new meaning and implications.

Today, we probe new technical opportunities with focus on artificial intelligence/robotics and 5G telecom services but also discussing their effects on business. The fact is that the concept of digitalization is constantly moving and changing with no periods of stability. Just when we though we understood and mastered digitalization, it changes shape and format. This obviously means that business (and IT) is challenged by continuous change. It is a game where the rules are totally unpredictable.

I would probably not primarily discuss the exact technical trends but its implications and effect on business. The reason is that the technical trends with change quickly, but its business implications (how to survive) are more stable. There are three main business implications of digitalization what are necessary to understand and address.

Barriers to entry are disappearing

First, the barriers to entry (technology/infrastructure, capital, patents or regulatory) of many industries are disappearing. The last 20 years has fostered a new business climate for entrepreneurs to challenge traditional industries with new concepts and business models (often IT driven). For example, World Economic Forum talks about a “democratization of technology/IT” as a key trend for digitalization. It is the idea that technical infrastructure is accessible (cheaper) to the general public and not only for capital intensive corporations. In combination with good access to risk funding/capital and an increasing innovative culture – “democratized of technology/IT” challenges the traditional business barriers. Who would have thought 20 years ago that industries such as telecom, music/media, and banking would be challenged by Swedish start-up such as Spotify, Skype and Klarna? Today, no industry is protected driving an unpredictable business evolution phasing out unprepared companies.

Customer behavior is changing

Secondly, the customer behavior is changing quickly with more and more consumers willing to test and try new digital offerings through digital channels. Fifteen years ago, the internet was still considered “unsafe” and “difficult” for most consumers – but today it’s the other way around. We see digital sales sky rocketing and the expectation is today on new cool apps and digital solutions making life better and more efficient. Banking Consumer Index (2017) stated that excellent technology is now a hygiene factor for the consumers - who now require personal interaction and customized products and services. The digital consumer is not willing to pay for services or products that do not create an experience or value.

Technical evolution is accelerating

Thirdly, the technical evolution is faster than any time in history – and it will not slow down. Moore’s law indicate that the process power will annually double in performance while its price reduced by 50%. Current processors can simulate complex and cognitive tasks through Artificial Intelligence and Robotics. In a couple of years, a processor can replace a human brain – and further down the line, it can replace departments or companies. Ideas and concepts impossible to realize a couple of years ago are now going into production. What we need to understand when it comes to technology is that each forward movement in evolution creates hundreds of new ideas and innovations – leading to new technical innovations. It is a technical tsunami that are changing our society from its core.

No business is safe

The true impact and evolution of digitalization is very difficult and complex to foresee as the three digital trends interact – creating an unpredictable business chaos. The level of predictability (months) is already rapidly decreasing in various industries. In bank & finance sector, the business predictability has decreased from 24 to 6 months during the last 15 years based on the combination of the three digital trends. It becomes more and more crucial for business to react quicker to trends, threats and opportunities. “Time to market” is not limited to Sales and Marketing but include the whole company in a fast-moving value chain. Here we see a difference between digital and traditional companies. Digital companies are designed to react quicker to trends and threats than traditional companies. A traditional company requires 18-24 months to react to a new trend or threat while a digital company react in less than 6 months. In practice, this means that the digital company achieves a series of “temporary monopoly” as the traditional companies are continuously 3-5 product cycles too late. The digital companies will during its “temporary monopoly” set the new standards of the industry and influence the customer behavior without competition – changing the nature of business. This is obviously a governance and leadership issue. Digital companies have change and speed as part of their corporate DNA and allow for more agility, creativity and empowerment to react quicker and with more force to new trends. Fast change in the market is the starting point for these companies. Worth thinking about!

Recommendations:

• Focus less on the current technical trends but rather on the implications of digitalization over time. What does high level of unpredictability in terms of technical evolution, customer behavior and business environment mean for your company? Would you do the same investments and use the same governance structure?
• What are the obstacles for your company reducing reaction time (time to market) to new business opportunities and threats – and avoid temporary monopolies? It is in most cases related to leadership, culture, and governance, and not technology.
• How do you ensure to get accurate data and information quality for management decisions regarding trends and implications? Do you have the needed analytical capabilities to interpret the information?

So, what will digitalization look like in 5-10 years? It is an impossible question to answer but I would turn the question around. Will we have banks, telecom operators, insurance companies, newspapers, and linear television? Will my kids require a driver’s license? Will I still need a car? The Swedish Government is considering a new high-speed train track between Stockholm and Gothenburg (ready 2028) – but will we still be travelling by train then? Or will they all be eaten by new digital business models, democratic technology and entrepreneurship? The world is spinning extremely fast and no business or industry is protected from digitalization except those prepared for the unpredictable – in a world without any periods of stability.