Digital Revolution - how to deal with it?

Digital Revolution - how to deal with it?

Why is the Digital Revolution (DR) a topic for executive coaching?

  1. During Sparring with business leaders, DR turns up in the context of strategic questions, capital expenditures, M&A. The leaders often express the desire to talk more about DR – to get a feel what this can mean and how it can impact their business
  2. DR is a challenge for most leaders. The objective of this series of 3 blogs is to give a brief summary with examples to make leaders and their management team more alert (aware) and at the same time more relaxed on the topic (know how to deal with it).

This series of 3 blogs around Digital Revolution (DR) covers the following themes:

  • Blog 1: The Digital Revolution – Definition, dimension of impact, the speed of this change
  • Blog 2: How shall my organisation deal with these changes?
  • Blog 3: What does DR mean for me as a leader and for the management team?

Digital revolution (DR) – faster and broader than generally perceived

First I would like to give the definition from Wikipedia. There are a lot of buzz words around this theme and the definition below covers it, with the exception of not highlighting the high, at times exponential speed of this change:

The Digital Revolution is the change from mechanical and analogue electronic technology to digital electronics which began anywhere from the late 1950s to the late 1970s with the adoption and proliferation of digital computers and digital record keeping that continues to the present day.[1] Implicitly, the term also refers to the sweeping changes brought about by digital computing and communication technology during (and after) the latter half of the 20th century. Analogous to the Agricultural Revolution and Industrial Revolution, the Digital Revolution marked the beginning of the Information Age. (Wikipedia)

DR hence is not change driven by a few, rather it comprises all the small and big innovations that became possible due to the digital development. This covers the innovation of millions of enterprises, institutes and individuals all around the globe in all kinds of industries and services. Some of these inventions impact the underlying hard and software, others build on these new capabilities, whilst other inventions are based on existing technology. Technology fosters new technology. All of this is the backbone for the almost unbelievable speed of change. So why can we not see the full speed? It is tricky because many developments are on the embryonic level or before the mass break through.  As some of these technologies grow in two to three digit numbers they will be a dominant technology by the time the average person sees them. The start at the size of a snowball can turn in to an unstoppable avalanche in 3 to 5 years time. This speed of global growth is quite recent and is an important element of the digital revolution.

An example for the acceleration in speed and the impact of digital change is the mobile phone. 1973 Martin Cooper developed the first Cell phone. It transmitted language, was large, heavy and cost a fortune. In the graph below you can see the intermediate steps, the increase of technological development per time unit. 2007 the first iPhone was on the market and the first apps were introduced. What started 10 years ago lead to a global smart phone avalanche. It changed most people’s lives on the planet. The smart phone is also used to make calls, but today this is just one function an for many no longer the primary purpose. It is a personal assistant for time management, written communication, exchange of pictures, documenting business and private live, evaluating and booking flights, hotels, cars,… Companies were created and live on features and apps that use the smartphone as a base. All this happened in accelerating speed over the last 10 years.

The development from 1973 to 1989 was unbelievably slower. These 16 years brought us from a hardly portable phone to a real portable phone with only very marginally improved functionality. It was only an elite who had access to that improved IBM mobile phone. From 1993 on speed increased significantly. It was 2002 that Blackberry impacted the business world with improved capabilities and costs that made its phone accessible to a wider audience. As we know today Blackberry’s dominant position on portable phones has been wiped out and the company sold its technology to a JV in Indonesia. Even the well-introduced brand name was no protection, the newcomers took it all.

Digital Revolution - how to deal with it?

Innovations that today are considered to be gimmicks can change the world tomorrow. Its hard to tell what will survive and what not. Another dimension is the global presence. The smartphone was originally assumed to only sell to masses in the economically strong countries. Reality today is that mobile phones are globally present. Innovations are so rapid, regulations have just no chance to keep up with them. The power of the digital revolution is not stopped by local economics, political or regulatory matters. It is only with a substantial time lag, that authorities step in and start to limit for example the internet, think about rules for UBER, etc.

The speed of CPU’s has increased dramatically and the cost of CPU’s has decreased dramatically. Today’s smartphones processing and storage capabilities surpass by factors the widely used commercial PC’s that were used 5 to 10 years ago. You may have heard of  “Moore’s law” (actually more a vision than a law). Moore originally indicated a doubling of transistors on an affordable CPU would double every two years. In simpler terms, the computing power of computers would double ever second year. Today the view is that the doubling takes place about every18 months. What ever it is – it is incomprehensibly fast.

Lets make an example of this acceleration of doubling every 18 months. For that we take speed as an example. If we perceived the speed of change 3 years ago as fast, say 100 km/h (car speed), today this would be 400 km/h (high speed train) in 3 years from now 1600 km/h (fighter plane) and in 6 years from now 6400 km/h (hyper speed). How on earth can this be explained, even more truly understood? Looking back10 years on what has happened is impressive, but we would be fooled if we believed that the next 10 years will bring that amount of change. Based on what we just saw the change is going to be a lot more, for most of us probably incomprehensibly more.  

One conclusion out of this is that we have to just accept the fact that this development is out of our control, it is almost impossible to foresee and hence makes planning very difficult. We will cover this aspect in the next blog.

This is an additional image to visualise the speed and acceleration of change from the past. Do you remember the first floppy discs with a capacity of 365 KB? They were replaced later on when the AT-PC came out with the powerful 1.4 MB discs. One of these discs cost around 4.—CHF (inflation not considered). Today a 16 GB stick costs CHF 5.--. Not only is the capacity not comparable, the read and wright speed is as well. So just for the fun of it. Imagine the pile of 1.4 MB discs that would fit on the 16 GB stick in your pocket. If you could stack them all one on the other the pile would be 330 meters high and look down on the Eiffel tower!  Today a USB stick with 128 GB costs CHF 50.--. According to Moore’s law we should be able to buy a 256 GB stick in 2018 for that same cost – probably for less.

The combination of digital speed increase and innovation drives this rapid change. Once we understand and accept that, we are ready to think how we want to deal with it. It kind of looses the threatening part. This then is the right platform to deal with the change.

Does the Digital revolution impact all businesses and all people?

Unnecessary question? Maybe. I bring it up because in spite of all of the above the reaction is often “Yes, I can see this makes sense, however I do not think that our business is going to be impacted substantially by DR”. My view is that I believe that all businesses and all people will be impacted (from substantially to dramatically impacted) and I would like to show why.

Some new technologies are as mentioned above just “combined” technologies. Social Media for example. Intelligent platforms permit Facebook, Twitter, WhatsApp, …. , with some additional development to have the impact they have. The massive impact on stores, travel agencies due to the internet platforms is just using existing technology. Obviously platforms will continue to grow and change a lot of businesses lives. Uber and Airbnb are such examples. The graph on the social web below shows the impact these tools can have, mainly due to the innovation of internet and smartphones.

Chart. English explanation to the German wording. The McKinsey statistic indicates on x-axis the time in years it takes to get globally 50 million users. The y-axis shows the different technologies.

Digital Revolution - how to deal with it?

Disruptive developments and the top technology drivers

Some of these innovations are disruptive to products, businesses or business models. They simply make them obsolete. Examples for the change we lived through and accepted. Encyclopaedias are digitalised and more so replaced by the Internet and services such as Wikipedia. Large Library’s are digitalising more and more, the telephone booths are replaced by mobile phones, radio, tv turns digital and replaces all underlying technologies used for analogue services, digital photography, e-mails, digital booking of trips, hotels,… and there are lots more.

Examples for Innovations that exist, but have not yet come to show the full impact:

  • The mobile internet platforms for banking, payments, health diagnostics, medical tools that can alarm and/or even apply medicine,..
  • Artificial Intelligence with expert systems for medical, technical and legal services. In combination with the mobile internet, analysing what you like, proposing where to eat, shop, who to meet, recognition of faces and so on
  • Robotic in the widest sense. Help people walk, lift heavy weights. This brings us to the field of machine / human interface. Devices that help humans to enhance their functions, vision, mobility, hearing, strength.. and that at a later stage are built in to humans to interact with the body’s biological system. Then there is all the automation of complex work in combination with artificial intelligence. 3-D Printing which goes to building houses, organs, …
  • Autonomous driving. Automotive is a key economic engine. Self-driving cars can mean that the quantity of cars will be halved. People will order cars to their home when they need it and give it back as soon as they are at their destination. What will this mean for the whole industry, the servicing industry, the taxi and uber business, ….
  • Genomics and modifying DNA. Today’s knowledge on DNA and the various elements and codes is breath taking. What will this mean if we can change these codes? Prevent serious illness, change character, enhance life expectancy? Will this influence what kind of children will be born in 5 years?

Do we want all of this?

Personally I do find some of these developments concerning and wonder what the consequences will be out of all of this. I know that I don’t know and organise myself accordingly focus on adjusting to what comes around the next corner.

Fact is, nobody asked my permission to do these inventions and I guessed you were not asked either. The future – as in the past – will probably not be much better or worse than what we know today – however for sure completely different. As a matter of fact a lot more different than what we can imagine today.

Take away

  1. This will be a challenge for the whole humanity, not just for business leaders. The key is to accept the change witch is the starting point to successfully deal with it
  2. There is a lot happening. We cannot now what exactly will be developed and on the market at what time. We simply lack the phantasy to foresee all the developments that will present themselves
  3. The future of most businesses and business models is hard to foresee. This uncertainty requires to take a different approach to the way we plan (topic next blog)
  4. The knowledge of the true customer need becomes even more important. (topic  next blog)
  5. The word “agility” becomes a whole new meaning in this context. Agility extends now not just to a few individuals but to whole organisations (topic next blog)

Next blog: How shall my organisation deal with these changes?

You still want to know more about future visions – digital revolution? Raymond Kurzweil, the author of  “The singularity is near” has a good video (link) on You Tube 

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