Today digital transformation is 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 discussed 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 most largest risks and greatest opportunities facing both public and private sector organization globally. It is also the most prominent concern and top priority of CEOs, business and government leaders worldwide.
On the one hand, it is causing a mass extinction event in industry after industry wherein companies are either ceasing to exist or becoming irrelevant. On the other hand, new species of organizations are rapidly emerging with a different DNA structure suited to the digital age (We refer to this as “Speciation” – more on this later). For people to survive and thrive in these new ‘species’ of organizations, they would also need to be structured differently with different sets of professional DNA structures in terms of skills, knowledge, and mindset.
Is digital transformation necessary?
Isn’t it evident that Digital Transformation appears necessary? Indeed, it is, but the irony about this hugely important and widely discussed topic is that it remains poorly understood by society at large. Therefore, I decided to dive into this subject during the 2020 lockdown to further my knowledge and understanding of this new essential knowledge tool that every professional should have in their quiver. It will impact all facets of life form if not already doing so.
Therefore, I will be writing various articles over the coming weeks & months on this topic to share my learnings, takeaways and thoughts. I hope you find this interesting to read. I certainly have.
Decoding Digital Transformation
Before we dwell into the technicalities and details of what Digital Transformation entails and how this can be embraced by the leaders, organizations, etc., let us first look at something rather interesting to understand change and evolution, i.e., Evolution of Life and Speciation.
1. Evolution of Life – Gradual Evolution vs Punctuated Evolution
The first form of life (single-cell organisms) on planet Earth dates back to about 3.5 billion years. Out of which, bacteria-like cells ruled the 1.5 billion (about a third). The constant evolution of this simple life form over 1.5 billion years resulted in the emergence of three different cell types. These laid the foundation for domains of life in animals, plants, fungi and algae. This new form of life survived for another 1.5 billion years before it experienced further evolution, resulting in life form as we knew it about 541 million years ago. The point I want you to note here is a constant evolution of life form 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 early life’s evolution was very slow there are two different theories about the evolution development process. According to Charles Darwin, organisms morph gradually and slowly from one species into another, i.e., Gradual Evolution. Contrary to the Darwinian view, Stephen Jay Gould’s work on Punctuated Equilibrium suggests that evolution occurs due to bursts of evolutionary changes which often occur in response to environmental triggers. This equilibrium continually changes due to the rapid explosion of diversity, creating countless new species that settle into the new standard of life form. Evolutionary triggers and further changes are responsible for the species’ cyclic process (inception, diversification, extinction and repeat) called Speciation.
You may be wondering how this is relevant to understand Digital Transformation. It is. Because this idea is so compelling due to its parallel to the business world today, where we are witnessing many evolutionary changes. Digital transformation has triggered a 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, which rapidly adapted to the new normal.
The first know mass extinction in the Earth’s history took place about 2.45 billion years ago, the Great Oxidation Event. In the first half of the planet’s existence, there was no oxygen in the atmosphere. 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 flourished, we witnessed oxygen filled the atmosphere. The cyanobacteria poisoned themselves and threatened themselves as species. Most perished, but the minority survived by passing to the ocean’s bottom – 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 a 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. This process is known as Speciation. Speciation occurred for the first time (possibly the greatest) and continued after that. Every mass extinction is a new beginning.
Again, why is this relevant?
Because change is inevitable, it is ingrained in the very ecosystem that we breathe in. Species always go through biological and environmental evolution. Evolutionary and disruptive changes are on the rise. In the past million year alone, the world has experienced disruptive & evolutionary changes on an average of every 100,000 years 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 that:
- We are amid evolutionary punctuation
- we are witnessing a mass extinction wave in the corporate world in the early decade of the 21st century
- there is 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 declared bankruptcy.
- Estimated 40% of the companies in existence today will shut their operations in the next ten years
- In 1958, the 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 suggest that established species who operate using tried and tested processes have no room for error, failure and therefore have no room for innovation. It prohibits them from speciation or personal punctuations. Species that only survive on a finite set of resources 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 and 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 it is much more than that.
It is not about:
- automation or changes in information technology.
- migrating processes, data and information into a digital platform
- digitizing specific processes or systems
- implementing some latest technologies
“Investing in technology isn’t the same as digital transformation.”
Instead, it is about:
- creating a digital CULTURE led from the VERY TOP
- having a DIGITAL CORE strategy at the organization’s very heart covering all three core elements i.e. PEOPLE, PLANT, and PROCESS.
- creating a digital MINDSET where people and processes constantly and automatically Learn, Unlearn and Re-learn.
- creating a CULTURE of innovation within the organization and teams
- inculcate a CULTURE of ‘Leadership by Design’
In short, Digital Transformation is about creating an ambidextrous organization, which, on the one hand, is utilizing existing resources to preserve and protect its existing competitive advantages. While on the other hand, it explores and experiments with new technologies for creating organizational readiness to pivot when business models and competitive advantages get punctuated to the changing landscape.
The biggest challenge about digital transformation is its inherent nature of constant change. It is not a process that will ever be complete, at least not in a 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 impact we can predict or even measure now.
We believe new technologies and possibilities will boost economic growth. It will also promote inclusiveness, improve the environment, improve quality of life, and extend human life length. However, before we can reap benefits, there will be some societal, economic, and environmental adjustments. Still, long-term benefits will outweigh the short-term costs.
Job losses. The machine’s replacing humans. We will lose few jobs to automation, but in the long run, it will balance out. New jobs will get created, and some of the 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 essential workforce skills will have changed.
Society would need to understand how to reconceptualize the current education system – which is too backwards-looking. Governments will have to provide more flexible and agile workforce training programmes that match the digital economy’s skills.
To conclude thoughts on digital transformation
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, 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 – Akhil Gupta”
The author of this article is a senior finance professional with significant experience in corporate & investment banking, corporate finance and commercial operations. Currently based in London, he has worked in multiple countries across Europe, Asia-Pacific and Middle East regions. He is passionate about sharing knowledge and adding value to larger community. Please leave your comment or share thoughts on this article via email at email@example.com. For more articles, please visit the website www.decodefinance.in.
The author has used his knowledge, experience, and understanding of the subject to write this article. His research is also aided by the notes and findings from the books on related topic written by another Authors. Any views, opinions, articulation and thoughts mentioned in the article belong solely to the author and not necessarily to the author’s employer (past or current), organization, committee, or any other group or individual. Under any circumstances, the author shall not be liable for any views or analysis expressed in this note. Further, the opinions expressed are not binding on any authority or Court.