Is Digital Only Transformative?

A story...

The word "digital" first came into my life when my father drove the digitalisation of telco data centres in Greece during the '90s. I remember him studying how to convert a telephony wiring setup with the size of a flat into racks of servers. It was hard for him to get rid of his beloved wires for the sake of a keyboard. He did though and immediately realised how efficient he could be, when things went wrong and a whole region was without service, he could fix the issue in a click of a button. He was "digitally transformed" and he enjoyed it.

The context...

Nowadays, organisations are going through a "software revolution" where systems, devices and interconnectivity are revived with high-end software that fundamentally upgrades their capabilities. It is most known as Industry 4.0 or Digital Transformation.

Before we delve into the subject, I will first define four key terms as:

• Digital is software and data over user/application interfaces, devices and infrastructure, using the internet and having a global customer reach.
• Digital enablers are the cloud, internet of things, AI/ML, automation, analytics, app development, modern architectures, blockchain, integration, security and DevOps.
• Transformation is a single metamorphosis during the lifecycle of an organisation.
• Digital leadership is the continuous evolution of organisation assets with digital enablers to achieve, sustain and ensure business competitive advantage.

On "Leadership Under 6x Championships", I have analysed what businesses and individuals can learn from sportsmanship based on 5+1 leadership characteristics. Now, I will use those traits to create a digital leadership argumentation and define a path for companies to follow.

Digital leadership...

1. Capabilities via TransferWise, SDN & 5G

Understanding and obtaining digital skills is a first necessary step in driving digital leadership, similar to learning the rules of basketball before playing it. In 2011, Kristo Kaarmann and Taavet Hinrikus founded TransferWise, a fin-tech startup born during a mature mobile-app and smartphone era, by two founders who studied computer science and worked in technology beforehand. At the same time, the banking sector was just recovering from the 2008 financial crisis and customer expectations were shifting to online services. The Kristo-Taavet venture exploited their capabilities and the market's instability to introduce a digital-only way of banking. Obviously digital skills are easier for startups to possess especially when the founding team has up-to-date knowledge. However, the leadership's continuum requires firstly to understand what digital is, then constantly identify market gaps and customer expectations, and lastly find ways to stay competitive.

Digital enablers differ in type and maturity within a 10-year period so do the corresponding skills, putting those into practise requires further internal changes. Organisations must adapt their systems and processes to allow individuals to generate value obtained via training. For example, software defined networks revolutionise connectivity and network engineers need to also sharpen their software skills in order to deploy and operate networks. Telcos have to find the balance between operating existing 4G infrastructure whilst enabling employees to propel 5G connectivity. The exact same principle will apply to 6G and that is a key reason behind working towards digital leadership and not only transformation. Organisations will not do this only once, they need to lead over the waves of innovation.

DL starts from capabilities obtained, practised and evolved all over a company's existence.

2. Orchestrated Harmony via BMW, Vodafone-IBM & DevOps

Joining an ecosystem of companies always boosts ideation and innovation, thus hubs in California and Berlin have become home for globally successful startups. A nimbler way to obtain capabilities is also via strategic partnerships that can ignite the digital journey faster. BMW partnered up with Apple to allow owners to unlock their cars via their phones and it goes further than that. Their mobile app is rated 2/5 by 3k users indicating low uptake and satisfaction whereas cars are rated 4+/5. This new partnership changes customer perceptions of BMW's digital channels for the better. Similarly the Vodafone-IBM partnership allows enterprises to globally connect IoT devices and analyse with Watson AI on top. Vodafone is generating big data and IBM's maturity in AI is more than 20 years old, jointly they offer a compelling proposition that is hard to build organically. Apparently, a strategic cooperation between digitally adept companies boosts capabilities for the customer's instant benefit.

Internal teamwork can also drive digital leadership faster. Business competition mandates speed and agility in delivering products and services to customers, which puts a burden on internal teams to generate value ready for consumption. The child of that cooperation is called DevOps illustrating a modern bridge between creating, testing, and operating assets. Everyone is expecting Twitter and Netflix to make numerous code changes per day with no difference to the end user, still DevOps has even bigger impacts in non-software companies like Starbucks that sped IT delivery by 74%. Ultimately, the goal is to collaborate and experiment seamlessly whilst avoiding mistakes and minimising team effort. Learning from how robots are used in the car manufacturing process, the answer is automation, team activities become faster, more precise, and always with the same result.

DL is uplifted by strategic partnerships and promoted by collaboration and automation.

3. Endurance & Learning via Bosch, Nokia, The Economist & Mobile Apps

The journey of digital leadership is full of ambiguity and uncertainty. None of the articles or publications can precisely predict the future, it is shaped as we speak hence every company has to create their own. However, the idea of black box thinking is key for success, assessing past actions to learn from is the easiest thing to do. A life-long learning example is Bosch, it started with mechanical engineering, evolved as a global automotive supplier, and currently has a broad portfolio that includes IoT, AI/ML, digital twins and smart cities. Their evolution started with electronics and now heavily relies on software. A diversification example is Nokia, once the most successful handheld device manufacturer failed to lead the smartphone wave of innovation. They chose to refocus their strategy on enterprise networks and all that learning is now surfacing them as one of the digital leaders in 5G and SDN fields. Both successfully endured and manoeuvred throughout the years.

Industry or cross-industry events can be even more educational if interpreted and acted upon appropriately. The Economist first created their website in 1995, passed the 2.6m unique visits in 2006 and a few years later launched their mobile versions. Apparently, as TransferWise revolutionised banking, a historical magazine became fully digital by actively learning from the market's demands. Mobile apps have enabled the daily human interaction with digital or in other words extended all non-digital activities to also digital. Social media access, airline bookings and online purchases have become mainly mobile. The lessons learnt from the mobile app incumbency are now shifted towards wearables and IoT devices trying to extend functionality, information generation, along with new sensor-based digital interactions with the environment to offer more data services to the end users. We are the epicentre of a device ecosystem around us and mobile apps are our first digital touchpoint.

DL requires endurance and learning from market trends, external strategies and failures.

4. Dedicated Consistency via Walt Disney, Tesla & Cloud

It is common to see software, internet and computer companies on the Forbes Top 100 Digital Companies 2019 List, most of them will stay there for years to come due to the "software revolution" we are living, but the list also provides evidence of consistency and dedication to a digital objective outside of the usual suspects. Walt Disney's Mikey Mouse has raised many generations and Disneyland is a wonderful place to visit, still the company is also committed to a digital world. From launches like the Disney Channel in 1983 until the ESPN+ in 2018 and Disney+ in 2019, the Group stayed dedicated to digital via acquisitions and capabilities extension. Evidently, 48% of their current open roles worldwide are linked to digital, showing the commitment to meet customer demands and market trends. Tesla, on the other hand, has embedded technology enablers from day one of the company's founding. It is not adapting to the era as Walt Disney does, but instead driving the era with a clear mission for technology-centric sustainable future, introducing a different car experience, pioneering autonomous driving and extending nifty services to mobile.

An essential objective of both digital transformation and leadership is the cloud. The cloud has become an abstraction layer to run applications on digital infrastructure with flexibility, resilience and scale on demand. It is a key enabler that fundamentally changes the way companies obtain, provision and use IT resources, plus qualifies most of the enablers mentioned in this article. Various options include private, public, edge and hybrid cloud along with bare metal and on-premises virtualisation. Selecting cloud is inescapable, still the exact path and solutions supporting it can have multiple variations best fit for each company's strategy, market, skills and preferences.

DL is reinforced by dedication to objective and built on a cloud innovation foundation.

5. Adaptability via Diffusion of Innovation, Big data & Machine Learning

The highlight of this article is the definition of digital as software and data. Both were invented decades ago but when Apple introduced the iPhone, Facebook was founded, Amazon launched AWS and Google became more than a search engine everything changed. This is exactly the essence of a digital transformation for every company, to join Google and the rest into this new norm. By applying the diffusion of innovation theory I argue that the current digital transformation period can easily be followed by one that digital is immersed everywhere eliminating the need to transform. Therefore, the digital leadership definition is more suitable to unveil a path of sustainable adaptation to the upcoming S-curves of innovation. First-mover advantages partially apply to a leadership journey, the pace of change is critical for companies that are before or at a transformation stage but for those leading, the stage of adoption and adaptation should be based on further evaluations.

Artificial intelligence is creating contradicting feelings to scientists, people and businesses. It can be thrilling to create and utilise but skepticism is ubiquitous due to ethical, social and humanitarian reasons. Nevertheless, two currently in use enablers are laying the ground for AI with the safety of control whilst allowing time to adapt, one is machine learning and the other is big data. Predicting the weather has so many variables that is common to wonder why it is hard to do, still it's a good example that includes both enablers. Those ever changing and growing variables are generating big data so impressive that projects like the Pangeo open community were created to work on it. Ultimately, the weather prediction is a game of adaptation, all data feeds are analysed by trained machine learning algorithms forming sequences of adaptations that occasionally come off target. Still, everyone can see the precision difference compared to 20 years ago and this down to those algorithms learning how to achieve perfection via the size of data captured and evaluated.

DL is sustained when adapting to the environment and era intelligently via the use of data.

5+1. Balance via The Innovator's Dilemma

The Innovator's Dilemma thesis is that "internal practises drive organisation leadership but also raise obstacles in developing new disruptive technologies that ultimately steal their market". Likewise, every company on a digital leadership journey shall strike a winning balance to avoid this market loss.

Disruptive innovation or disruption in general is easy to understand when comparing Netflix with Blockbuster and how the later failed to withhold their market. However, the comparison is historically scoped in favour of Netflix as those events have already happened. The balance in search is more difficult when focusing on how successful companies such as Daimler and Allianz can withstand a new wave through present lenses.

One way is to intentionally create internal disruption. Companies can create teams to work against their products, services and processes with the aim to learn and disrupt before it actually happens. Acting as beacons to detect everything in and outside their industry that can affect their business, then embrace it and ultimately try to make changes on internal practises to absorb it. However, that has financial and organisational implications that not all companies are willing to accept even if they acknowledge it. Netflix is one that successfully created the Chaos Monkey and the Simian Army projects with this philosophy.

A second way is to join ecosystems that constantly seek for alternative ways of working and build new innovation projects. The best example is the open source software community through which numerous disruptive technologies have become mainstream such as Android, Linux and Hadoop. The impact of open source is powering 86 percent of smartphones in the world and has made Kubernetes a big thing in cloud computing in no time. Therefore, being part of this community helps not only to detect up-coming disruption but also become the catalyst in driving it. To conclude, the balance between internal company practises and disruption that might lead to market losses is powered by communities that think and act against the norm whilst generating new value.

DL avoids market losses by balancing successful practises with disruption via communities.

In summary...

A digital leadership path requires:

1. Digital capabilities obtained, evolved and practised over and over again.
2. Strategic partnerships and closer team collaboration highlighted by automation.
3. Constant learning from successes and failures in trends, strategies and actions.
4. Commitment to a digital objective built on a cloud innovation foundation.
5. Adaptation to the environment and era intelligently via the use of data.
6. A balance between internal practises and disruption powered by communities.