Getting digital

This is the first in a series of blog posts I’ve planned to reflect my understanding of what the digital wave is all about and how it is interacting with our customers’ as well as our own business. The objective is as much to clarify my own thinking as much as informing - so do excuse my naivete as I think my way through this.

So let’s start at the start, so to speak. What is digital? And what is it all about?

The word Digital, I understand, comes from digits or fingers and toes. It basically refers to counting, which we of course intuitively use our digits for. So digital has something to do with counting and numbers.

What’s not digital? The opposite of digital in most contexts is Analog, i.e. continuous, non-discrete value which are reflections of the physical world in some respect. An old school photograph is analog – the underlying picture cells are actually molecules of silver nitrate or some other chemical – so numerous that there is practically no discernible boundaries between one and another. On the other hand, a digital photo has discrete, separate pixels. So being digital is counting things into discrete numbers (or converting from analog into such a form).

At the heart of digital, in a sense, is numeric thinking, discrete logic and of late silicon. Digital has come to imply all things that derive functionality at the end of the day from a piece of silicon, which has components like transistors with discrete states (on or off, this or that), that capture, process and spit out information using rules. Processors and chips, solid state electronics.

So what is the big deal about digital? Chips have been around for decades and decades. So has digital logic, programs and programming languages, digital sensors and the whole paraphrenalia. What has changed or is changing that makes digital a ‘wave’ or a ‘thing’ so to speak.

Some of the things driving the ‘wave’, as I understand it, are :

1. ‘Digital’ cost: Silicon (rather memory, processing power etc.) keeps getting cheaper than ever before
2. Scale: If a person answers a customer query, you need another person very soon. If a webpage or an app or an IVR does, you need another cheap chip after quite some time. So digital stuff scales well.
3. ‘Physical’ cost: People are becoming more and more expensive. People expect more from life.
4. Finally, the network!

• Digital stuff moves fast. Since it’s captured as electronic states, and electronic states are pretty amenable to transmitting at the speed of electrons which is pretty fast.
• As soon as things start talking or connecting in a network, you get ‘network’ effects. This applies to all things, whether digital or physical. You’ve heard old adages like ‘team synergy’ or ‘We > Me’ right? The idea is that a team can bring together diverse skills and ‘leverage’ them for everyone’s benefit. Similarly, there are network effects when different digital information nodes get connected. The interesting thing about network effects is that they grow exponentially. Every time another ‘node’ joins a network, the potential ‘connections’ jumps by an ever increasing number. And remember ‘scale’ – ‘Digital’ networks don’t have as many restrictions or costs associated with more connections.
• Digital networks are becoming pervasive and ever cheaper to set up (mainly due to ‘digital’ cost in 1. – digital networks incur ‘digital’ costs). When a phone gets into the hands of a person, in effect they get connected to a digital ‘network’ – they can create and receive digital information.

So to recap, you have pervasive digitally connected networks, exponentially growing ‘network effects’ on the back of ever cheaper digital stuff which are driving a ‘digital wave’ transforming how we do things.

What things, you may ask? Well, the same things! The same things people using capital and tools have been doing since time immemorial – making things, using things, meeting, talking, learning, buying and selling or having fun. But also new things, or rather new ways of accomplishing the old things. So maybe not as much new as in a lot of new ways. The cool thing is that ‘digital’ stuff is equally happy talking to the physical world of machines and other real things (through ‘sensors’ – things that convert analog physical things into digital values or ‘actuators’ which convert digital messages into a physical thing – like a light bulb going on, a robotic arm moving or a car turning on), to human beings (through screens, keys, knobs, switches, retinal projectors, vibrators or fingerprint sensors…) and to each other (the network). So really the network effects and possibilities sort of multiply. I mean, imagine a global network of computers but which can't talk to a thermometer. No online weather stations. Someone entering the temperature reading by hand. That’s what things were like before ‘digital’ truly became ‘digital’ as we see it today.

So the ‘digital’ wave is a combination of waves in which sensors, actuators, screens, networks of silicon and meat and machine and silicon itself have been getting cheaper and more connected and generating network effects which are further accelerating. On top of that, the meat i.e. people have started learning how to use all things digital much better. The reason why this wave is so big is that it connects to all activity, whether human or not. And network effects. And cheaper. You get the picture.

But why does this really matter? This matters because all organizational and business models are optimal functions of underlying realities – things like connections, speed, cost, reliability and reach. As the digital wave washes over all spheres of human activity including industry, the radically different values for these variables that digital solutions present are leading to equally radical reinventions of business models. Just like the assembly lines changed car making or all manufacturing, the digital reality is here to stay and define new optima. The businesses which figure out how to use the advantages and disadvantages of digital have the opportunity to up-end their industries, as some have proved (Think Uber for taxis, Stuxnet for sabotage or Wikipedia for reference books, 3d printing for manufacturing or Amazon for retail). But also recall all these examples are well integrated physical/digital businesses – it’s not digital or nothing or that everything is about software. Digital is not IT. Digital is not just technology. Digital is about a host of technologies together creating transformational possibilities. At least now I am starting to sound like a management consultant.

When you think digital many people think SMAC – i.e. Social, Mobile, Analytics and Cloud. How do these translate to what I’ve just written? Very well. ‘Social’ refers to the network effects of connecting people to people through digital. Imho, mobile refers to 2 things – Firstly, the increasing presence and capabilities of sensors and actuators embodied in mobile devices, the second is how by becoming portable, mobile devices enable networks to travel and extend their reach in the physical space. So the potential network effects multiply even further. Third, ‘cloud’ – ‘Cloud’ is about efficiencies of scale enabled by things being networked so that important things can be done at one place and available across the network equally. And finally, ‘Analytics’:

Analytics: One of the biggest side effects of pervasive digital networks is they create more persistent information.
And one of the biggest side effects of cheaper more capable silicon is that you can do more complex manipulation of much more information cheaper and faster than before. Marry these together and you get Analytics!. However, a bunch of smartly instructed silicon chips crunching a bunch of silicon digits doesn’t really do anything by itself right? So to have any point to this it must serve some end purpose. And at the end of the crunching there needs to be some ‘actuation’, some action or change leading to a result. So really, why do any analytics?

That’s gonna be the subject of the next article in this series – Analytics 101. Watch this space!