The Year We Stopped Riding the Magical Wave of "Digital"

Mark 2022 as the year we stopped riding the magical wave of "digital".

Technology is never decisive, and is often strategically distracting. It can be expensive confusing new technology for a modern strategy. And it can be lethal for those still buying the simple headline that technology vision is synonymous with growth. If there's a lesson from last year, it's that our thinking will need to become better at gauging the distance between the real stakes of new economic ideas and the marketing tools and sketchy rationalizations of Big Tech. This is a great assessment by Brooke Masters , the US Financial editor at the Financial Times, yesterday in her year-end piece (Three ways Big Tech got it wrong ):

"It’s time to unlearn the lessons of Big Tech.

For 20 years, the Silicon Valley giants and their peers have set the standard for corporate success with a simple set of strategies: innovate rapidly and splash out to woo customers. Speed rather than perfection, and reach rather than profits proved key to establishing dominant positions that allowed them to fend off, squash or buy potential rivals.

Entrepreneurs everywhere took note, and an assumption that scaling up and achieving profitability would be the easy part took hold far beyond the internet platforms where these ideas originated.

Investors, desperate for growth and yield amid historically low interest rates, were all too happy to prioritise the promise of growth over short-term earnings. During the pandemic, the trend became extreme, as the shares of companies with big dreams and equally large losses soared to dizzying heights.

Those days are over. Inflation and rising central bank rates have changed the financial calculus. When investors can earn measurable returns from bank deposits and top-rated bonds, speculative investments that promise growth lose their edge. The share prices of Google, Amazon and Facebook are down between 40 and 60 per cent year on year, and their younger emulators have done even worse. A Goldman Sachs index of unprofitable technology companies has fallen by 77 per cent since its February 2021 peak.

There is also a growing sense that most important challenges of our time — improving health, cutting carbon emissions, basically anything that involves a real world rather than purely digital product — will require a different approach.

Indeed.

While it's been a weird and difficult year for everyone, 2022 marks the end of tech exceptionalism. Tech’s five giants ?have collectively lost $3 trillion in market value. The most dramatic loser, Meta , barely even counts as part of "big tech" anymore — nearly two-thirds of its value was wiped out last year, leaving its market capitalization at just over $300 billion.

From The Economist today (How tech’s defiance of economic gravity came to an abrupt end ): "After years of growth, digital markets are maturing. Take advertising, the lifeblood of Alphabet Inc. and Meta , and a growing sideline for 亚马逊 , 苹果 and 微软 . During past downturns, ad spending fell but spending on digital ads kept growing, as advertisers pulled their budgets from old media like?tv?and newspapers and shifted adverts online. Today, much of that migration has already taken place: about two-thirds of ad spending in America this year was digital. Online ad platforms are thus vulnerable to the cyclical shifts that have long battered their offline rivals. In July Meta reported its first-ever quarterly drop in revenue; in October it reported another."

These difficulties mean that the year ahead will be a lean one in techland. Most have made a resolution to trim their costs, which in many cases means cutting the payroll. Tech firms worldwide have announced more than 150,000 job cuts so far in 2022, according to Layoffs.fyi , a website that tracks layoffs in the tech industry. Meta alone accounts for 11,000 of those. Amazon has told graduates who were meant to be starting work in May 2022 that they will need to wait until the end of 2023. Whereas tech once seemed like something of a haven for investors and employees, its starting to feel like anything but.?

Where tech entrepreneurs, and the press outlets that adore them, go to sell and cover the next new possibility is a big question. As Silicon Valley works to design the world in its image, reconfiguring our ideals in order to fit their business models, it’s easy to bask in the eternal sunshine of it all, to simply sit back and let the warm glow consume every corner of our consciousness.

We have to think more critically.

The End of What Digital "Can" Do

“Silicon Valley is good at "reframing” questions, problems and solutions,” explains Adrian Daub in What Tech Calls Thinking , his lively dismantling of the ideas that form the intellectual bedrock of Silicon Valley. “Equally important to Silicon Valley’s world-altering innovations are the language and ideas it uses to explain and justify itself. And it’s easy to come away with the sense that the original way of stating the problem is made irrelevant by the reframing.”

“Consider how much mileage the tech industry has gotten out of its technological determinism. The industry likes to imbue the changes it yields with the character of natural law: If I or my team don’t do this, someone else’s will. Or consider how important words like “disruption” and “innovation” are to the sway the tech industry holds over our collective imagination. How they implicitly cast you as a stick-in -the-mud if you ask how much revolution someone is capable of when that person represents billions in venture capital investment.”

Edison's great advantage was in systems thinking.

Writing on a century of American innovation and technological enthusiasm, Thomas P. Hughes (American Genesis: A Century of Invention and Technological Enthusiasm, 1870-1970 ) described invention as the process of solving new problems. Radical success, he said, comes at a system level, from striking breakthroughs or improvements in nascent systems rather than from the incremental improvements in well-established technological ones.

“In general, today’s accounts of the information revolution focus upon artifacts, such as computers and the Internet. This approach is myopic. We should broaden our concept of the information revolution. The other industrial revolutions involved far more than hardware. Besides technical artifacts, these earlier revolutions involved political, economic, social, organizational and cultural changes….”

If not completely irrelevant, the word "digital" has become incidental as a bullet in the PowerPoint. "Disruption" as a war cry hasn't delivered economic growth at scale. And the infinite flow of content and mind-numbing headlines on what digital technology "can" do have all failed to spark the kind of systemic change in direction needed to sweep aside the status quo.

In other words, what tech calls “value” needs transformation.

Success will take strategic imagination, an innovative kind of “innovation” born from a different cognitive pattern, "disruption" in the form of creative leadership and patience that goes against the very fabric of experience that has up to now given most technology people their identity. It'll be more like learning the first commandment of the big wave surfer: never take off on the first wave of a big set, via SurferToday .

"It's hard to resist a good-looking wave when you're waiting for 10 minutes, and adrenaline wants to pump your whole body. The problem is that if you wipeout, you will take the entire set on the head."

For the next phase, smart strategy starts with disassembling the technology industry narrative of "progress" that pretends to be novel but is actually an old motif playing dress-up in a hoodie. Nicholas Carr in his blog, Rough Type :

"Facebook, it’s now widely accepted , has been a calamity for the world. The obvious solution, most people would agree, is to get rid of Facebook. Mark Zuckerberg has a different idea: Get rid of the world.

Cyberutopians have been dreaming about replacing the physical world with a virtual one since Zuckerberg was in Oshkosh B’gosh overalls. The desire is rooted in misanthropy — meatspace, yuck — but it is also deeply idealistic, Platonic even. The world as we know it, the thinking goes, is messy and chaotic, illogical and unpredictable. It is a place of death and decay, where mind — the true essence of the human — is subordinate to the vagaries of the flesh. Cyberspace liberates the mind from its bodily trappings. It is a place of pure form. Everything in it reflects the logic and order inherent to computer programming.”

Let's hope not??

/ jgs

John G. Singer is Executive Director of Blue Spoon Consulting, a global leader in ecosystem-centered market strategies . Blue Spoon delivers a Punk Rock ethos of disruption . It was the first to apply systems theory to design a new operating model for pharmaceutical marketing.