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The four fights to win in Digital Strategy

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Yesterday’s tentative approaches won’t deliver today; you need absolute clarity about digital’s demands, galvanized leadership, unparalleled agility, and the resolve to bet boldly.

If there’s one thing a digital strategy can’t be, it’s incremental. The mismatch between most incumbents’ business models and digital futures is too great—and the environment is changing too quickly—for anything but bold, inventive strategic plans to work.

Unfortunately, most strategic-planning exercises do generate incrementalism. The only way for leaders to cut through inertia and incrementalism is to take bold steps to fight and win on four fronts:

  • Fight ignorance by using experiential techniques such as “go-and-sees” and war gaming to break leaders out of old ways of thinking and into today’s digital realities.
  • Fight fear through top-team effectiveness programs that spur senior executives to action.
  • Fight guesswork through pilots and structured analysis of use cases.
  • Fight diffusion of effort—a constant challenge given the simultaneous need to digitize your core and innovate with new business models.

Thus, here’s how real companies are winning each of these fights—overcoming inertia while building confidence about how to master the new economics of digital. Companies can join in that effort, thereby giving their digital strategy a jolt and accelerating the shift of their strategy process as a whole, from old-fashioned annual planning to a more continuous journey yielding big moves and big gains even when the end point isn’t entirely clear.

 

FIGHTING IGNORANCE

Many senior executives aren’t fully fluent in what digital is, much less up to speed on the ways it can change how their businesses operate or the competitive context. That’s problematic. Executives who aren’t conversant with digital are much more likely to fall prey to the “shiny object” syndrome: investing in cool digital technologies (which might only be relevant for other businesses) without a clear understanding of how they will generate value in the executives’ own business models.

They also are more likely to make fragmented, overlapping, or subscale digital investments; to pursue initiatives in the wrong order; or to skip foundational moves that would enable more advanced ones to pan out. Finally, this lack of grounding slows down the rate at which a business deploys new digital technologies. In an era of powerful first-mover advantages, winners routinely lead the pack in leveraging cutting-edge digital technologies at scale to pull further ahead. Having only a remedial understanding of trends and technologies has become dangerous.

Raising your technology IQ

For inspiration on how to raise your company’s collective technology IQ, consider the experience of a global industrial conglomerate that knew it had to digitize but didn’t think its leadership team had the expertise to drive the needed changes. The company created a digital academy to help educate its leadership about relevant digital trends and technologies and to provide a forum where executives could ask questions and talk with their peers. Academy leaders also brought in external experts on a few topics the company lacked sufficient internal expertise to address.

Supplementing the academy effort (aimed at leaders) was an organization-wide assessment of digital capabilities and an evaluation of the company’s culture. This provided a fact base, which everyone could understand, about what the organization needed to build over the course of the digital transformation. As business leaders developed digital plans, they were accountable for explaining and defending them to other executives. They also had to help gather those plans into an enterprise-wide digital strategy that every business leader understood and had helped to create.

Overcoming competitive blind spots

If your company resembles other known companies, still stuck in some old ways of thinking about where money gets made and by whom. Companies are also likely to be overlooking ways digital is changing both the economics of the game and the players on the field in your industry. If any of this sounds familiar, you probably need a jolt—something that forces you to think differently about your business. More specifically, you need to start thinking about it as digital disruptors do.

From experience, this demands a process that begins with a sprint to get everything moving, to see what your industry (and your company’s role in it) could look like if you started from scratch, and to redraw your road map.

Once the new realities are discovered, companies should speed up the process of understanding how other players—including nontraditional ones—will respond. Seeing through the eyes of “baggage-free” attackers inspires an awareness of how players with very different core competencies are likely to act in the new landscape. It can also propel a shared sense of urgency to change the old ways of thinking and acting.

Such a session radically change the way companies leaders think about their business, their industry, and the digital shifts remaking both. The end result is a set of leading-edge ideas for deploying digital to make the current operating model faster and more effective, for investing in new digital offerings, for designing and launching a new digital ecosystem to meet the emerging needs of digital consumers, and for partnering with start-ups beginning to emerge as leading players in advanced mobility.

FIGHTING FEAR

Getting left behind by digital first movers can be hazardous to your company’s future. But many of companies’ executives may perceive responding to digital—making the big bets, building new businesses, shifting resources away from old ones—as hazardous to their own future. As we’ve noted, that exacerbates the social side of strategy and breeds strategic inertia. If you want to make big digital moves, you must fight the fear that your top team and managers will inevitably experience.

From what we have seen, this kind of fight doesn’t happen organically. You need to design a programmatic effort with the same rigor you would insist on to redesign key processes across your organization. This typically involves making a clear case that executives can’t hide from the changes digital is bringing and that encouraging and accelerating change—rather than chasing it—can create more value. Then you need to give executives the tools and support network they must have to succeed as leaders of that journey. Many companies focus on the extensive detailing of digital-initiative plans but skip the critical step of building an equally rigorous program to sustain the leaders driving change.

Honest dialogue

Companies can organize workshops where executives can discuss the specific mind-sets and behavioral shifts needed to gain “ownership” of digital initiatives as a group and to become role models for their organizations.

Support networks

Leaders can form communities that cut across their businesses, to share best practices and coordinate the timing of implementation. Over time, the role of these communities can grow to include skill-building activities, such as bringing in speakers with specialized capabilities and motivational messages and organize Silicon Valley go-and-sees that reinforces the importance of leading digital change. The communities also provide peer support to help teams navigate the new landscape.

Indeed, leaders who understand the shifting economics also understand that their careers will be affected one way or another.

 

FIGHTING GUESSWORK

Pursuing an aggressive digital strategy involves leaps into the unknown: simultaneously, companies are likely to be moving into new areas and overhauling existing businesses with new technologies. What’s more, in many digital markets, the premium of being a first mover makes it necessary not only to shift direction but also to do so faster than your peers. The combination of ambiguity and the need for speed sometimes gives rise to guesswork and moves that are hasty or poorly thought out—and too anxiety about whether a move isn’t going to work or just needs more time.

Building the proof points as you go

One way to fight guesswork is to anchor your strategy decisions to a thesis about the business outcomes that different digital investments will produce. This is less about elaborate business-school modeling and more about thinking that draws fast, ground-level lessons from the data to determine whether your business logic is correct. Put another way, it means figuring out if there is sufficient value to make it worthwhile to invest something—as part of a process of learning even more.

This approach increases the odds of successful implementation: a well-articulated view of the outcomes means that you can track how well the strategy is working. It also makes it easier to assess whether the new direction is worth it in terms of both financial capital and organizational pain.

Those proof points must be grounded in digital reality.

Pilots and stage gates

A second way to reduce the need for guesswork is to take full advantage of real-time data and the opportunities they provide for experimentation. Digital does amplify the gut-wrenching uncertainty by multiplying the strategic choices leaders face while reducing the time frame for making and implementing those decisions.

But it also contains a silver lining: the potential for gaining rapid, data-driven insights into how things are going. Information on the progress of a product launch, for example, is available in days rather than months. That makes rapid course corrections possible and, ultimately, considerably improves the chances of success.

An important element of this nimble approach is breaking up big bets into smaller, staged investments.

 

FIGHTING DIFFUSION

Effective strategy requires focus, but responding to digital inevitably risks diffusion of effort, or “spreading the peanut butter too thinly.” Most companies we know are trying, and struggling, to do two things at once: to reinvent the core by digitizing and automating some of its key elements, for example, and to create innovative new digital businesses.

The challenge is acute because of the dizzying pace of digital change and the uncertainty surrounding the adoption of new technology. Even if the technology for autonomous vehicles pans out, for instance, when will the majority of people really begin to use them? Given the impossibility of knowing, it’s easy to wind up with an unfocused hodgepodge of digital initiatives—a far cry from a strategy.

Two concepts can help a company navigate. First, view your company as a portfolio of initiatives at different stages of seeding, nurturing, growing, or pruning.

Second, embrace the necessity of “big moves,” such as the dramatic reallocation of resources, sustained capital investment, radical productivity improvements, and disciplined M&A. Successful market-beating strategies nearly always rest on such moves. Making them mutually reinforcing, so that developments in the core help to support new digital businesses and vice versa, is a critical part of managing the risks of diffusion.

A portfolio approach

As a first step, companies go through their portfolio business by business, focusing on three questions:

  • Which emerging digital products and services are missing from the portfolio?
  • Which product offerings and elements of the existing operating model should be digitized or fully digitally reengineered to improve customer journeys?
  • What areas should be abandoned?

Answers may differ from one company to another, but become comfortable with hard choices and more attuned to new opportunities by tying all decisions to clear use cases.

As part of the exercise, companies develop scenarios for how the value pools in each of its industry verticals would probably shift across component customer value chains. Companies may want to get a sense of the types of services that clients and potential clients may likely to demand and thus may try to obtain from new suppliers or IT outsourcers. For businesses where more revenue would be likely to shift, the companies are comfortable placing bigger bets on new digital offerings, in contrast with its approach to businesses where the revenue at stake isn’t changing as much.

Big, mutually reinforcing moves

This systematic evaluation of value-pool opportunities across the portfolio generates a frank discussion of how the organization’s risk appetite has to change. It also catalyzes a greater willingness to invest in new digital businesses—which companies must do.

As part of this strategic evolution, companies may launch an aggressive program to better leverage foundational digital capabilities, such as automation, advanced analytics, and big data. These capabilities, to be sure, will be key building blocks for the new digital businesses. Just as important, however, by deploying the capabilities at scale across existing businesses, the company will be better able to stretch the life of its core offerings.

The portfolio strategy pays dividends both in revenue gains and cost reductions. For example, investing in a balanced fashion between core and new businesses lead to faster than expected revenue streams from new offerings. This increases the leadership’s commitment to the strategy, bolstering confidence that the new portfolio offerings will provide growth more than compensating for the eventual decline of core businesses.

In conclusion, companies’ best digital competitors—the ones you really need to worry about—aren’t taking small steps. Neither can you. This doesn’t mean that a digital strategy must be designed or put to work with any less confidence than strategies were in the past, though. Strategy has always required closing gaps in knowledge about complex markets, inspiring executive teams (and employees) to go beyond their fears and reluctance to act, and calibrating risks when you bet boldly.

The good news is that the digital era, for all its stomach-churning speed and volatility, also serves up more information about the competitive environment than yesterday’s strategists could ever imagine. Simultaneously, analytically backed, rapid test-and-learn approaches have opened up new avenues to help companies’ correct course while staying true to their strategic goals.

Today’s leaders need to step up by persuading their organizations that digital strategies may be tougher than other strategies but are potentially more rewarding—and well worth the bolder bets and cultural reforms required, first, to survive and, ultimately, to thrive.

 

  • By Tanguy Catlin, et al

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The 4th Industrial Revolution, the Future of Jobs and the Right-Skilling for the Future Workforce  

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The 4th Industrial Revolution is building on the first Industrial Revolution which used water and steam power to mechanize production, the second which used electric power to create mass production and the third, which used electronics and information technology to automate production; the 4th Industrial Revolution is taking automation to new levels, blurring the lines between the physical, digital, and biological spheres and using technologies to perform tasks previously carried out by humans, ranging from piloting vehicles to ‘rules-based’ jobs in areas such as accounting and law.

When we compare it with previous Industrial Revolutions, we find the dramatic differences between the fourth Industrial Revolution and the other three. In its scale, scope, and complexity, the transformation will be unlike anything humankind has experienced before. The 4th Industrial Revolution is not merely a prolongation of the Third Industrial Revolution but rather a new and distinct revolution.

Firstly, people can continuously produce new information and generate new knowledge in the mining of information. The possibilities of billions of people connected by mobile devices, with unprecedented processing power, storage capacity, and access to knowledge, are unlimited. We can record a person’s daily life through their mobile phone location.

When this data is monitored for a long period of time, we can get to know a person’s lifestyle habits, such as their work place, the supermarkets they shop in, the restaurants where they dine, the times they do so, and even their personal preferences. This technology will allow the intelligence level of machines to increase through continuous data accumulation and analysis.

Secondly, the Industrial Revolution represents not only a huge advance in technology and in the improvement of productivity, but will also transform modes of production and the relationships between elements of production processes. The 4th Industrial Revolution, by enabling the complete communication of all relevant information at every stage in the production chain, creates separate production sectors for each process and informs how they relate to each other, bringing together such processes as inventory taking, improving production efficiency, saving energy and reducing emissions, thus making the manufacturing industry part of the information industry. At the same time, it can make production flexible and allow mass customization, enabling different products to be produced in a production line, which will revolutionize the warehousing, transportation and the whole manufacturing industry.

Thirdly, the 4th Industrial Revolution will spawn a new economic form, the ‘sharing economy.’ A typical example of sharing economy is ride-hailing online services, such as Uber and the Chinese Didi service, which allow customers to obtain taxis services from private car owners. The impact of this new form is disruptive, not only to the taxi industry, but also the whole transportation industry.

(Maybe in the near future, we won’t need drivers at all and unpiloted vehicles will fill the streets.) The impacts of the sharing economy are not limited to online ride-hailing services, but also include the shared space service, e.g. Airbnb, and the global online work platform. From the shared motors and houses, to the shared umbrellas, basketballs, toys, clothing and jewelry, the sharing economy is constantly updating, and will be very profound and revolutionary.

Last but not least, as the economists Erik Brynjolfsson and Andrew McAfee have pointed out, the revolution could yield greater inequality, particularly in its potential to disrupt labor markets. With the growth of automation, robots and computers will replace workers across a vast spectrum of industries. Low-skill/low-pay jobs will disappear and the poor will face tougher challenges, which in turn will lead to an increase in social tensions.

In a strict sense, this is not a unique feature of the fourth Industrial Revolution. Historically, Industrial Revolutions have always begun with greater inequality followed by periods of political and institutional change. However, mankind will face a more serious challenge in this revolution, because it is robots and computers that take our jobs, not the flow of labor between different sectors.

What Happens with Employment?

The characteristics of the fourth Industrial Revolution are destined to bring about different impacts on employment, which are no longer confined to one industry, but all industries. At the same time, a lot of jobs will disappear, but there will be a lot of new job requirements. It is expected that more than 65% of children entering primary school today will end up working in completely new jobs that currently do not exist when they enter the workplace 15 years from now.

As the changes brought by the social media, digital publications and e-commerce, the most in-demand occupations did not exist 10 or even five years ago. According to the Future of Employment report, a high percentage of global employment is in the high risk category. People may be more concerned about what types of jobs are at high risk than specific Numbers. So which jobs are at greatest risk? What jobs will be safe in the future? These are some of the questions on the minds of people.

Whilst the business world is already discussing and preparing for how this revolution will affect their businesses, dubbing it “Industry 4.0”, the wider societal impacts of this new revolution have not, to date, been discussed in depth nor planned for.

Past Industrial Revolutions have forced society to undergo major and often painful processes of adaptation, for example from rural, largely agricultural societies, to urban, industrial societies, and then to post-industrial societies dealing with the loss of traditional industries and sources of employment. The societal impacts of the 4th Industrial Revolution also appear likely to be far-reaching, resulting not only in the social and economic impacts of the loss of many current jobs, but also fundamental, and increasingly volatile shifts in the nature of work and future jobs, and in how public and private services will be delivered.

Right-skilling for the future workforce

The fourth Industrial Revolution has shown the possibility of disrupting the entire industries and trigger massive job loss through technological innovations, such as artificial intelligence, machine learning and 3D printing. Just consider the impact of driverless cars on the taxi and ride-sharing industry. This new age requires significant “right-skilling” – retraining your workforce and acquiring people with the right skills to fill the gaps.

For right-skilling, organizations need to have a strategic plan for talent to make the shift. Any good talent strategy should focus on retaining and training existing talent, as well as take into consideration all of the levers and options, which includes acquiring new workers (either internal or external).

A growing number of forward-thinking organizations are concluding that to emerge stronger from the coming automation age, they must develop the skills of their workforce to meet new requirements rather than simply retrench. Contractors and new hires will not be enough; retraining must be part of the solution. Not to mention that firing 20 percent of the workforce because they don’t have the right skills has negative implications for the company and society.

A company undergoing major changes in the workforce due to automation was not able to eliminate part of the workforce, due to employees being highly unionized. Instead, the firm worked to understand the future roles and skills needed by their workforce, and how to transition into these new roles. By determining the future capabilities and skills required based on functional team assessments, they were able to conduct an analysis to determine what percentage of existing employees had these skills, and what percentage needed to be reskilled.

By 2030, as many as 375 million workers globally will have to master fresh skills as their current jobs evolve alongside the rise of automation and capable machines, estimates McKinsey Global Institute. And while individual sectors and companies will experience layoffs, it is expected most economies will generate net new jobs in the years ahead as different types of careers, new sources of demand and reskilled workforces emerge.

Still, an unprecedented skills crisis will strike unless employers and employees recognize that they must adapt to change and begin actively forging reskilling initiatives. For employees, self-direction is also necessary to discover new promising work opportunities and to reskill.

How should an organization think about right-skilling its workforce? One good way is to determine how many employees it will take to handle A, B and C skills. If you conclude you need ten but only can get five employees, it will take longer to build and benefit to the new way of working. Companies that identify the skills needed and the employees with those skills in advance will be at a strong advantage.

Certainly, employers will hire and outsource some of the future skilled talent they need. But right-skilling will play a significant role, since hiring and outsourcing won’t prove sufficient to fill most gaps.

Building a competitive workforce of the future proactively requires:

  • Gaining clarity on today’s workforce gaps and the future skills needed. Translate your strategy into a vision of what future skills are needed. Quantify the chasm, including the business value at stake.
  • A robust plan to supply the future demand. Design a portfolio of initiatives that encompasses hiring, right-skilling and contracting. Upgrade your talent and operations infrastructure to reinforce the new workforce composition and performance management system.
  • Rapid, disciplined execution. Establish a dedicated, cross-functional team, including HR and business unit members, for agile plan execution.

In a recent survey, 75 percent of executives said they believed reskilling would fill at least half of their future talent needs, given the war for talent and hiring difficulties. How organizations specifically apply right-skilling, and the implications, will be explored in the near future.

 

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