Ten years of digital transformation and what it tells us.
Image by Geralt.
As 2018 draws to a close, this is a time that marks a decade of digital transformation.
I’m a firm believer in how a retrospective lens can be illuminating and curious to take stock of the last decade’s events. Gleaning insights from the successes, trials and, perhaps, false turns of the last ten years can help support the sustainable and cost-effective digital and commercial development strategies for the future.
At the time Visceral Business began in September 2008, social media led the charge. Two-way and many-to-many communications were altering marketing dynamics, but there was little focus on digital business as a joined-up thing.
The Lehman’s collapse was still a few weeks away. George Bush Jnr was President and Gordon Brown was Prime Minister. Fears were high the world was going to end with the start of Hadron Collider Big Bang experiment, indicating perhaps how easy it can be to misjudge the impact of some situations and miss the warning signs of others.
Facebook had 100 million monthly active users back in 2008, compared to the 2.27 billion it had in the second quarter of this year and Twitter was still a start-up, with 6 million registered users.
Today, the skepticism that was so prevalent at that time, about whether digital communications and technology would make much of a long-term impact, has disappeared. Digital business has become universally acknowledged as a critical issue and is a much more complex picture, involving every aspect of business functionality. New developments making their mark today were barely on the digital radar then, including blockchain technology, AI, robotics, machine learning and genetics.
Since 2008, digital start-ups have up-ended incumbents in every business sector. This month, Netflix will overtake Sky subscriptions in terms of volume. The retail sector, as has been defined for over forty years, is disappearing - hollowed out by the advantages of internet shopping and the collapse of the purchasing power of the middle class.
In food service, fashion, consumer durables, banking, and more, entrants online are challenging traditional retail brands that were built up on the high street. The ripple effect of cloud-based business has been extensive and pervades both the direct-to-consumer and B2B commercial landscapes.
“The first lesson from all that’s taken place in the last ten years is the power of having a game-changing frame of mind.”
A running theme over the last decade has been how the blind spots of businesses invested in inflexible ways of working have become their Achilles Heel, and been called out. Decision-makers are being asked to be prepared to think differently and challenge assumptions. This includes acquiring a readiness to cut out any, and all, unnecessary processes.
Using digital business design, reinventing service and supply journeys end to end, re-conceiving the operating proposition and the way it’s delivered, and putting consumer needs and their desire for ease and convenience first, is a priority.
What a quick snapshot of the last decade makes clear is essentially that businesses in every operating sphere must prepare to disrupt themselves or be disrupted.
Reviewing a comparison of the largest companies globally in 2008 and 2018 gives a clear picture of this. Where businesses rich in fixed capital assets dominated the top 10 in 2008, the value of the intangible economy usurps them today. What’s also notable is how new companies can grow exponentially with the right strategic proposition, whatever year it is.
With that said, what seems to have happened more often, in digital transformation terms, has been augmentation rather than reinvention - the adding-on of technical infrastructure and support systems to existing operating frameworks.
In the last few days of this year, HMV has become an illustration of how even having a strong brand name can’t save a business adopting a ‘digital first’ mantra but keeping basic things the same. Digital transformation must go deeper.
The World Wide Web was designed with the intention of enabling increased self-reliance and new levels of capability. It does this by connecting things together directly, without a need for intermediaries. But it is perhaps inevitable that the phenomenal pace of change has spawned an entire new marketplace of middleware designed to bridge the gap between organisations employing digital skills in-house and their need to stay competitive.
This has created a loss of agency and initiative to some extent, as vendors have capitalised on the sales of technical solutions and the harnessing of the data that comes with it. And for many, it’s been a costly investment.
Even with the abundance and efficiency of proprietary solutions on offer, there remains a fundamental need to inject hands-on digital business design experience into the perspective of senior decision-makers and to equip organisations with the means to create their own digital infrastructure. This is a basic part of having a holistic digital vision and data capability.
“The second insight of the last ten years is how resilient organisations can be to deep innovation.”
There’s been a monumental growth of platform companies, Facebook being the obvious example. Their growth has been generated by mining network dynamics and user data, but organisations transitioning to being digital-by-design have generally been less effective understanding and adapting to user and stakeholder behaviour.
Culturally, this is a crucial transformation element. An organisation that wants to avoid reverting to default habits and settings, must be able to identify its most progressive and engaged constituents. They should understand how their behaviour can be propagated to support constructive and organic change, as part of an effective learning-by-doing environment.
Image by Paul Gilmore
While there’s been a wide array of technical developments in the last ten years, by comparison the nature and structure of the firm and how we organise to deliver commercial benefit remains largely unchanged. The idea of flatter organisations was only just beginning to emerge in 2008, but in the last few years the gig economy has taken hold.
Companies, notably Uber, hit big-league valuations as a result of making the most of this as a disruptive opportunity. Uber’s ethics and development path have been highly controversial. As a brand, however, Uber illustrates the close link that exists now between new ways of working and a company’s core proposition. It is the case that to be a game-changing business an organisation has to act differently. Digital strategy is the unifying thread, connecting technical infrastructure, brand and user experiences, operations, human resource development and analytics.
With this kind of smart working has come the reshaping of contract relationships, organisational structures, outsourcing and the introduction of partner ecosystems. Collaborative culture has challenged existing conceptions of how good work gets done. Though, for the coders with Github and repositories experience who’ve led the way, this has been normal practice for more than the last ten years.
In the next ten, we will hopefully begin to fundamentally address and redefine how we organise effectively for the digital age.
Image by Micaela Parente
In recent years, of course, issues of security and ethics have become front page news. The ‘bad actor’ elements that have surfaced on social media have served to stunt open discussion to a significant degree. Suspicions of tracking, questionable governance and ethical practice have led to a loss of trust amongst people and put the brakes on full engagement with digital culture, leading to reduced levels of collaboration.
In some ways, we have regressed since 2008. Digital development has regressed in terms of marketing - where organic distribution was the original proposition, this has been largely supplanted by paid for and programmatic advertising. With advertising as the revenue generator, social media has a renewed reliance on broadcasting alongside content management served up by algorithm, side-lining the role of the consumer as a pre-determining element.
It remains to be seen how sustainable this is a strategy. Social media feeds peppered with the interruption of inserted advertising content have led to some flat-lining of the major platforms and dissenting voices have been making their views known. We have moved away from original digital capabilities of ‘publish once, share everywhere’, and that’s fundamentally inefficient.
In terms of marketing, a combination of the loss of trust in brands and social media platforms, the range of channels, app activities and interactions on offer together with the reduction of organic reach have made a true understanding of networked audience perceptions much harder to achieve.
“The third insight that the last ten years provides is about this regression.
It has served to escalate the costs of scaling any business.
In that sense, arguably, digital business modeling has lost its way. ”
A few ‘data monopoly’ organisations, obviously including Google and Facebook, hold a large amount of user data today. But, despite businesses having access to such data, organisations do not seem to have developed longer-lasting or more sustainable relationships with their users.
Quite the opposite, in fact. Competition and churn have intensified, change has been hard, user loyalty has declined and the costs of this attrition and trying to keep pace with market demands have intensified.
Image by Andrian Valeanu
Ten years ago, data was barely discussed as a subject and social media was still for innovators. Now, the two have come together, with significant concerns about privacy and data portability remaining unresolved.
As Visceral Business goes into its 11th year of digital business consulting, for us, data is now front and centre. Data as the evidence of interaction is the petrol behind nearly every business decision made today. We are looking at how data-enabled businesses can exchange data as part of legal and ethically sound frameworks, the role data monopolies play in shaping business development and how organisations can open up more data by default.
And we are also looking at the long-term implications for markets as this ‘internet thing’, as my friend Emer puts it, becomes woven into the basics of future economics.
Throughout the last ten years, it seems that technical and digital developments have been moving faster and slightly further ahead than users’ awareness of them and, as one manifestation of this trend, silent surveillance has supplanted audience engagement and collaboration.
Research by Streetbees suggests that 98% of Facebook users don’t trust it. Edeleman’s last Trust barometer at the beginning of the year actually went further, framing these issues as a basic battle for truth, while Huawei has brought serious insecurities around technical infrastructure into the frame.
So, what’s next? At times, it seems the binary choice ahead is one of either heightened affordances and possibilities or of being hostages to AI-influencers and the people behind them’s future fortunes.
Channel management, algorithms, AI and fake news have become popular talking points without many of the digital basics being addressed around business modelling, governance, operational process and structure.
After a decade of digital business being under development, are we about to move beyond initial posturing and the surface attraction of technology to address these fundamental economic and management issues and make good on digital business’ promise and potential?
I hope that’s what the next ten years will be about.
Wishing you a prosperous and successful 2019.
Visceral Business will begin a regular newsletter in 2019 focusing on development in innovation, leadership, change, data and digital business design for the next year and beyond. If you’d like to receive these updates, please sign up to keep in touch.