Resistance to hype is not always wisdom. In his Autobiography, Benjamin Franklin recounts the story of a neighbor who refused to buy property in his city,
… for Philadelphia was a sinking place, the people already half bankrupt, or near being so; all appearances to the contrary, such as new buildings and the rise of rents, being to his certain knowledge fallacious; for they were, in fact, among the things that would soon ruin us.
Franklin nearly fell under the man’s melancholy spell, but alas, had already made his investments. He would be vindicated.
This man continued to live in this decaying place, and to declaim in the same strain, refusing for many years to buy a house there, because all was going to destruction; and at last I had the pleasure of seeing him give five times as much for one as he might have bought it for when he first began his croaking.
In the late 1990s I heard about a CIO (also a Philadelphian, it turns out) who insisted that e-commerce was “a fad.” He was half-correct. The term was a fad, but the thing itself was real. His deferred investments left the company playing catchup for over a decade and a half.
“Digital” certainly implies elements of hype. These include fashionable new ways of working –flattened organizational structures, open spaces, scrums and kanban boards. It also includes a new cult of youth; the inscrutable and difficult-to-placate Millennials, the “digital natives” who grasp the new realities at a level the rest of us cannot understand. (To put this conceit in proper perspective, watch this scene from A Hard Day’s Night). Digital means a certain style of product design, sleek and smooth, which looks fresh now but, like all design, will eventually look dated.
But hype should never be dismissed. It should be interpreted as signal, and studied for essence. There is a definite business essence beneath digital hype. It consists of related trends in strategy, marketing, and analytics. The underlying reality is a genuinely novel environment created by mobile, social, and the Internet of Things (IoT). None of these phenomena are fads. They are rather new environmental conditions that change the traditional relationship between business strategy and information technology. They transform technology from an implementation detail (clerical IT) to an intrinsic element of strategy. The greatest evidence of this shift is that the established strategy consultancies (McKinsey, BCG et. al.) have each created their own digital practices. Whatever you think of these firms, they are neither trendy nor easily led.
But why are mobile, social, and IoT so important? Why do they represent a tectonic shift in business, rather than simply one more trend in a long line of trends? I believe the answer is that they create a completely new field of possibility through the way they blend the physical and virtual worlds. A person with a mobile device is effectively a human data transceiver. An IoT device is a nonhuman one. APIs and service-oriented architectures enable free interaction between all of these transceiver-actors, interaction that creates massive amounts of data while meeting real objectives in the physical world. At the same time, we now have all the cheap processing power we need to analyze that data, improve the interactions, and meet those objectives more and more effectively.
These conditions change the primary focus of businesses from efficiency to responsiveness. It is not that efficiency is no longer important. But it is a solved problem of the industrial age. Basic efficiency is not the competitive differentiator it used to be. The world of human and nonhuman transceivers shifts the field of competition from efficient planning to responsive interaction.
Business strategy cannot possibly persist unchanged in this environment. The strategies of efficiency belong to the industrial past. Industrial-age strategy is represented by a pyramid: orders issued from the top and executed at subsequent layers below. Digital strategy is far closer to John Boyd’s OODA (Observe, Orient, Decide, Act) loop. Those who take best and fastest advantage of the human and nonhuman transceivers win. Those trapped in the assumptions of linear and top-down planning lose. Even if they are parroting digital hype, they are still missing digital essence.
Rob Lawrence 