Digitally Transform or Else!
What predator lives next door to your business?
It is a relatively new species, called Digital Transformation Exponential Growth that most recently has become dragon-size. Business growth at a linear rate creates an ever increasing gap between status quo and what is possible as the chart above illustrates. That business devouring dragon lives in the region of the gap between what’s possible and traditional more linear business transformation.
“It does not do to leave a dragon out of your plans if you live near him.” from The Hobbit, J. R. R. Tolkien
“When hotels measure their market share against their competitors, they don’t take Airbnb into account because it’s not a hotel chain. … Your competition is anything that can solve your buyer’s pain.” — Keils & Lieberman, Smash the Funnel.
A Picture of Business Disruption
Clayton Christensen in his book, The Innovator’s Dilemma, succinctly described disruption brought on by technological change in a chart in that book which we’ve recreated below. A simple example to bring to life the concepts illustrated there is the emergence of desktop PCs. Prior to their commercialization, computing was done on large mainframe computers. Those mainframes met the needs of the market from the low end to the high end of the range of performance demands. Initially the desktop PCs could not perform at the minimal level of the low end of the market, but eventually caught up as we all know. Mainframes meanwhile kept improving but overshot the needs of the bulk of the market, and the rest is history. The latest innovation that has emerged now is cloud computing and it is a critical component of the Digital Transformation race.
Statement just before the dragon’s dinner: “One of the things that is mind-boggling right now is how much we have to change all the time.” — — Anne Mulcahy, former CEO, Xerox
We’ve All Been Through It
My own experience with keeping pace has been in the process industries. I’ve been in a specialty chemicals business where margins were high and if you had a patent on your molecule and the customer built your product into their formula of ingredients you were all set. The name of that game was to amp up the R&D resources to keep on inventing new stuff, antioxidants and UV stabilizers in our case. A few years later, in another company, in a commodity business, the name of the game was cost competition. When supply exceeded demand, prices dropped and only the low cost producers survived. We purchased outside technology to replace our liquid phase reactors with vapor phase to achieve better raw material efficiency that yielded low cost finished product. That kept us in the top 25% best cost producers per the established industry benchmark. Every circumstance requires unique and creative solutions. You no doubt have your own industry and business-specific war stories.
Digital Transformation Challenge
What is different about the Digital Transformation race currently underway? The rapid pace of change is what’s different. The first chart at the start of this article attempts to depict this. The oft quoted Moore’s Law says that every 18 months processing power for computing doubles. Many leaders not close to the level of action don’t realize the amazing computing power now available at low cost with cloud computing. When quantum computing emerges and becomes practically applied who knows what previously unsolvable problems will yield to that new power. In a recent project requiring finding the optimum solution out of trillions of possibilities we found that deterministic methods, such as linear programming, would not work because the constraint equations were non-linear, discontinuous, and highly complex. We applied a heuristic muilti-stage stochastic optimization method and intelligently searched the solution space to score solutions per the objective function thousands of times until a point of diminishing returns was reached. With quantum computing who knows? We may be able to, in a reasonable amount of computing time, score every single one of the trillion trillion possible solutions for this particular problem, and find the one best one, with a 100% probabilistic guarantee which a stochastic method, if it had infinite computing time, would have yielded.
Our CTO, George Danner, award-winning author and keynote speaker, in his most recent book, The Executive’s How-To Guide To Automation, comments on what the future holds.
“We sit on a unique moment in history. The past has brought us technological innovations that allow us to very closely mimic the complex decision-making process of humans. It has also produced organizations with vast numbers of complex problems to solve every hour of every day. Up to now most organizations operate with an army of humans somehow making it all work by the end of the day. The future will be different. Very different. Because we possess the potential for automation that we did not have before, we are set to embark on an unprecedented wave of automation for organizations of every shape and size.”
So as leaders, what do we do to keep from being disrupted out of business? Let me stimulate your thinking along these lines:
· Many firms are short of talent for AI/ML/Data Analytics, and could benefit from a strategic partnership with a firm that has such talent, and can bring in a fresh set of eyes to stimulate new thinking. Maybe that connects with your need at the moment. Recruiting, hiring, onboarding the right people may take too long and not be the most cost effective approach.
· Examine your business processes, workflows, systems that today involve large amounts of manual effort. In our current upheaval of shortages of materials and products brought on by the pandemic, the most intelligent supply chain management is crucial to keep or gain market share. Can scenario planning for that be digitized to yield higher quality and quicker decisions? Another example — We are currently building a Digital Twin for a firm’s business unit P&L that will allow “what if” experiments to be done on a digital replica which studies are currently done in a time consuming manual way with spreadsheets. What business critical system or workflow of yours is highly manual that can be automated?
· What do your customers need that could be better served by digitizing a current system that is customer-facing. How can you lower transaction costs?
· Challenge your team to bring leadership a list of possible use cases prioritized in terms of urgency and ROI.
Innovation is crucial to survive and thrive. With the current Digital Transformation race, the need for speed is paramount.
Several hundred years ago, this guy had something to say about this:
“I have been impressed with the urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.” Leonardo da Vinci
