Digital Leaders Blog

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A very interesting article has recently appeared in the McKinsey Quarterly by Marc de Jong and Menno van Dijk entitled ‘Disrupting beliefs: A new approach to business-model innovation’. The article provides advice on how industry incumbents can reframe their underlying business models in an era of digital disruption.

Established business models, according to the authors, are under attack - being subject to rapid displacement, disruption, and, in extreme cases, outright destruction because of the digital and social media revolutions. A simple but very useful Infographic is presented showing how business models can be reframed when threatened by digital disruption.

The five main stages are:

1. Outline the dominant business model in your industry.

2. Dissect the most important long-held belief into its supporting notions.

3. Turn an underlying belief on its head. Formulate a radical new hypothesis, one that no one wants to believe—at least no one currently in your industry.

4. Sanity-test your reframe.

5. Translate the reframed belief into your industry’s new business model.

Please click on the image below to enlarge the infographic.

The above reframing should be applied to each core element of the incumbent’s business model, especially the need for innovation in four key areas:

  • Customer relationships: from loyalty to empowerment.
  • Key activities: from efficient to intelligent.
  • Resources: from ownership to access.
  • Costs: from low cost to no cost.

It is well worth taking the time to read the full article which you can find here.

In an era where no industry, no company is immune from the threat of digital disruption, we would encourage you to apply the five step approach to your own organisation. The results may surprise you.

As usual, all comments and feedback are very welcome. Is your business model about to be disrupted?

Jim H

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Business Schools and Digital Leaders

We have been arguing for some time now that more Digital Leaders are urgently required.

It is nice see, therefore, that innovative Business Schools are at last moving in this direction.

Please see the two articles below for a quick overview of some recent developments in this area.

Also nice to see a brief mention in both articles of our own Digital Leaders class at SBS.

MBA Careers: Business Seeks Tech-Savvy Leaders For Digital Transformation

Business Schools Help Executives Keep Pace With Digital Innovation 

Take care.

Jim H

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An interesting Infographic has just been published by MIT Sloan Management Review and Deloitte based on their 2015 report entitled Strategy, Not Technology, Drives Digital Transformation.

The Infographic illustrates how rethinking strategy, culture and leadership can help organizations transform digitally.  Please click here to enlarge the image.

The full report, with detailed Executive Summary, can be downloaded here.

Take care.

Jim H

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The Digital Vortex

I have just completed a second reading of the recent report entitled 'Digital Vortex: How Digital Disruption is Redefining Industries' mentioned in our last post.

This should be considered required reading for anyone wishing to develop a deeper insight into the coming digital tsunami.

The Executive Summary from the report is reprinted below.  You can access the full report here. No registration is required.

  • Digital disruption has the potential to overturn incumbents and reshape markets faster than perhaps any force in history.
  • The Global Center for Digital Business Transformation (DBT Center), an IMD and Cisco initiative, is dedicated to original research and to creating opportunities for executives to innovate new business models for the digital age. To learn more about the current state of digital disruption and the outlook for industries, the Center surveyed 941 business leaders around the world in 12 industries.
  • The results of our survey surfaced several troubling findings about the potential for disruption, and incumbents’ readiness to adapt. Survey respondents believe an average of roughly four of today’s top 10 incumbents (in terms of market share) in each industry will be displaced by digital disruption in the next five years.
  • Despite these dire ramifications, digital disruption is not seen as worthy of board-level attention in about 45 percent of companies (on average across industries). In addition, 43 percent of companies either do not acknowledge the risk of digital disruption, or have not addressed it sufficiently. Nearly a third are taking a “wait and see” approach, in hopes of emulating successful competitors. Only 25 percent describe their approach to digital disruption as proactive—willing to disrupt themselves in order to compete.
  • The impact of digital disruption can best be understood through the construct of a vortex. A vortex exerts a rotational force that draws everything that surrounds it into its center. The Digital Vortex is the inevitable movement of industries toward a “digital center” in which business models, offerings, and value chains are digitized to the maximum extent possible.
  • As industries move toward the center of the Digital Vortex, physical components that inhibit competitive advantage (such as manual, paper-based processes) are shed. Whatever can be digitized is digitized. The components of digital value can then be readily combined as disruptive business models. These models knit together different types of capabilities and deliver customer value in new ways. The most successful disruptors employ “combinatorial disruption,” in which multiple sources of value—cost, experience, and platform—are fused to create disruptive new business models and exponential gains.
  • We asked executives in each of the 12 industries we studied to estimate the likelihood of disruption based upon four variables: 1) investment in disruption, 2) timing of disruption, 3) means of disruption, and 4) impact of disruption. The industry that will experience the most digital disruption between now and 2020 is technology products and services. Pharmaceuticals, meanwhile, is likely to experience the least amount of digital disruption. However, all industries will see competitive upheavals as innovations become increasingly exponential.
  • Based on their ranking and placement within the Digital Vortex, firms can evaluate the speed at which their industry will experience disruption. They then can choose to “disrupt themselves” or potentially be displaced by a new business model. This does not mean discarding what has made them successful or emulating invogue digital tactics. Rather, they must challenge the assumptions that have underpinned prior success, and stress-test the ways in which they deliver value to customers. It means changing the organization itself, including its operations, culture, revenue model, and more—in fundamental ways, and perpetually.

As always, feedback and comment are very welcome.

Take care.

Jim H

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Digital disruption could overturn incumbents and reshape markets faster than any force in history, according to a new report by the Global Center for Digital Business Transformation (DBT Center), an initiative between Cisco and the International Institute of Management Development (IMD) in Lausanne, Switzerland.

Based on a survey of 941 business leaders in 12 industries and 13 countries (including Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan, Mexico, Russia, United Kingdom, and the United States), the report concluded that digital disruption will displace approximately 40 percent of industry incumbents within the next five years. Despite this, 45 percent of companies do not believe digital disruption merits board-level attention.

Most of the executives surveyed see digitization as a positive for business and society – with 75 percent stating that digital disruption is a form of progress, 72 percent that it improves value to customers and 66 percent feeling that it empowers individuals. However, only 25 percent describe their approach to digital disruption as proactive.

‘Walking into the abyss’?

You can find a good summary of the report here and here.

The full report is available at Digital Vortex: How Digital Disruption is Redefining Industries.

As usual, all comments and feedback are very welcome.

Is your own organisation walking into a digital abyss?

Jim H

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The Internet of Living Things

A recent article on the O'Reilly Radar site, by Hagen Finley, examined the new opportunities being created for wellness management by The Internet of Living Things

Using two illustrative examples of aero-engines and tyres, the article begins by presenting a concise summary of the Internet of Things and its potential impact on core business models. According to the author, real-time reporting from embedded sensors not only changes the way machines function, it changes the way they are sold and operated.

For example, aero-engine manufactures such as GE and Rolls Royce are now renting rather than selling engines to carriers, supported by a full-service contract. Sensors embedded in the engines provide consumption-based billing information and allow GE to perform just-in-time maintenance on field-replaceable engine parts. The carrier’s maintenance model is dramatically more effective and efficient than the previous non-sensored model, which either pulled engines out of service based on mileage or based on part failure, both of which translated to waste for the carriers.

Michelin is starting to follow a similar business model, selling sensor-enhanced tyres on a ton-kilometer revenue contribution basis where payment is proportional to the work done by the tyre over a defined time period. The embedded tire sensors allow Michelin to offer large-fleet trucking companies a new service that monitors and manages fuel consumption.

You can read how this type of business model could apply to the Internet of Living Things for our bodies by reading the full article here.

Makes sense to me........... 

As usual, all comments and feedback are very welcome.

Jim H

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Digital Disruption News No.1


The first in a regular series of posts keeping you up-to-date with what’s happening in the world of digital disruption.

Please right click links to open in a new tab.

The Swedish house designed by 2m people. This is what is called 'cool'. Big data in design - http://buff.ly/1GJqta9  

Soon, the idea of receiving medical treatment exclusively at a doctor’s office or hospital will seem quaint - http://buff.ly/1dhyoRc  

What it takes to build your Digital Quotient | interesting interview with McKinsey - http://buff.ly/1GGYbNi  

Connected machines: Taking manufacturing to the next level of IoT - http://buff.ly/1LlBmSD  

Good article on Digital Marketing Automation Tools - http://buff.ly/1LsjAei  

Why Startups Are More Successful than Ever at Unbundling Incumbents via HBR - http://buff.ly/1MXgmzT  

Interesting piece on airplanes, big data, sensors - http://buff.ly/1QKmkdI  

The Best Digital Strategists Don’t Think in Terms of Either/Or, very good via HBR - http://buff.ly/1LcprGU  

The Age of Smart, Safe, Cheap Robots Is Already Here via HBR - http://buff.ly/1H2lXoF  

Big Data and Predictive Analytics to Improve Pratt & Whitney Engine Performance - http://buff.ly/1GeVSig  

Farming smarter with big data. Great example of digital disruption in one of the most traditional of industries -  http://buff.ly/1MX9TFd  

Ten ways autonomous driving could redefine the automotive world | interesting from McKinsey & Company - http://buff.ly/1H2mred  

Industry 4.0: A confluence of trends and technologies promises to reshape the way things are made via McKinsey - http://buff.ly/1d9rnlz  

Separating Digital Leaders from Digital Laggards - http://buff.ly/1d9rGNd  

Facebook, Google set to crowd out competitors in digital news - More digital disruption for the newspaper industry - http://buff.ly/1BvlNW8  

Bank branch use falls 6% as customers embrace digital. Smartphones and tablets to overtake branches this year - http://buff.ly/1d9lUuR

Thriving in an Increasingly Digital Ecosystem | good article on Digital Disruption from MIT Sloan Management Review - http://buff.ly/1IXcrSW  

Is Your Business Ready for a Digital Future? | more from MIT Sloan Management Review -  http://buff.ly/1d9q5qO  

Managers in the Digital Age Need to Stay Human - spot on via HBR - http://buff.ly/1Bvm1N1  

Interesting example of how Big Data can be used to reduce University drop out rates? Coming here soon? - http://buff.ly/1MXaEhD  

A New Digital Drama Unfolding in the C-Suite - who should lead digital change? - http://buff.ly/1K4rHz7  

Digital Leaders Urgently Required - new evidence - http://buff.ly/1LsdGtH  

Interesting, the top ten brands on LinkedIn in terms of Content Marketing - http://buff.ly/1SACrrT  

UK business risks losing market share due to bad customer service, more demanding young, social media savvy customers - http://buff.ly/1H6P9MY  

How One Company Reduced Email by 64% - a must read for everyone suffering from email overload - http://buff.ly/1H6QC5U  

What Makes FC Barcelona Such a Successful Business via HBR - http://buff.ly/1CldhnU

As usual, all comments and feedback are very welcome.

Jim H

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In a recent interview with Upstart Business Journal, Ray Wang argues that since 2000, 52 percent of the names on the Fortune 500 list are gone, either as a result of mergers, acquisitions or bankruptcies. The changes are the result of digital business models creating disruption in the marketplace. While about 5 percent of organizations are leaders in proactively transforming their business models to adapt to the latest technologies (Microsoft, Oracle, Apple, Amazon, Facebook and Uber among them), 30 percent remain laggards who don’t want to change.

Wang states that Digital Darwinism is unkind to those who wait. Anybody, even the smallest startup can overtake a large Fortune 500 company because it’s the non-traditional competitors that are creating new customers and new customer classes.

While the average age of a company on the S&P 500 was 60 years old in 1960 it will continue to shrink to 12 years old by 2020.

The full interview can be accessed at Don't get cozy, Fortune 500: it’s do-or-die time for digital disruption, says this author

The author was promoting his new book entitled Disrupting Digital Business: Create an Authentic Experience in the Peer-to-Peer Economy. A review of the book can be found on Amazon.com

As usual, all comments and feedback are very welcome.

Jim H

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One of the most frequently asked questions we receive during workshops is what impact will the digital revolution have on employment? Will we see large scale employment loses, across a wide spectrum of industries, due to digital disruption?

Author Martin Ford thinks so.

In his book with the above title, the author argues that, from an employment perspective, the current digital revolution will be quite different from the previous industrial revolution. In the latter, some jobs were eliminated, but these were more than compensated for by the employment creating effects of new technologies. The digital revolution will be quite different.

The review of the book on Amazon contains the following two hard hitting paragraphs.

'As technology continues to accelerate and machines begin taking care of themselves, fewer people will be necessary. Artificial intelligence is already well on its way to making “good jobs” obsolete: many paralegals, journalists, office workers, and even computer programmers are poised to be replaced by robots and smart software. As progress continues, blue and white collar jobs alike will evaporate, squeezing working- and middle-class families ever further. At the same time, households are under assault from exploding costs, especially from the two major industries—education and health care—that, so far, have not been transformed by information technology. The result could well be massive unemployment and inequality as well as the implosion of the consumer economy itself.

In Rise of the Robots, Ford details what machine intelligence and robotics can accomplish, and implores employers, scholars, and policy makers alike to face the implications. The past solutions to technological disruption, especially more training and education, aren’t going to work, and we must decide, now, whether the future will see broad-based prosperity or catastrophic levels of inequality and economic insecurity. Rise of the Robots is essential reading for anyone who wants to understand what accelerating technology means for their own economic prospects—not to mention those of their children—as well as for society as a whole.'

More details can be found at Rise of the Robots.

For a less pessimist view, please see The Robots Are Not Coming - Forbes.

As usual, all comments and feedback are very welcome.

Jim H

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A fascinating article on the way in which Airbnb uses Big Data and machine learning to guide 'hosts' on pricing and how to increase bookings. What they don’t teach you on Hospitality Masterclasses :-)

http://www.forbes.com/sites/ellenhuet/2015/06/05/how-airbnb-uses-big-data-and-machine-learning-to-guide-hosts-to-the-perfect-price/

As usual, all comments and feedback are very welcome.

Take care.

Jim H

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According to new research by Harvard Business Review (HBR) Analytic Services, there is a strong positive relationship between digital leadership and business performance. Successful companies have a CIO taking a leadership stance in digital transformation.

The top seven strategies of CIOs within companies that HBR considers “Digital Leaders” - organizations strong in both digital leadership and management - are shown in the infographic below.

A key finding is the importance of digital learning. Digital Leaders place considerable emphasis on raising the digital skills bar having CIOs who are educating and empowering line of business leaders in digital knowledge.

To download the full report, click here (registration required).

As usual, all comments and feedback are very welcome.

Jim H

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This Open Letter on the Digital Economy, from MIT, absolutely nails it in my view.

Although based on a US perspective, the call for a three-pronged effort covering changes in public policy, new organisational models and more research into the economic and social implications of the digital revolution is of equal relevance to many other countries.

Please take the time to read the Open Letter, following the links as appropriate.

As usual, all comments and feedback are very welcome.

MIT Open Letter on the Digital Economy

Jim H

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AMBA Refresher Day

We are delighted to be speaking at the AMBA Refresher Day in Edinburgh next Wednesday 10th June.

Participants at the event will be mainly Alumni members and non members of the Association of MBAs with the aim of the day being to 'go back to school' - bringing delegates up-to-speed with new topics being covered by MBA programmes in today's fast moving business environment. Not surprisingly the topic for our session is 'Digital Darwinism and Digital Dinosaurs'.  It will be interesting to see how many of the audience, having graduated three or more years ago, see themselves as being 'Future Digital Leaders'.

More details of the event can be found here.

Our slides can be accessed on slidshare as below:

We look forward to meeting everyone at what should be a very interesting day.

Take care. Jim H

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Technologies like 3-D printing, robotics, advanced motion controls, and new methods for continuous manufacturing hold great potential for improving how companies design and build products to better serve customers. But if the past is any indicator, many established firms will be slow to adjust because of a formidable obstacle: legacy assets and capabilities that they are reluctant to abandon.

The question of why older incumbent firms are slow to adopt new technologies even when the economic or strategic benefits are clear is discussed in this interesting article on the Harvard Business School blog - https://hbr.org/2015/05/breaking-the-death-grip-of-legacy-technologies

As usual, all comments and feedback are very welcome.

Take care.

Jim H

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According to a new market research report by MarketsandMarkets, the Global Digital Transformation Market is expected to grow from $150.70 Billion in 2015 to $369.22 Billion by 2020, a Compound Annual Growth Rate (CAGR) of 19.6%. Key technologies include mobility, analytics, social media, and cloud computing.

Major vendors in the Digital Transformation Market include Apple, IBM Corporation, Oracle Corporation, EMC Corporation, SAP AG, Adobe Systems, CA Technologies, Hewlett Packard (HP), Google, Microsoft Corporation and others.

A good summary can be found at 

http://www.prnewswire.com/news-releases/digital-transformation-market-worth-36922-billion-by-2020-505441641.html

 

As usual, all comments and feedback are very welcome.

Take care.

Jim H

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Without Big Insight, Big Data Is Useless

Big Data is often heralded as a transformative force that will usher in a new era of data-driven decision making. However, many enterprises are finding themselves drowning in data, but with no better insight into the issues confronting their businesses, according to a new report from Forrester Inc.

A good summary of the report entitled “Digital Insights are the New Currency of Business" can be found at - Without Big Insight, Big Data Is Useless - CIO Today

As usual, all comments and feedback are very welcome.

Take care.

Jim H

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According to Cisco's 10th annual Visual Networking Index, the number of people connected to the Internet will increase by one billion over the next five years, from 2.8 billion in 2014 to 3.9 billion by 2019, with much of the growth coming from emerging nations.

There will be an additional 10 billion new things connected to the Internet, from 14.2bn to 24.4bn connected devices, including smartphones, tablets, watches and sensors. Almost half of these connected devices will be things in our homes with other fast growing areas being wearables that improve our health and well-being, and cars that talk to each other and to us. This will herald a radical shift in how we connect to each other and the world around us especially with faster broadband speeds, increasing from from 20.3 Mps to 42.5 Mps.

According to Cisco, the massive uptake in broadband and new devices will lead to unprecedented digital and social upheaval. It is critical that business leaders and policymakers prepare now to meet the challenge presented by this new digital class.

The full report can be found here.

A useful summary can be found here.

As usual, all comments and feedback are very welcome.

Take care.

Jim H

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An interesting article by Business Insider reports that the future remains bleak for the US newspaper industry which has struggled for over a decade to adapt to the digital era. The May sale of the San Diego Union-Tribune for $85 million highlights the horrific slump in the value of "old media" companies in recent years. A decade ago, the newspaper was believed to be worth $1 billion. One estimate by the Pew Research Centre suggests that the valuation of once proud US metropolitan dailies including the Boston Globe, Philadelphia Inquirer, Chicago Sun-Times and Minneapolis Star-Tribune, have fallen by more than 90 percent from their peaks. Weekday circulation for the US daily newspaper sector has fallen by 17 percent over the last decade with a 50 percent decrease in as revenue.

While every newspaper chain talks about getting digital faster, it appears that most are no closer to where they need to be. You can access the full article here.

As usual, all comments and feedback are very welcome.

Take care.

Jim H

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Leading Digital Transformation

One of the best and most recent books on digital transformation is Leading Digital: Turning Technology into Business Transformation by Westerman, Bonnet and McAfee (2014).

Over a four year period, the authors studied a large number of ‘Digital Masters’ - defined as companies who were proactively using digital technologies to drive significantly higher levels of profit, productivity and performance - across a diverse range of industries. ‘Digital Masters’ were 26 percent more profitable than their average industry competitor; generating 9 percent more revenue with their existing capacity and driving more efficiency in their existing products and processes.

While evidence of the innovative use of digital technology exists in most industries, the majority of organisations fall short in terms of digital mastery; threatening their survival and growth in the new digital era. 

According to the authors, companies that struggle with becoming truly digital fail in two main areas - they fail to develop the required digital capabilities to work differently and the leadership capabilities required to set a digital vision and execute it. ‘Digital Masters’, on the other hand, excel in these two capabilities. They build digital capabilities by rethinking and improving in three main areas - internal business processes, external customer engagements and their overall business model. They also build strong leadership capabilities to envision and drive transformation.

In terms of digital leadership, the authors argue that large companies are prone to inertia and entropy, especially in terms of their use of new technology.  This makes it difficult to get started and to drive change.  Based on the extensive case research undertaken, they argue that the only effective way to drive digital transformation is top-down, through strong senior executive direction coupled with methods that engage workers in making things happen.

Digital leadership involves creating a transformation vision, engaging and energising employees to make the vision a reality and digital governance providing the guardrails and steering wheel to keep transformation on the right track.  It requires strong technology leadership capabilities to power transformation forward, especially the need to build strong relationships between IT and business leaders. ‘Digital Masters’ use this relationship to drive change in their internal platforms and digital skills.

To support the successful implementation of digital change programmes, very practical advice is presented in the authors’ ‘Digital Transformation Compass’ shown in the header image of this article (please click to enlarge).

The four main coordinates of the compass are:

  • Framing the digital challenge
  • Focus investments
  • Mobilize the organization
  • Sustaining the transformation

There is a very useful slidshare presentation accompanying the book which you can find here.

The video below is also well worth watching.

As usual, all comments and feedback are very welcome.

Is your organisation a 'Digital Master' or a laggard? What are the main barriers to digital transformation that need to be overcome?

Take care.

Jim H

 

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