Digital Leaders Blog

digital disruption (46)

Next week I will be in Iceland delivering two half-day workshops.

The first session will examine the changing role of HR in an era of digital disruption.

The key motion being discussed during workshop two is whether marketing, as we know it, is becoming obsolete. Is the convergence of disruptive technologies (mobile connectivity, social media, the cloud, big data, predictive analytics, algorithms, IoT, AI, automation, cognitive computing, augmented reality and the blockchain), combined with the rapid emergence of a new generation of constantly connected customers (Gen C), leading to the end of marketing as usual?

Key discussion points will include:

  • Has the marketing profession adapted quickly enough to the digital era? Does the profession need to #adaptordie?
  • Are we viewing the world as it is or as we have always known it? Are we operating with out-of-date marketing paradigms? What are the new ‘rules’ of sales, marketing and PR in an era of customer empowerment? Content and engagement not broadcasting? Marketing as a two-way conversation with your customers?
  • Gen C - are we aligning marketing with the buying behaviour and growing expectations of constantly connected customers and digital natives?
  • On the web, do we still view customers as passive sheep just waiting to be driven to our web site? Is the linear sales funnel still relevant when ‘prospects’ and ‘targets’ are now in control?
  • Is ‘social selling’ the new B2B marketing?
  • What are the implications for brand management when the brand has become the customer experience of the brand, experiences that are widely shared across social platforms?
  • Should we all just ‘shut up and listen’, developing actionable insights from social media conversations?
  • Have social customer service, managing the online customer experience, word-of-mouth and community engagement become the new pillars of marketing success?
  • Is SME export support policy stuck in a 35 year, pre-digital time warp?
  • Do we need a new approach to measuring marketing performance and business impact?
  • What new marketing skills are required in a digital era? Are we developing next generation marketers? Is our marketing education system 'fit-for-purpose'? Does academic research in marketing have any relevance today?
  • How will emerging technologies such as the Blockchain, Big Data, IoT etc impact on marketing?
  • Are we ready for Marketing Darwinism, a phenomenon when technology and society evolve faster than our ability to adapt?

Hopefully, it will be an interesting session.

As always, comment and feedback are very welcome.

A follow-up post will cover the key questions being addressed in the HR session.

Comment and join in the discussion on LinkedIn here.

Take care.

Jim H

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Digital native companies have captured value from established businesses because of their innovative use and development of technologies, business models and customer experiences.

According to a recent study by McKinsey, however, an overlooked element in the success of these companies has been their use of next-generation operating models defined as:

"The continual effort to improve end-to-end customer journeys and business processes by applying advanced technologies and sophisticated operational methods in an integrated manner. The combination typically results in, or is built around, a business model that is new to the industry and allows the company to move, adapt, and scale quickly."

By applying next-generation operating models, traditional companies can develop the agility and customer focus needed to fend off challenges from digital natives.

As shown in the Infographic below, there are three main components to a next-gen operating model:

  • Continually improving the end-to-end customer journey with a clean sheet approach.
  • Establishing agile ways of working through journey-focused teams.
  • Integrating technology with operations by testing and learning.

Accelerating the shift to a next-generation operating model involves taking three mutually reinforcing actions at once.

The full article can be found here.

Take care.

Jim H

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UK companies are struggling to keep pace with technological advances but see technology disruption as an opportunity rather than a threat, according to KPMG’s CEO Outlook 2017.

As a part of the annual survey, 150 UK business leaders were asked how technology was affecting their business. Charting their views, one third (37 per cent) felt their organisations were struggling to keep pace with technological advances. They also see piloting emerging technologies, attracting strategic talent and building data collection capabilities as their top worries over the next three years.

However, even though 40 per cent of the CEO cohort expect technology innovation to cause major disruption in the coming three years, they remain optimistic about the opportunities it brings. Over two-thirds said that technology disruption is more of an opportunity than a threat.

You can read the full article here.

Take care.

Jim H

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If you were hoping that Digital@Scale would somehow sanction easing into the digitization of your company, you’ll be sorely disappointed. Authors Anand Swaminathan and Jürgen Meffert, both senior partners with McKinsey, set the tone in the first paragraph of their book with this statement: “In the digital age, companies need to rethink their entire business models. Those who don’t risk failure and extinction.”

They also quickly disavow business leaders of two false notions. One is that digitization is an information technology issue. While digital technologies are important, the authors emphasize that the goal of digitization is not spiffy new software and other tech, but “completely new business models.” The second falsehood is that digitization can be delegated off the CEO’s desk. Instead, they argue, digitization “starts with the CEO.”

Read the full article here

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Fit for Digital


A new report by Fujitsu, entitled Fit for Digital, has concluded that digital disruption is the new normal, and will fundamentally redefine the way organisations operate.

Across every industry, boundaries are being torn down as hyper-connected technology redefines the limits of what is possible.

‘From creating richer, more rewarding customer relationships to honing razor sharp processes and operations, digital technology is giving organisations the power to reimagine what they can do and what they can be’.

Based on the views of 1,180 C-Suite decision-makers around the world, the report arrived at four main conclusions:

Digital disruption is here to stay

Disruption is the new normal. Revenue streams, processes, customer relationships: all have been transformed by digital disruption. And while business leaders are enthusiastic about the opportunities that digital is creating, many have concerns for the future - a future in which they see continued upheaval.

Technology is at the heart of the battle

The boardroom agenda is now digital. Leveraging the full potential of new technology is the best way to thrive in a digitally disrupted world.

Evolution is key

Customers are demanding digital. Business leaders are fully aware of the consequences of failing to meet that demand. As the pace of change accelerates, so does the competition. The only way to thrive in this hyper-speed environment is to evolve.

Organisations need strategic support to succeed

Despite the challenges posed by digital disruption, business leaders are highly confident that their organisation can survive. Few, however, believe that they can do it alone. Digital disruption is fuelling a desire to work with expert technology partners, not just to provide guidance, but to collaboratively create digital strategies.

You can download a full copy of the report here – Fit for Digital

Take care.

Jim H

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Evidence is emerging of a growing digital divide between organisations who ‘get IT’ and those who don’t; between those using digital technology to successfully transform their business and those still stuck on the starting blocks.

A new report from Harvard Business School provides evidence that this digital divide is already having a major impact on subsequent financial performance.

Based on detailed research covering 344 large US based enterprises, the Harvard study concludes that ‘digital leaders’ (enterprises who are transforming digitally) outperform ‘digital laggards’ across a range of financial measures.

Organisations that sit in the top quartile of Harvard’s Digital Transformation Index achieve significantly better gross margins, earnings and net income than organisations in the bottom digital quartile. A similar disparity is evident across other financial and operating indicators 

A more detailed summary of the report can be found on the Bridgeall blog here.

As always, comment and feedback are very welcome.

Jim H

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According to Didier Bonnet, one of the main authors of the highly acclaimed 'Leading Digital' book published two years ago, most large companies are struggling to successfully implement digital transformation with the majority of boards having a long way to go before they are mastering the digital challenge .

In a recent interview, Bonnet made the following observations covering the two year period since publication of the book:

  • CEOs and their teams are now much more aware of the impact of digital technology on their businesses. Many are investing heavily in digital capabilities, hiring new digital talent, such as Chief Digital Officers, to lead digital transformation.
  • While CDOs can be a useful catalyst and accelerator of digital transformation, they are not a sure recipe for success. It is critical to have a strong transformational leader at the top of the organisation to drive digital change.
  • Board evolution for the digital era has been very slow. Almost 80 per cent of company directors state that they are not satisfied that their boards have the sufficient digital proficiency to anticipate the competitive technological threats and opportunities for their firms. Less than 20 per cent of Fortune 500 companies feel fully equipped to deal with the technological challenge. Boards require 'transformational digital talent' - people who fully understand the power of new technologies but also the complexity of using these technologies for business impact in large complex organisations.
  • The challenge for many large firms is not so much where to put the investment (The What) but more on how they adapt their organisations to gain competitive positions (The How). 
  • Asked what had surprised him most over the last two years since publication of the book, Bonnet answered the lack of urgency around investing in digital skills. A 2013 study on ‘The Digital Talent Gap’ showed that over 90 per cent of companies lacked major digital skills to successfully execute their digital strategies. It is doubtful if this figure has moved by more than a few percentage points in the last two years. Everyone is aware of the problem, but very few are tackling it in any meaningful way.

“I firmly believe that, with the increasing digital divide happening within firms, the threat of technological unemployment becoming more and more visible and the competitive pressures to accelerate digital transformation, this is an under-resourced area and it’s moving too slowly.”

The full interview can be accessed here.

As always, comment and feedback are very welcome.

Jim H

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A new report from the Global Center for Digital Business Transformation, an initiative of IMD Business School and Cisco, has identified four competencies and three behaviours that business leaders need in order to excel in an era of digital disruption.

The report entiled Redefining Leadership for a Digital Age, presents findings from a global survey of more than 1,000 executives across 20 different sectors.

The vast majority of leaders agree that they are caught in a technology-change vortex that is drawing in whole industries and creating disruption on an unprecedented scale. 92% of those surveyed stated that they are feeling the effects of digital disruption, with one-third rating the impact of digital disruption on their companies as "very significant."

Despite the quickening pace of digital innovation, less than 15% of leaders said that they were "very prepared" to meet the demands of a digitally-disrupted business environment. The majority of participants (almost 80%) indicated that they were "starting preparations" or were "fairly prepared" to tackle digital disruption. Less than 20% of respondents indicated that digital technologies such as analytics, mobile and social media are fully integrated into their organisations with 30% of respondents either rarely or only occasionally using digital tools and technologies

In terms of digital leadership, the report outlines the following "HAVE" competencies as the most important success criteria for senior executives facing a landscape characterised by digital disruption:

  • Humble - In an age of rapid change, knowing what you don't know can be as valuable in a business context as knowing what you do. Digital leaders need a measure of humility, and a willingness to seek diverse inputs both from within and outside their organisations.
  • Adaptable - In a complex and changing environment, an ability to adapt is critical. The global reach of digital technologies has opened up new frontiers for organisations, shrinking once insurmountable continental divides and erasing traditional boundaries between territories. Dealing with the cultural and business impacts of this requires adaptability.
  • Visionary - In times of profound disruption, clear-eyed and rational direction finding is needed. Having a clear vision, even in the absence of detailed plans, is a core competency for digital leaders.
  • Engaged - Painting visions for the future, successfully communicating these visions and being adaptable enough to change them, requires constant engagement with stakeholders. This broad-based desire to explore, discover, learn and discuss with others is as much a mind-set, as it is a definable set of business-focused activities or behaviours

These digitally-engaged executives are called "Agile Leaders" - those who have adapted and evolved their practise for an environment continuously disrupted by digital technologies and business models.

Nearly half (42%) of those identified as Agile Leaders said that they were making more informed business decisions as the result of well-directed data gathering, effective analysis and good judgement.

The three key behaviours which allowed Agile Leaders to successfully navigate disruptive environments are:

  • Hyperawareness: They are constantly scanning internal and external environments for opportunities and threats.
  • Informed decision-making: They make use of data and information to make evidence-based decisions.
  • Fast execution: They are able to move quickly, often valuing speed over perfection.

The report identified the following additional practices that Agile Leaders adopt in a digitally-disrupted business environment:

  • 26% of Agile Leaders use digital tools and technologies frequently, compared with just 7% of non-Agile Leaders
  • 32% of Agile Leaders seek disruptive approaches to deal with challenges (1% non-Agile Leaders)
  • 28% of Agile Leaders use virtual networks and forums (1% non-Agile Leaders)
  • 76% of Agile Leaders encourage their team to challenge their observations and opinions (19.4% non-Agile Leaders)
  • 27% of Agile Leaders make use of business simulations or scenarios to support decisions (1% non-Agile Leaders)
  • 26% of Agile Leaders take risks to speed up execution (4% non-Agile Leaders)

You can access the full report here

The above findings are bound to stimulate detailed debate in our forthcoming Digital Leadership Executive Programmes.

As always, feedback and comment are very welcome.

Jim H

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Will 3D printing disrupt the construction industry?

Apis Cor, a company that 'prints buildings', claims to have constructed the first 3D printed house in a town outside Moscow.

The house took less than a day to construct and cost under $11,000 to complete. A mobile 3D printer created the building's concrete walls and partitions as a fully connected structure, rather than printing the building in panels at an off-site facility as is usually done. The portable machine was then removed from the building, with a group of contractors completing the home - adding the roof and windows, and finishing the interior.

By shifting the construction of the building's shell to 3D printing, Apis Cor aims to prove that this type of construction can be "fast, eco-friendly, efficient and reliable." 

Will 3D Printing revolutionise the construction industry? Can it improve living conditions around the world by using smart machines to deliver fast, efficient and high-quality construction processes. What are the implications for employment in the industry?

Original article here: http://apis-cor.com/en/about/news/first-house

As always, comment and feedback are very welcome.

Jim H

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The Scottish Government is looking for your thoughts and contributions as it prepares an update of the National Digital Strategy for 2017 and beyond. An innovative example of crowdsourcing/co-creation at its best or a deer caught in the headlights of a digital disruption express train, unsure how to respond? Is there a crisis of digital leadership in an area critical to the future competitiveness of the Scottish economy?

Ideas and contributions are being sought in six main areas: Connectivity, Economy, Skills, Public Services, Participation and Cyber Security. As someone who has worked at the coalface of digital developments in Scotland and internationally for over two decades, I will drip feed my own contribution in a series of blog posts over the next week or so. My interests are mainly the economy and skills themes.

We are not a world class digital nation – nowhere close

The current digital strategy for Scotland was published in 2011. It outlined the steps to be taken to “ensure that Scotland was well positioned to take full advantage of all the economic, social and environmental opportunities offered by the digital age”. The underlying vision was for Scotland to become a world-class digital nation by 2020.

The starting point in updating the national digital strategy should be an honest assessment of where we are, the progress made since 2011 benchmarked against leading digital nations – our digital strengths, weaknesses, opportunities and threats.

This is standard business strategy textbook stuff. I see no evidence of such foundation work being undertaken in the context of the updated digital strategy.

The ‘ideas’ web site calling for contributions to the debate states:

‘While the high-level aims of the (2011) strategy are still relevant today, the vast majority of the actions it describes have been delivered over the past five years’.

Where is the evidence to support this sweeping statement? I disagree that the vast majority of actions have been delivered.

Taking just one example, the 2011 strategy had a stated objective that:

‘Scotland’s enterprise agencies will play a critical role in helping us to deliver a world leading digital economy’.

In what way have we become a world leading digital economy? Are we really claiming that this key action has been successfully delivered when the Government’s own statistics show that only 3% of Scottish companies can be described as being ‘Digital Champions’? (Source: Digital Economy Business Survey 2014, Scottish Government).

Yes progress has been made over the last five years and there are exemplars of best digital practice in Scotland. However, we are nowhere close to being a world class digital economy. Despite two decades of digital business support being available to companies in Scotland through the enterprise network, only 3% are championing digital. Why? What are the barriers? What implications does this raise for future SME support policy in this area? More of the same?

An honest assessment of Scotland benchmarked against leading digital nations is also required.

For example, as Scotland procrastinates in developing a digital strategy ‘fit for purpose’ in an era of turbulent digital change, the UAE has just announced a target of becoming a world leader in Fourth Industrial Revolution technologies, building on previous government initiatives promoting other disruptive technologies such as the blockchain, smart transportation, 3D printing, and artificial intelligence.

Dubai, in particular, is rapidly emerging as a world class digital nation. Key milestones over the last five years have included:

  • 2011 - introduction of e-payment cards for government services
  • 2011 - e-voting introduced
  • 2013 - all government services to be available through mobile devices and apps
  • 2013 - Smart Government launched – aim to become the world’s smartest city
  • 2014 - Happiness Index launched to measure the happiness and satisfaction of the public with digital public services – aim to be the world’s happiest city
  • Feb 2016 - 1,000 new digital initiatives launched to embrace the Internet of Things
  • May 2016 - world’s first 3D printed office block opened - vision of being a world leader in 3D printing technology
  • April 2016 - 25% of all transportation in Dubai to be smart and driverless by 2030
  • October 2016 - Dubai mandates Blockchain only Government documents by 2020
  • May 2016 - Dubai government services score 89% on the Happiness Index
  • Nov 2016 – become a world leader in Industry 4.0

Will our updated national digital strategy follow the lead set by Dubai? Will it have agreed KPIs and targets covering the latest technologies critical to the successful digital transformation of our eceonomy – IoT, automation, additive manufacturing, the Blockchain, Internet 4.0 and so on? While many 'talk the talk' in terms of being world class digital, Dubai and the UAE appear to be 'walking the walk'.

Other evidence exists to support the view that the UK/Scotland is falling behind in the global digital race.

As we plan Scotland’s digital strategy for 2017 and beyond, we really do need to cut the spin. Stop pretending that we are a leading digital nation. That does no-one any favours.

Research Urgently Required

In addition to the above, there needs to be a realistic assessment of where Scotland is positioned in relation to the rapid pace of digital change currently taking place. A realistic assessment based on sound research.

We live in an era of Digital Darwinism. Digital is NOT a sector. It will disrupt every industry in Scotland. The changes we have seen over the last twenty years are nothing compared to what is coming. No industry, no organisation, no individual will be immune from the threat of being disrupted.

As a nation, are we sleep walking into an on-coming digital tsunami?

While we see frequent forecasts and reports covering the potential economic impact of Scottish independence, the impact of Brexit, the impact of Trump’s election in the US, where is the research looking at the potential impact of digital disruption on the Scottish economy?

With some academic studies suggesting that 40 percent of jobs could be lost over the next decade or so as a result of automation, where is the research concerning the potential impact of digital disruption on Scottish labour markets, skills and employment?

How will the Scottish economy and Scottish jobs be affected by the following?

Broadband + Mobile Connectivity + Social Media + Enterprise Social + The Cloud + Big Data + Predictive Analytics + Algorithms + Internet of Things+ Artificial Intelligence + Robots + Automation + Cognitive Computing + 3D Printing (Additive Manufacturing) + Wearables + Autonomous Vehicles + Drones + The Blockchain + Generation C = The End of Business as Usual

The short answer is we don’t know. Research is urgently required in this area to ensure that the updated digital strategy is built on a foundation of rock not sand.

As always, comments and feedback are very welcome.

More to follow……..

Jim H

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While it is understandable that discussions about Brexit will dominate the political and economic agenda in the UK for the foreseeable future, we need to ensure that other equally important issues are not relegated to side show status.

The most important of these 'other issues' is digital disruption. 

The potential negative impact of Brexit on the UK and Scottish economies will pale into insignificance if we do not rise to the challenge presented by disruptive digital change.

Digital Disruption

As argued strongly in our end of 2015 FSB Report - Digital Disruption and Small Businesses - the changes brought about by the Internet over the last twenty years are nothing compared to what is coming over the next few years. No industry, no organisation is immune from the threat of being disrupted. With 40 per cent of jobs under threat from automation, no individual is immune.

Many businesses, across a broad spectrum of sectors, could be displaced by digital disruption over the next five years. Transforming digitally, not Brexit, is the number one survival challenge facing UK business today. Digitally transforming our economy to enhance international competitiveness is the number one economic challenge. Staying relevant in a digital world is the main personal challenge we all face.

Collectively, we need to transform or become a nation of digital dinosaurs.

Falling Behind

Given the very strong link that exists between the innovative use of digital technology and national competitiveness, it would be economic suicide to allow digital to become a side show. It should be the main event, not Brexit. Across a wide range of digital maturity measures, the UK is already falling behind many of our overseas competitors.

Evidence for this comes from no less a source than the World Economic Forum’s Networked Readiness Index (NRI) which 'assesses the factors, policies and institutions that enable countries to fully leverage information and communication technologies (ICTs) for increased competitiveness and well-being; and the role of ICT in driving innovation'.

Key headline findings from the 2016 report in relation to the UK are as follows:

  • Worldwide there are seven countries leading the field in terms of ICT investment - Singapore, Finland, Sweden, the Netherlands, Norway, Switzerland and the United States. The seven are all 'enthusiastic adopters' currently deriving a wide ranging economic benefits from being digital.
  • Worryingly from a UK perspective, the report states clearly that the leading seven nations are in the strongest position to capitalise on the next wave of digital disruption. ‘The breakaway of these seven economies is significant for other nations given the role that networked readiness is likely to play as the world transitions to the Fourth Industrial Revolution’. Since publication of the report, it is interesting to note that the Netherlands has become the first country in the world to roll out a nationwide Internet of Things Network.
  • While the UK sits in 8th place, just behind the seven leaders, it is progressing at a slower rate than most leading countries, especially in terms of infrastructure and individual usage. With most other nations increasing their ‘capacity to innovate’, the UK may struggle to maintain a top ten position. There are seven countries with an NRI Score of 5.6/5.7 pushing the UK (5.7) for a top ten position - Canada, Korea, Germany, Hong Kong, Denmark, Luxembourg and Japan.
  • The report findings covering business use of the Internet and ICT are also very worrying from a UK perspective. Businesses in the UK occupy 1st and 2nd position worldwide in terms of their use of the Internet for B2C and B2B transactions (mainly ‘having a web site’). However, our overall ranking on the Business Usage Index is only 16; behind Switzerland, Sweden, Japan, United States, Finland, Germany, Netherlands, Israel, Denmark, Austria, Norway, Chinese Taipei, Korea Republic, Singapore and Luxembourg.
  • In terms of ‘firm level ICT adoption’ (the readiness of businesses to adopt new technology), the UK ranks in 14th position; 18th position in terms of the number of patent applications made per million of population; and in 10th position for ‘capacity to innovate’. For investment in ‘staff training’, the UK ranks as 21st in the world - a shocking indictment of our willingness to invest in training and people development.
  • Reinforcing the above, we are ranked in 24th position for ‘overall skills development’; 21st position for the ‘quality of our education system’; and in 46th position for the ‘quality of our math and science education’.

A World Class Digital Nation by 2020? I think not!

While the NRI Scores presented above relate to the UK as a whole, there is no reason for thinking that results for Scotland would be much different, if these were available. There is, of course, the added danger that discussions around Indy 2, as well as Brexit, could push digital much further down the political agenda. Does economic suicide await?

As normal, all comments and feedback are very welcome.

Jim H

Note: Now in its 16th year, the annual ranking of 139 world economies on their networked readiness is the result of a partnership among the World Economic Forum, INSEAD and Cornell University. Economies are measured on 53 indicators organised in 10 “pillars” such as infrastructure, political and regulatory environment. An economy’s performance in each of the 53 indicators is used to compute its standing in the Networked Readiness Index (NRI). Full details can be found here.

Details of our next Digital Leaders Masterclass in association with the University of Edinburgh Business School can be found here. You can register an interest in attending here.

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Five key propositions emerge from the growing volume of publications on digital disruption and digital transformation.

1. In an era of pervasive digital change, no industry, no organisation, no individual is immune from the threat of being disrupted. Our FSB Digital Disruption Report from December 2015 listed a broad range of sectors under threat. The question is no longer whether your industry will be affected.  The only pertinent questions to ask now are how severe will the impact be (‘bang’) and over what time scale will this take place (‘fuse’) - see our previous post Will Your Industry Be Disrupted, also the Deloitte report entitled Short Fuse: Big Bang.

2. Most organisations remain woefully ill-prepared for the coming digital tsunami. The pace of digital change is taking place at a much faster rate than our ability to adapt. Various reports have warned of a growing ‘strategic gap’ between the digital progress being made by most organisations and where they should be to remain competitive. The challenge is not just a technology one. A wide range of internal barriers need to be overcome before successful digital transformation can take place - especially organisational, people and cultural barriers.

3. There is a growing need for a new breed of senior executive - Digital Business Leaders. Senior executives who can combine high level business knowledge, experience and understanding with the ability to develop digital transformation strategies fully aligned with and supportive of agreed business goals and objectives. Executives with the personal skills and confidence to drive organisational change. Almost every report on digital disruption published over the last three years has pointed to the lack of digital leadership and skills being major barriers to change.

4. The days of the business leader who knows nothing about technology (often proudly claiming that they know nothing about it) are numbered. In an era of rapid digital change and digital disruption, how can anyone claim to be ‘leading’ without understanding how technology is impacting on their industry, their organisation? Is it time to call time on non-digital leaders unwilling to adapt.

5. The growing need for Digital Business Leaders raises important implications for our education, skills development and executive education systems. While there is a growing recognition of the need for digital transformation, current industry leaders (with a few exceptions) lack the digital knowledge, understanding and confidence to drive change. Younger managers (digital natives) may have the technology skills and confidence required but lack the high level strategic understanding of how to fully align digital technology to support core business goals. Technologists, CIOs and others may be very good at what they do but may lack the leadership skills to drive change.

The core challenge facing all of our organisations is this - how do we prepare future leaders for the twin demands of management and digital technology?

Does our management development and education system require a complete reboot?

As always, feedback and comments are very welcome.

Dr Jim Hamill

Full details of our next Digital Leaders Masterclass in association with the University of Edinburgh Business School can be found here. You can register an interest in attending here.

 

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Digital Disruption in the Auto Industry

According to a recent Harvard Business Review article, the global auto industry is facing a trio of disruptive technologies: electric batteries, autonomous vehicles, and the mobile phone.

While the first two of these have been seen as long-standing threats (Telsa), the mobile phone as the third disruptor?

According to the author, Joshua Gans, mobile phones present a disruptive threat to carmakers’ underlying business model of selling people cars. The mobile phone has enabled ride-sharing apps, such as Uber and Lyft, to match drivers to riders. If these apps continue to grow, then people could have less of a need to own their cars since they can hire them at will. This could potentially force carmakers into business-to-business sellers rather than business-to-consumer sellers. 

Ford provides a good example of how this could impact on underlying business models in the industry. It's spinoff company, Ford Smart Mobility LLC, is seen as a key development in Ford's evolution to be both a car company and a mobility company.

The company's vision is to be a leader in “connectivity, mobility, autonomous vehicles, the customer experience and data and analytics.”

Quite a step from selling any colour of car so long as its black.

You can access the full article here.

As always, comments and feedback are very welcome.

Jim H

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The Robots Are Coming … to Take Your Job

With some academic estimates suggesting that 47% of jobs could be at risk as a consequence of computerisation, the impact of digital disruption on global labour markets is rapidly becoming a major source of concern for many governments around the world, or more accurately, should be a source of concern.

It was with great interest, therefore, that I listened to a recent interview with Martin Ford, author of Rise of the Robots: Technology and the Threat of a Jobless Future, which appeared on the Knowledge@Wharton show on Wharton Business Radio.

Martin talked about how the robot revolution has affected businesses in a host of industries, what it means for jobs in the years ahead, and what other surprises might be on the horizon.

His core argument is that traditionally, robots have been based in factories, but over the next 10 to 20 years, automation in the form of robots, smart software and machine learning is going to invade most industries across the board. It’s going to start impacting jobs at all skill levels, not just low-wage jobs. Automation will begin to have a major impact on professional jobs too.

With few professions immune from the threat of being disrupted, including yours, it is well worth a listen.

An edited transcript of the conversation can be found here.

As always, comments and feedback are very welcome.

Jim H

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Last week we delivered the Closing Address at the Digital Transformation 2016 Conference held in Edinburgh and attended by over 200 participants. 

The theme of our presentation was digital disruption and whether Scottish business and the Scottish economy in general were ready for the coming digital tsunami.

Our main conclusion was that with fewer than 3 per cent of Scottish companies being 'digital champions', according to the Scottish Government's own research (see our FSB Digital Disruption Report), the  stated policy objective of becoming a World Class Digital nation by 2020 was already out of reach. Digital change is taking place at a more rapid pace than our ability to adapt.  

A new study recently released by the European Commission lends further credibility to our own research. The study concludes that the UK has fallen behind other countries in Europe in areas such as connectivity, digital skills and the integration of digital technology,

The 2016 Digital Economy and Society Index (DESI) measures the digital progress being made by EU countries in key areas such as affordable broadband, business integration, cloud services and so on.

While the UK score remains above the EU average, it is growing more slowly than the average. Denmark, the Netherlands, Sweden and Finland are leading the way, while Estonia, Germany, the Netherlands, Malta, Austria and Portugal are the fastest growing.

Speaking about the report, Alex Smith-Bingham, head of digital at Capgemini, states:

"Whilst it's encouraging to see that the 2016 DESI shows some improvement in the digital transformation in Europe, it is worrying that progress is slowing. This is especially true in the UK where we are categorised as 'lagging behind'. That is, still above the average in Europe, but growing more slowly than the rest of the EU."

Compared to the rest of the world, European countries lead in business adoption of digital technologies, while Denmark, Finland and Norway are world leaders for digital public services. In terms of connectivity, however, Europe is beaten by South Korea and Japan..

You can read the full article here.

Jim H

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A new report from McKinsey & Co examines disruptive trends transforming the global automobile industry. It concludes that disruptive technologies, together with emerging markets and changing consumer preferences around ownership, will revolutionize how industry players respond to changing consumer behavior, develop partnerships and drive digital business transformation. Digitization, increasing automation and new business models have already revolutionized many other industries; automotive will be no exception.

The four main disruptive technology-driven trends affecting the sector are:

  • Diverse mobility
  • Autonomous driving
  • Electrification
  • Connectivity

A combination of these trends leads to eight main predictions being made:

  1. Driven by shared mobility, connectivity services and feature upgrades, new business models could expand automotive revenue pools by about 30 percent, adding up to $1.5 trillion.
  2. Despite a shift toward shared mobility, vehicle unit sales will continue to grow, but likely at a lower rate of about 2 percent per year.
  3. Consumer mobility behavior is changing, leading to up to one out of ten cars sold in 2030 potentially being a shared vehicle and the subsequent rise of a market for fit-for-purpose mobility solutions.
  4. City type will replace country or region as the most relevant segmentation dimension that determines mobility behavior and, thus, the speed and scope of the automotive revolution.
  5. Once technological and regulatory issues have been resolved, up to 15 percent of new cars sold in 2030 could be fully autonomous.
  6. Electrified vehicles are becoming viable and competitive; however, the speed of their adoption will vary strongly at the local level.
  7. Within a more complex and diversified mobility-industry landscape, incumbent players will be forced to compete simultaneously on multiple fronts and cooperate with competitors.
  8. New market entrants are expected to target initially only specific, economically attractive segments and activities along the value chain before potentially exploring further fields.

Automotive incumbents cannot predict the future of the industry with certainty. They can, however, make strategic moves now to shape the industry’s evolution. To get ahead of the inevitable disruption, incumbent players need a four-pronged strategic approach:

  • Prepare for uncertainty
  • Leverage partnerships
  • Drive transformational change
  • Reshape the value proposition

A detailed summary of the report can be found here. You can also download the full report from the same link. 

Automotive revolution - perspective towards 2030: How the convergence of disruptive technology-driven trends could transform the auto industry (PDF–2.4MB).

Jim H

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According to a recent survey by Fujitsu, European business leaders view digital transformation as being critical to their future success. However, most companies lack a clear strategy for 'getting there'. The majority still see the digitalization process as a gamble.

The research concludes that most executives agree that failing to digitalize fast enough will result in a loss of productivity, reduced business responsiveness to rapidly changing markets and problems with customer retention and loyalty.

While there is agreement that digital transformation will have a major top line impact in terms of how organizations create value for their customers, a huge disconnect exists in terms of strategic priorities for digital projects.

  • Only one in three respondents agreed that digital priorities are fully aligned within their organization.
  • Many business leader think digitalization is a job best left to the IT department.
  • One in three executives think they are already over-spending on digital projects.
  • Only 25 per cent feel “extremely confident” in advising on the right choices.

The Fujitsu survey supports the main findings of other recent studies in this area and shows that Digital Business Leaders Are Even More Urgently Required.

Read the full article here.

Take care.

Jim H

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According to new research from the Global Center for Digital Business Transformation (DBT Center), a joint initiative of the Institute for Management Development (IMD) and Cisco, 47 percent of retail executives believe that disruption could put them out of business. In spite of this, only 24 percent have a plan for digital transformation.

The report entitled, A Roadmap to Digital Value in the Retail Industry concludes that retail is now close to the centre of the Digital Vortex - being one of the three industries most vulnerable to digital disruption. The Digital Vortex is defined as the movement of industries toward a digital center, a place where business models, offerings, and value chains are digitized to maximum levels - see previous blog post on the Digital Vortex here.

Key Highlights from the report are as follows:

  • Retail nears the center of the Digital VortexRetail is one of the three industries most vulnerable to digital disruption.
  • Close to half of retailers are at riskForty-seven percent of retail leaders believe that digital disruption is a high-risk proposition. According to the DBT Center research, four of today's top 10 retail firms will be displaced over the next five years.
  • Leadership is not proactively addressing riskAlmost half of retail executives surveyed do not acknowledge the risk of digital disruption - or have not addressed it sufficiently. Only 24 percent have a plan and are willing to disrupt themselves in order to compete.
  • New retailers will emerge. Retailers believe that newcomers, or start-ups, will likely be the biggest source of digital disruption. Nearly 38 percent believe these start-ups will come from inside the industry.

 As always, comment and feedback are very welcome.

Jim H

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Digital Disruption: Are We Ready?

Scottish business remains woefully unprepared for the oncoming digital onslaught. To leverage the full potential of new technology and reduce the threat of becoming a nation of digital dinosaurs, a new breed of senior executive is urgently required - Digital Business Leaders.

These are two of the main conclusions emerging from our recent ‘Digital Disruption Report’ prepared on behalf of the Federation of Small Business in Scotland. The report raises important implications for Scottish companies, policy makers and the business support network.

Digital Disruption and Scottish Business

The core premise of the report is that we have entered a new and even more revolutionary phase in the development of digital technology; a period characterised by turbulent digital change and digital disruption. Across a wide range of industries, digital technology is threatening to disrupt existing value chains, business models and traditional ways of doing things.

A non-exhaustive list of twenty examples of digital disruption is presented. These include well publicised cases such as Airbnb and Uber. Less well-known, but equally important, examples across a broad range of sectors would include Agriculture (Big Data); Accountancy (Cloud Services); Construction and Building Services (3D Printing); Business Finance (Crowdfunding); Healthcare (Wearable Technology); Distribution (Drones and Autonomous Vehicles); Fast Food (Automation); Higher Education (MOOCs – Massively Open Online Courses); Retailing (Showrooming); and Additive Manufacturing.

No industry, no company in Scotland should consider itself immune from the threat of being disrupted. The innovations witnessed since the advent of the Internet twenty years ago are nothing compared to what is coming over the next few years. We ain’t seen nothin’ yet.

The prime cause of disruption is the rapid convergence of closely related disruptive technologies including ubiquitous broadband and mobile connectivity, social media, enterprise social, the Cloud, Big Data, Internet of Things, wearables, intelligent machines, automation and the rise of Gen C - a generation of constantly connected customers and constantly connected employees.

As a consequence, Scottish companies now operate in a digital business environment completely different from even a few years ago. Are we well positioned to maximise the opportunities presented by new technology for driving future growth and competitiveness? Unfortunately, the evidence would suggest not.

While there is growing recognition of the need for our businesses to transform digitally, a major ‘strategic gap’ exists between the current use of digital technology by Scottish companies and the dynamic pace of digital change taking place, between where we are and where we need to be. Digital led change is taking place at a much faster rate than the ability of Scottish business to adapt.

We need look no further than the Government’s own statistics to support the view that the majority of businesses in Scotland remain woefully unprepared for the coming digital onslaught. Based on a representative sample of 4,002 companies, the Digital Economy Business Survey published in March of last year provides the most recent and comprehensive evaluation of the digital progress being made by Scottish business. The report concludes that only 3 per cent of surveyed companies could be described as ‘Digital Champions’ with only 0.2 per cent being ‘Digital Pioneers’. By contrast, a full 81 per cent were classified as ‘Disconnected Doubters’ (13%), ‘Basic Browsers’ (38%) or ‘Tentative Techies’ (30%).

These are very worrying statistics especially given the fact that digital business support to companies in Scotland has been available for almost two decades.

In an era where digital business transformation has become critical, the lack of digital progress being made by the majority of companies in Scotland represents a major threat to the future competitiveness of the Scottish economy.

Adapt or Die

Given the potential impact of digital disruption on employment, growth and national competitiveness, it is essential that Scottish companies make digital a top priority NOW. Developing an appropriate response to digital change is the number one challenge facing Scottish business today. Nothing else comes close. It is no longer acceptable for digital to be seen as a peripheral activity or ‘not relevant to us.’

To remain competitive Scottish business needs to transform digitally, embedding digital at the core of everything they do. This will require the development of digital capabilities in at least three main areas:

  • External: the use of digital to support customer engagement, to deliver exceptional customer experiences and to maximise the efficiency and effectiveness of the sales and marketing effort.
  • Internal: digital applied to internal processes, to build agile, fast moving, flexible organisations capable of adapting to a world of rapid change.
  • Strategy: the development of new business models supported by digital technology.

With a recent report suggesting that four out of ten industry incumbents, across a broad spectrum of sectors, will be displaced by digital disruption over the next five years, Scottish business faces a stark choice – ‘adapt or die’. There are already many examples of companies who have become, or are in the process of becoming, digital dinosaurs due to their inability to adapt.

To support digital business transformation, we urgently require a new breed of senior executive – Digital Business Leaders: leaders who combine high level business knowledge, experience and understanding with the ability to develop digital transformation strategies fully aligned with and supportive of agreed business goals and objectives. Leaders with the confidence and personal skills to drive organisational digital led change. Such leaders remain in very short supply.

Public Policy Implications

While the ultimate responsibility for moving to a much higher level of digital maturity lies with business owners and senior executives themselves, digital disruption also raises important public policy issues.

In June of last year, an ‘Open Letter on the Digital Economy’ from a group of leading US technologists, economists and investors was published on the MIT Technology Review website. The letter called for radical changes in US public policy in a wide range of areas critical to digital success including education, infrastructure, entrepreneurship, trade and immigration. It also called for more research to be undertaken into the impact of digital disruption on the US economy and US businesses.

The ‘Open Letter’ could act as a blueprint for something similar in Scotland.

Digital is already a ‘top agenda’ issue for the Scottish Government with the stated objective of becoming a ‘World Class’ digital nation by 2020. The fact that digital change is taking place at a much faster rate than the ability of our companies to adapt makes it unlikely that this objective will be achieved at least in the business world.

Digital Business Support

The business support network too has a critical role to play, ensuring that the level and type of support available to businesses is ‘fit for purpose’ in an era characterised by turbulent digital change and digital disruption.

There needs to be a much stronger emphasis on creating more Digital Leaders to drive change. All network business advisers in Scotland need to become ‘digital’.

In terms of globalisation, the encouragement of SME exporting has been a major policy objective in Scotland for at least four decades. Much of the export support and advice available to SMEs, however, is stuck in a pre-digital time warp. We urgently require a ‘Digital Supported Export Programme’ to ensure that Scottish companies with export potential begin to leverage the full potential of digital technologies for overcoming barriers to international trade, leading to more rapid globalisation.

With some estimates suggesting that over 40 per cent of jobs could be replaced by digital technology over the next two decades, the time for action is now.

‘Digital Disruption and Small Business in Scotland: A Report for FSB Scotland’ is available here.

As always, comments and feedback on this post are very welcome.

Take care.

Jim H

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