This Time IS Different: The Seven Digitalist Principles

If you are reading this, then you are likely a digitalist. Welcome. Together, we have a front-row seat for the emergence of the digital economy – the rewiring of the social, economic, physical, and spiritual networks that unite the globe. Digitalists are the people with the leadership responsibility to guide our organizations through this change. […]

Jeff WoodsIf you are reading this, then you are likely a digitalist. Welcome. Together, we have a front-row seat for the emergence of the digital economy – the rewiring of the social, economic, physical, and spiritual networks that unite the globe. Digitalists are the people with the leadership responsibility to guide our organizations through this change. This magazine is a guide to help digitalists drive this transformation.

My Digital Economy Moment

The Premiere Issue of Digitalist Magazine
The Premiere Issue of Digitalist Magazine

Every digitalist has a moment when they realize how big this opportunity is and how vital it will be in improving lives around the world. It wasn’t a transaction on Uber or Airbnb or Instacart that made me realize the scope of this change.

My digitalist moment was on a rustic, secluded surfer beach in Uruguay, surrounded by friends, last New Year’s Eve. Despite the seeming seclusion, we were more vividly connected with friends all over the world than ever.  No one had a traditional camera, yet we digitally captured each moment in a way previously unimaginable. One person captured our entire trip on iPhone video and edited it – on the phone itself as we went along – into a professional production better than any state-of-the-art editing suite could accomplish two years before. We interacted with friends around the world throughout the night: a digital, global experience creating a community of separate but shared experiences from this lonely beach. This was something different than you could have ever imagined when you saw the first grainy webcam videos being broadcast over the World Wide Web 25 years ago. Maybe it was the champagne, or maybe it was the company, but consider it my breakthrough moment that launched this publication and our focus on what this digital economy means for leaders.

This magazine is for people who understand the power of the digital economy and who have the enormous responsibility of leading our enterprises through this digital change. More importantly, it will bring our networks together to change the world for the better.

Captivating Customers in a Digital World

Being a digitalist is not just about solving a problem with technology that 1.5 billion of us already use. It’s about creating entirely new customer experiences. These experiences are resonating with customers: the winners in the digital economy will be digital native companies, nonprofits, and governments that create these new experiences and capitalize on what we estimate to be a US$90 trillion global opportunity.

Digitalists must change their companies before it is too late. Cisco’s John Chambers makes people sweat, with his estimates that this force will extinguish 40% of global companies, while only 30% of companies will achieve a successful digital transformation. A combination of upstarts and industry turbulence will mark this era. This magazine will unpack the digital world so that you understand what it takes to be a digital leader.

Three things will define the experiences that motivate customers to adopt your digital experience. Let’s take a lesson from Uber. When it started, it positioned itself as a luxury service. Traditionally, most luxury brands differentiate themselves with end-to-end, personalized, concierge services supported by human interaction and proactive intervention. But Uber used digital technology to go in the opposite direction – personalization through digital interactions. There wasn’t a human at the other end of the service. Uber broke the mold as a luxury service that completely eliminated much of the traditional human concierge-level care. It transformed the service in three important ways:

Seamless Experiences. Most important to the digital Uber experience is that it is an end-to-end seamless process, natively built for a digital platform. There are no gaps or manual process steps. Automation IS the innovation here.

Connected Experiences. Everyone in the Uber value chain is connected to a common platform. Sensor technology gives consumers information on the wait time and whether there are cars nearby. From the initial request to the arrival of the ride and payment, customers are immediately and consistently connected to the transparency the Uber platform offers.

Data-Driven Experiences. Customers want what they want, when they want it. And usually, they want it now. Through machine learning, riders and drivers can access the information they need at that moment. The technology does not consider what’s happening next week, tomorrow, or even two hours from now. Rather, it provides insight into the moment – where the next Uber car can be found that second – or, in the driver’s case, whether the next pickup is just around the corner.

Digitalists have the responsibility to help their enterprises position themselves around the digital experiences that meet these three requirements. The way to do this is by understanding what’s different and how to master the principles of the digital economy.

The Seven Principles to Master the Digital Economy

Each of these seven principles shows what’s new about the digital economy and shows the ways your business strategy must change to ensure a sustainable digital strategy. These are the defining principles of the digital economy – and they are the guiding principles of this magazine.

  1. Validate Digital Ideas with Lean Startup Methodology

Bill Gross of Idealab stated at a recent TED Talk that the deciding factor of a great new company is timing. For example, people were right to be skeptical of whether the Internet economy would fully deliver when Boo.com spent over US$100 million and then flopped, largely because of timing (fashion came just a bit later in e-commerce). But iterative development, cloud computing, and app stores have streamlined the process of determining if this great idea is “prime time” or not.

There will still be bubbles and crashes in market valuations of companies around the Digital Economy. The difference is that the long-term trajectory is real and overshadows short-term crashes.

The emergence of lean startup models—both in true startups and in enterprise new ventures—enables concepts to be tested for less than $100,000. 3D printing enables companies to establish consumer acceptance of a physical product for $15,000. New iterations of a business model can be constantly tested and adjusted without massive disruption.

The other side is a proliferation of ideas being tried. If you thought there were a lot of Internet companies, just wait for the number of digital startups because it is so cheap to do it. There will be a multitude, but they won’t all be successful.

Finally, the lower barrier to entry, coupled with social collaboration technology, enables the Digital Economy to harness the intellectual capability of the world, not just of Silicon Valley. That is why, in this magazine, we are showing you what’s happening digitally around the world, not just in Silicon Valley.

  1. Network Software + Sensors to Eat The World

Marc Andreessen, the entrepreneur, investor, and cofounder of Netscape, was right, but we’ve learned a couple of things since his 2011 proclamation that software is eating the world. Software IS eating the world, and so are sensors—but only when they are all networked together.

Until recently, most software and sensors were cut off from the Internet, on proprietary protocols, limiting the impact of the Internet. The substantial decrease in the cost of IP connectivity has brought sensors and software onto the general Internet. Deep Internet connectivity is the key to unlocking the business value in expanding the digital opportunity.

  1. Design Experiences That People Can Live In

With the Internet, you went to the computer. The subtitle of Howard Rheingold’s foundational book, The Virtual Community, is Homesteading on the Electronic Frontier. The title is fitting as it juxtaposes the computer as a frontier with the “in the home” element that the computer represented at the time. It occupied a discrete part of your life—you controlled when it could intrude. Today, 68% of people literally sleep with their phones or tablets. Amazon Echo is always on with you.

This immersion creates the immediate and vivid experiences that are essential to the Digital Economy. If your experiences don’t take advantage of this immersive experience, you’re missing the point. The opportunity to create value through digital experiences is limitless compared to experiences through the computer that occupy only part of the day.

  1. Embrace Third-Generation IT to Overcome Digital Corporate Complacency

Gartner has identified that we are beginning the third generation of IT. In the first generation (until the 1990s), IT was a foreign occupier in the corporate world, overseen by the priests of IT, whose language was indecipherable to the uninitiated. The business was seen as an annoyance to the IT folks, who delivered projects largely over budget and on whatever time frame suited them. It worked because of the dramatic business benefits that IT investments generated, and there wasn’t really an alternative.

This all changed as Y2K ushered in the second generation of IT. In the Y2K moment, businesses realized the existential threat that unmanaged IT posed to the business. At the same time, in the early part of the 2000s, the global economy entered a slump that decreased the strategic role of technology to enterprises. As a result, most businesses responded by locking down systems, reducing costs, and putting in place risk-averse IT managers who delivered less true innovation, but who managed to bring enterprise IT spending and timetables under control to deliver clear, but less impressive, business value. This era also coincided with the absorption of Internet technologies into corporate IT environments, which muted the impact of Internet technologies on business
strategies.

The Digital Economy represents the third generation of IT. Today, the first cohorts of digital natives are entering senior management and executive positions. Fewer executives are “not tech savvy” and most are taking a hands-on approach to the way IT and business can collaborate. For leaders, the business-IT duality has been broken, and leaders in the Digital Economy will be created by fully integrating business and IT into cross-functional delivery of digital products and services. Executives now understand that all products and services will be delivered or enhanced with integral digital experiences. Lean, iterative approaches make innovation more palatable to large enterprises because they don’t require the big-bet investments that Internet-era innovations entailed. As a result, enterprises are not waiting for startups to threaten their competitive position before making digital innovation happen. We show in this magazine that executives see the primary digital threat as coming from incumbents, not startups. If your enterprise is still clinging to secondgeneration IT models, you’re not prepared for the Digital Economy.

  1. Focus on Exponential Technologies to Create Digital Experiences

Steve Jobs once noted that it is important to “choose which horses to ride very carefully,” that you must choose to ride technologies that are in their spring rather than their fall. We don’t have unlimited resources in our companies, and we must be pragmatic about finding which technologies to look to for the next digital experience.

Peter Diamandis, in his book Bold, gives you a road map to the exponential technologies that are growing so rapidly that their use is going from lab to democratic mass-market use: 3D printing, sensor networks, infinite computing, artificial intelligence, robotics, and synthetic biology. We will cover this road map of topics because these are the technologies that are disruptive enough to shape the digital world.

  1. Overlay Data on Every Process to Power Digital Experiences

Information exists to power new experiences. One of the first large-scale digital experiences powered by information was Google Maps, which dedicated itself to digitizing everything about geography to change the way we investigate space. Google Street View takes it further with the hyperaccurate mapping that drives Google’s driverless cars. It wasn’t necessarily a breakthrough in image recognition or artificial intelligence that powers the cars. Instead, it was the development of hyperaccurate mapping that enabled Google to step over the complexities of conventional approaches to autonomous vehicles. The vehicle uses the maps to drive and detects differences in the environment to determine how to alter course from the expected position if needed.

In another famous Google example, Google Translate wasn’t enabled by a breakthrough in speech-processing capabilities. Instead, the breakthrough was the publication of the UN document archive, which contained mountains of simultaneously translated documents. Google didn’t use a lot of new translation techniques, it just released machine learning on this treasure trove of documents to kick-start the translation product.

Finding ways to use existing digital data as well as clever ways to digitize new data is a key facet of digital business models.

  1. Accelerate Your Digital Transformation by Creating a Learning Organization

Joe Stiglitz and Bruce Greenwald, in their most recent book Creating a Learning Society, point out that for most of human history, living standards increased only gradually until the 1800s. They attribute the dramatic rise in living standards since then to learning. Andrew McAfee and Capgemini Consulting point out that not only is this phenomenon increasing, but digital leaders that learn to use technology more quickly are outperforming their peers by 9% on revenue generation, 26% on profitability, and 12% on market cap. Deloitte finds that companies with engaged employees are 56% more likely to get to market first.

One indefatigable genius with a great idea will, no doubt, define many advances in the Digital Economy. But even Elon Musk, the CEO of Tesla Motors, needs a team around him that can learn at breakneck speed. R&D labs across the corporate world are filled with incredible ideas without routes to market. This is why we put learning as the final, and potentially most important, issue.

As an incumbent, you must move your organization forward without fatally disrupting existing businesses. This artful dance is the most complex issue that enterprises face, even when they have the best ideas in the Digital Economy.

Successfully navigating the digital economy will require mastering these seven principles of the new economy. It’s the difference between being among the 40% that disappear or among the 30% that rule the new economy. Just creating a cool interface won’t work if it doesn’t inspire people to “live in” your digital experience. Trying to live in a world of gated, major releases of your digital experience won’t work – you must continually innovate.

This is all moving fast. You need to see the trends when they first form. Later is too late. That’s what we’re doing with this magazine – surfing the front-edge, under-the-radar trends in the front of the magazine. Then, in the back half of the magazine, we show you the technologies and ideas that you can profit from as they move from emerging to mainstream.

The trick to the digital economy is mastering all the principles. We use these rules to guide our content, breaking down trends and technologies to help you understand how to use them to rebuild your business for the digital future. Ultimately, the digital impact is too great to be just about downloading our favorite movie or a clip from yesterday’s game. It means bringing people together to make meaningful progress in addressing the vexing issues of humanity. We take this journey together, with the world, to make the world run better and to improve people’s lives.

jeff woods

 

 

 

Editorial Director
Jeff Woods

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Executive Quarterly, Q3 2015