Sometimes I think Clayton Christensen’s great work on disruptive innovation has become almost too successful. In recent years, protagonists inside companies, urging digital change, have come to rely on it too much. “If you don’t act, you will be disrupted!” they say. “Remember Kodak!”  “Don’t get Ubered!”. I have used these arguments myself many times. They do resonate and they have moved boards of directors and individual CEOs to action. But sometimes that kind of messaging can backfire.

Today, many business leaders are confident of their ability to spot a digital threat a mile off. They have changed. They have now done their due diligence. They have investigated possible future business models. They have assessed and countered price comparison engines and other attempts to ‘re-intermediate’ their markets online. In many cases they have not yet have fully understood the way digital business could reinvent their products, but quite rightly, if someone comes into the room repeating old e-business style disruption risk messages, they roll their eyes.  More disruption messaging can start to sound like an artificial attempt to create a “burning platform” story, in order to sell a self-serving vanity project. If the recipient of your message sees things that way, it could backfire. You might undermine your authority and set back your company’s digital business strategy.

So if you believe there is a compelling new digital business vision for your industry – what should you do?  Well, perhaps it’s better to try selling the positive, rather than scaring with the negative. Right now we are coming towards the end of a business cycle. Growth is getting harder to find. Global M&A activity has reached its highest level ever – a sure sign that CEOs are hunting peer companies for growth, because they struggle to see opportunities to generate growth organically. If we want to grow existing markets, we need more customer demand. Innovation is always the spur for that. In our book Digital to the Core – we argue there is in fact a huge new opportunity in digitalising products themselves. Things like self driving cars, digital cigarettes, 3D printed mechanical parts and sensor enabled clothes will cause the next big wave of new value creation that customers will crave. And that is the alternative story to disruption fear – digital product greed. However the opportunities to digitally remaster products may not be evenly spread and not everyone in a market can win.

Digital products connect to clouds. Clouds provide services and those services form in platforms. The problem is, customers tend to want only a few strong integrated and standard platforms. Think about the market evolution of digital music and movie download, ebooks, search and social media. The number of platforms tends to reduce quickly to just 2 or 3.  So those companies that move early can either define a platform, or negotiate good terms with those who do.  There is a sense of “winners take all” with digital business, or at least that the early movers get the lions share of the spoils.  That’s a good way to create a sense of urgency when motivating change. The returns from digital business could be very valuable- but only if you move quickly.  There is some fear in that message – like there is from disruption. But in this case – it is called the fear of missing out. FOMO.

“Lone Penguin”. Christopher Michael. CC 2.0 via Wikimedia.

FOMO is a real motivator for the true entrepreneur.  CEOs in particular, kick themselves when they see others take opportunities and make money from situations that they could have or should have spotted themselves.  So rather than repetitively talking about the dark fear of digital disruption loss – wouldn’t it be better to sell the time-limited opportunity of the digital business big win?

In our new book Digital to the Core, Graham Waller and I explore what digital business really is, how every industry will be digitally mastered and how you can lead that change in your own organisation.

In our book Digital to the Core, Graham and I identify three digital macro forces that are compelling businesses and whole industries to change. These technology related forces are powerful enough to be considered alongside others in business scenario and strategic planning – such as customer demographics and energy prices. The second of these forces is Compound Uncertainty.

Every industry will be digitally remastered as its products and services become more digital. For example cars are becoming more digital as they gain autonomous driving capabilities and some aspects of banking could be fundamentally redesigned around blockchain. For business strategists the key questions are: how will the big changes happen in an industry and when? It’s easy enough to accept that there might be a digital disruption within a decade or so, but to succeed in navigating that change you must know how and when to act. The problem is that digital business change usually creates lot of uncertainty – stemming from three sources.

1. The capabilities and price / performance of technology itself.
2. The rate at which regulators will adapt to the new product possibilities.
3. The timing of changes to the culture – of customers and wider society, that will enable the new product capabilities to flourish.

Let’s illustrate with a contemporary example that could have an impact on multiple industries such as logistics, retail, emergency services and aviation: autonomous flying drones. A few weeks ago, Graham and I ran a couple of webinars attended by around 200 people. We asked “Do you believe e-commerce delivery by aerial drone will be operating in major cities around the world by 2020?”.  70% said yes – but are they right and should their CEOs therefore be moving quickly and decisively on that assumption? Most of the people answering that online poll were male technology industry professionals. Few were city planners, package logistics company managers, aviation regulators or mothers of small children.

First there is the technology question. When will aerial drones be capable of flying with sufficient precision, range, speed and in a wide variety of weather and visibility conditions, highly reliably and at a cost that will justify their commercial use? There are battery issues, electronic component issues, highly complex autonomous software design problems and physical engineering challenges.  Amazon’s most recent drone design looks very different to its first – showing how fast this is all changing.

Second there is regulation. Different agencies will have a say. Of course the aviation authorities must decide about safe airspace use but what about city and local government – don’t they have rights too?  Each country will take a different approach and will evolve its rules at a different pace. Some might try to delay drones because of heightened security fears. Others might choose to accelerate regulation to attract investment in a new industry.

Third there is culture. A recent article reminds us, drones sound like bees. They are not silent. Do we want that as a constant background noise in our environment?  And though drones are being enabled with parachutes and other safety features – they cannot be entirely safe. Stories like this one, where a child lost an eye, could alarm people. Though you might like the idea of drone pizza delivery in principle – how happy would you be if the primary flight path of a local pizzeria, took most of its drones directly over your house at a height of just a couple of hundred feet?

We called our second force compound uncertainty because these elements of technology, regulation and culture tend to interact in ways that multiply the possible scenarios. For example the regulator might be more permissive if the emerging drone industry forms professional associations and standards bodies. Or our cultural objections might reduce when we see early examples of lives saved by drone based emergency blood-pack delivery. There might be complex trade-offs between noise reduction, height of flight-path and the distance that can be covered in a single battery charge. The list of interactions goes on.

In our book, we explain how leaders can think about these uncertainties and start to do better than their competitors at harnessing them to their own advantage. There is a triple tipping point to be found between the three sub-forces and the leader’s job is to judge or nudge it into place.

Issuing a vague call for more digital innovation without thinking how your people are likely to respond to it, could do more harm than good.

Listen above or read below, the same text.

Recently I was advising the COO of a major organisation, on innovation management. The organisation had tried a few times in the past, but the results were disappointing. This is common. Sustained innovation is hard to do in large enterprises. However, this time the executive sensed that the initiative really must succeed – or they might irrevocably lose a leadership opportunity to others.

We often meet CIOs who have been tasked by a CEO or COO (though rarely by a CFO) to “do more innovation.” In this era that request is usually associated with the keyword digital. Eager to please, and with a bias for action the CIO just gets something started in the hope that it will evolve and blossom. Initial results seem good but within a few months or a year it fizzles out. That happens simply because the business executive neglected to set course, speed and mission.

A new innovation management initiative will fail unless you can agree, and very simply articulate 3 things:

1) Why must we innovate?
2) Where must we innovate?
3) How much must we innovate?

If you can’t say why, in a very clear and repeatable way then your people will lack a foundation and clear motivation. People are always more thoughtful and committed if they understand why they are being asked to do something. In a business a generic answer might be “because the customer is never satisfied and needs more from us every year just to pay the same price.” This simple fact is obvious to your sales people, but may not be part of the everyday experience of people in support functions. In a cancer research non-profit, the reason for innovation might be obvious but in a government administration department it might not. In large operations – “if it ain’t broke don’t fix it” is often a tacit default behavior code – you have to give a reason to deviate from that.

The second key question is: where to innovate? It is very unlikely you need more innovation equally across all parts of the enterprise. However, without guidance a scattergun response is common. People come up with ideas all over the place, some are valuable, most are not and precious resources get squandered. Sometimes innovation is focused in the “usual places” but this time around, that might not be where it matters most. There is less point innovating in product, if regulatory compliance drag is your critical business strategy problem. Innovating more in customer service might be a waste if your fastest rising business problem is theft and fraud loss. Digital innovation can be relevant anywhere – internally or customer facing. You have to say where it should be most vigorously applied.

The third question is how much innovation you are seeking; breakthrough or incremental? Do you want ideas that could change your business model or only things that will lead to 5% improvements to existing business processes? Do you want to develop whole new services that exploit untapped digital business moments? Or do you just want to reduce shopping basket abandonment on your website? You need to set the right tone or your ideas inbox will be filled with offerings of every kind. Don’t think that you can afford to waste such energy and goodwill. If you ask for the wrong kind of thing and then do nothing with what you are offered, your people will quickly become cynical about contributing. Then you undermine the cultural capacity of the organisation to innovate. Repeat the same mistake a few times and the reputation of “innovation” itself will be tarnished.

Think hard about the 3 questions before starting out. They can be surprisingly difficult to answer clearly and concisely.  You might use a whole day of an executive team offsite to come to an agreement. Do not ask someone to lead an innovation initiative until you can boil down the answers to these questions, so they fit on a single sheet of paper.

Our view is that in the end, every industry will be digitally remastered as digital change penetrates right inside and becomes part of all products and services – not just the way they are marketed and sold. So in the end, you are likely to need a lot more digital business innovation than you might think. That’s the subject of our new book Digital to the Core, which we hope you will find helpful as a guide to the momentous changes ahead.

It is December 31st 2015 and like many people I am thinking about my New Year’s resolutions. Some people think that they are a waste of time – but resolutions seem to work well enough for Marc Zuckerberg’s self-improvement.

( Listen above or read below – the same text )

The natural boundary between two years and the refreshed post-holiday mindset provide a good opportunity to stand back, review and set out a new challenge. However, as the date change rapidly approaches, sometimes we fail to finally nail down and clearly articulate the one or two big ideas that will make a real difference.  So let me help by offering you a pre-crafted suggestion for a professional resolution:

      In 2016, take digital to the core

By ‘core’ – we mean, into the heart of your products and services. We mean, use the technologies of the internet era to reinvent what your organisation makes or serves.

Recently I met with some old friends and colleagues who have worked over the years on British Airways website. They reminded me that it was inaugurated on December 24 1995. The internet has been a fact of business life now for over 20 years! For much of that time we have applied what the internet can do, to the outside edges and the supporting capabilities of our enterprises. Digital marketing, e-commerce, e-procurement, dynamic supply chain management, portals and collaboration, media sites, investor sites.. all these things, including many now made mobile, have had a great effect. But they didn’t reinvent the core. That’s often the last and most important stage.

The banks went online, to provide you access to your account very early in the history of the internet. The difference today – is they are beginning to reinvent money and banking, through things like the R3 blockchain consortium. The car companies formed Covisint in 2000 as a B2B exchange for car manufacturing parts supply and services. The difference today, is that they are planning to reinvent personal transportation, with autonomous vehicles providing uber-like mobility-as-a-service.

When a fundamental enabling technology like the internet arrives, for the first decade or two society uses it to do the same things – but better and faster. Then, once we have truly understood its potential, we use that technology to reinvent what we do and how we live.  The first cars were called horseless carriages and they were designed like carriages.  The first TV programs were like radio but performed in front of a camera. Eventually, we learned how to use cars to redesign where and how we live, and TV to redesign how we educate ourselves about the world and even how we operate modern democracy.

We have now entered the reinvention phase of the internet. Every product and every service will be digitally ‘remastered’ – taking it to a completely new level of capability and performance. This is happening on your watch. It is something you have the opportunity to be a big part of. So don’t let 2016 be just another year of superficial digital wallpapering over the old cracked business model, products and services.  Resolve that this year, you will take digital to the core.

To help you lead your organisation though this next stage of profound digital change, we have written a book. Its packed full of early example cases from many different industries and countries. I hope it helps you on your journey.

Happy new Year!

Do you believe New Year’s resolutions are too old fashioned – too analogue – for the digital age? Marc Zuckerberg, the CEO of Facebook doesn’t think so. He sets himself a major new self-development challenge, outside of his mainstream job, every year. So should you. It’s too easy to fall into a rut of repetition, dusting off last year’s plan, updating the dates and project names and running it all over again. However, the world around us changes. So from time-to-time, most of us need to stand back and ask how we could improve ourselves and our organisations at a more fundamental level.

( Listen above or read below – the same text )

If you did not set any fresh work-related personal development challenges for 2016, or if those you tried are not working well – help is at hand. Every year for over a decade Gartner has published a set of contemporary ideas for New Year’s resolutions, based on our interactions with many hundreds of CIOs who are facing similar challenges and have uncovered interesting solutions.

The macro challenge of this era for CIOs, is how to move digital change forward in the enterprise and how to change the IT department’s role and capability in that regard. So our resolutions for 2016 center on the kind of leadership improvements you can make, to put you in a better position to drive that change more effectively. This year we organised the resolutions into three categories:

• Influence to the top and link through the core
• Acquire the resources needed to deepen digital business change
• Reshape your organization.

To make digital change more substantial in your enterprise, it is vital that your CEO, board and others understand the substantial business opportunities they may be missing and the risks of inaction. It’s easy to say that the CIO should be able to convince them, but not always simple in practice. One of our 2016 resolutions in this category is simply to start taking non-executive board directors out to breakfast. Should you seek permission before doing that? Not necessarily. Would dinner be an equally good choice – probably not.

To acquire the resources needed to deepen digital change, the business must often make an investment that is considerably beyond the scope of an incremental change to the IT budget. Some of the smartest large companies are already finding that selling assets from the ‘old model’ is a way to fund the development of the new digital model they will pursue. So one of our 2016 resolutions is to start making a private ‘sacrifice list’ of those things you would suggest they sell, if and when that conversation arises. A bold move? Perhaps – but being prepared for key breakthrough moments is the hallmark of great leadership.

To make your whole organisation more digital, requires the culture to change. That’s not easy but it is essential. If your people don’t truly ‘think digital’, they will do a couple of interesting projects and then fall back into the old ways and methods. So one of our 2016 resolutions in the third category of reshaping the organisation – is to write some digital behavior maxims and make them ‘wallpaper’. This means make them extremely visible on walls, screen savers and drinks coasters so they become part of the fabric of everyday discussion. We have seen it work at a major organisation.

Our CIO resolutions research is available to Gartner clients in a detailed advice  report. Whether you are a client or not – you can attend our free webinar about the resolutions, live Thursday 21 Jan (or afterwards; recorded). Co-author Patrick Meehan and I will go through all the 10 + 2 resolutions for 2016 live in an audio and slides presentation. We hope we can coach and inspire you to an even better personal performance in 2016. Join us won’t you?

P.S.  All business C-level leaders and senior managers should also consider our ‘macro’ resolution for 2016:  Take Digital to the Core.

Even if they have reasonably good strategies and an intent to commit investment, many medium and large conventional corporations in traditional industries still struggle to advance their digital business capabilities. Often the issue is about learning to take risks in a different way and shifting to a more exploratory culture. Traditional companies are organisational machines built and perfected for safely and reliably delivering modest growth and incremental innovation. The trouble is, that very strength is also what leaves them open to disruption. So the old dog really does need to learn new tricks. But how?

[ Listen to me here or continue reading below – the same text ]

One great way to do it, is to work with and learn from startups. It’s not just that the individual startups may have great ideas and create future options for your business. The act of working with and alongside them will brush off on your corporate culture. Senior and middle management who have been working in a steady-state, high-control, traditional corporate environment for decades, will have their eyes opened. From the zeal of a real mission, to minimum viable product, to design thinking … ideas and patterns of thought will brush off. That can be the catalyst needed to start changing your culture more deeply.

I recently had the privilege of seeing such a corporate awakening in action, when I was invited so speak at a ‘hackathon‘ for leaders of the Italian part of the very large and historic international insurance company Generali. The company chose to work with a major Italian incubator called H-farm, that at any one time is helping hundreds of startups, with some them growing to be substantial companies. It was very interesting to see first-hand, managers and leaders from corporate departments such as IT and HR, all wearing hoodies and working through right through the night on new ideas at the interface between insurance and the digital world.

H-Farm itself is an interesting incubator in the way it works regularly with larger corporations from Illy coffee to Whirlpool appliances. Apparently, Luxottica’s ongoing relationship with Google Glass, was forged at H-Farm. This impressive incubator is but one of the many members of the global accelerator network – an organisation that helps them collaborate and learn from each other. There are a great many incubators around the world now, many of them with over a decade of experience. There’s likely to be one in a city near you.  Helping them, by reaching out to collaborate on a corporate culture reboot exercise is likely to help both parties. What do you have to lose?  Nothing really – except some initial mild embarrassment at shedding your corporate blinders.. and spending a modest budget outlay you would have easily wasted on a conventional piece of dull consulting work that was destined for a dusty shelf anyway.

Working with startups is a great way to start changing your culture, to take Digital to the Core of your company. It’s the subject of our new book, that’s available from in all the usual formats and from all the usual outlets.

Recently, Graham Waller and I ran a couple of online Gartner webinars about digital business leadership. As usual for those sessions, we operated several live polls of the online audience, interspersed within the hour of presentation. The session attendees were a broad mix of senior managers, senior professionals and executives from technology and business roles across a wide range of industries and countries. One poll asked about access to digital talent. Here is the result:

About half the audiences for the two sessions voted and we have combined the very similar results. As you can see, just under half of those who voted, chose the options that said they were struggling or in crisis when trying to attract top digital talent. Another third said they were having only limited success. This is hardly surprising.

[Listen above or carry on reading below  – the same blog post ]

During the first decade of the century, most large corporations believed the “IT doesn’t matter” idea. Technology was a commodity to be outsourced and offshored – not a core competency. Big brand companies in many industries let it be known they didn’t want or need hot technologists inside their firms. Such messaging is sticky and cannot be undone overnight.  However In the post financial-crisis era, most business strategists have flipped away from the essence of the  “IT doesn’t matter” viewpoint. Now it feels like everyone craves talented digital and technology people. But of course there were few “academy firms” for a long period,  so polished and practiced senior talent is in short supply. Simply put –a generation of business leaders collectively failed to ‘manufacture’ the big digital talent pool they now want.

During that first decade of this century, computer science courses went out of fashion for a while. Young people preferred to chase marketing, law, finance and other degrees and careers. Who could blame them? Coding was being hived off to the lowest cost bidders in the cheapest global locations via outsourcers and online marketplaces. And entrepreneurial geeks were not cool back then. We sometimes conveniently forget the 10 year gap between the dot com crash and the 2010 theater release of “The Social Network” – the movie that turned millions of movie goers into digital startup admirers and wannabes.

So the digital talent shortage is partly a deep structural thing. Nowadays computer science course numbers are rising fast and colleges around the world are trying to add data science degrees to their curricula as quickly as possible. However the supply / demand correction will take several more years, especially because iconic big companies like GE, Ford and GM have been hiring so many tech people in recent years to rebuild internal technology competency centers. They have set up a trend that many more large and medium companies are likely to emulate – even if they do so in a diluted way.

So you will be competing for talent. There’s no way around that.  What can you do about it?  Throwing big salaries, palatial facilities, free food and Foosball tables at the problem might help – if you have that option, but many don’t.  Even if you do, it won’t be sufficient. True talent often works for the challenge, the mission, the buzz and the opportunity to shine and to grow. Talented people will come to you if you can show them those things, as a leader.

That’s where it becomes personal. As a leader, you have to display a more magnetic personality; one that has the drive to want to make a difference with digital. You have to paint visions that people can sign up to. You have to convince them you can blast obstacles out of their way. You have to make them believe that your dull old corporate brand has a new spring in its step and it really does believe disruption is on the horizon. You have to go public with that messaging – getting your face and your voice out there to be heard, like our friend Klas Bendrik, the CIO of Volvo cars who promotes his view in public online videos. If you can convince people that a ‘digital or die’ belief set is real in your executive leadership team – then you might attract some truly outstanding talent towards your company.

We call that behavior the ‘attractor’ persona. It’s one of six key digital leadership personas Graham and I identified in our book, Digital to the Core. We derived them by observing the leadership patterns that seem to be working and making a difference, within those more traditional industries and companies that are making real progress in their digital business transformations.

You can find out more about the six personas in our book, which is available in print, e-book and audio book formats. Or you might like to try our new online digital leadership personas self-test, It takes only a few minutes and will help you think about what you could do to up your game and take Digital to the Core.

I recently gave a talk about digital business to some country business unit managing directors and other senior executives of a large global group company. Afterwards, the legal officer remarked to me that he had understood the message. He must become a digital legal officer. I was heartened by that. It’s an example of a key moment of recognition. The scale of industry change that digital business brings, is so impactful – that every part of the way a company operates, must change. Everyone around the c-suite table must be engaged and involved. Digital business is not something that can be delegated or assigned to just one or two leaders.

[ Listen above or continue reading below – the same text ]

Recently, Graham Waller and I ran a couple of online Gartner webinars about digital business leadership. As usual for those sessions, we operated several live polls of the online audience, interspersed within the hour of presentation. The session attendees were a broad mix of senior managers, senior professionals and executives from technology and business roles across a wide range of industries and countries. One poll asked about the level of digital business engagement across the c-suite. Here is the result:

About half the audiences for the two sessions voted and we have combined the very similar results. As you can see, only a quarter are in the green segments where all, or most of the executive team is engaged. We think that’s a problem. But you might reasonably ask why should everyone be involved?
Let’s take a quick look at an industry that is undergoing deep digital business change: automotive. Most major car company CEOs are now fully aware that the mid to long term future of their industry involves self-driving vehicles combined with ride sharing services that will revolutionise the way people move. This change is now so deep and advanced that Mark Fields, a CEO who we interviewed for our book – has re-designated the core purpose of Ford to be a mass ‘smart mobility’ company.
In the amazing self-driving smart vehicle future not far ahead of us, ownership and payment models for cars will change, responsibility and legal liability for “driving” will change and intelligent software engineering will be a core competency. So if a car company’s legal people, finance people and automotive engineering people are not deeply and intimately involved in digital change – how can it happen? If you fear self-driving cars, the car company marketers will need to help you overcome your phobia. If the car company desperately needs scarce ‘Google class’ AI software talent, the creative and competitive competency of your HR team becomes essential. This critical involvement proceeds seat by seat around the entire c-suite table. In fact it might only take one absentee or avoider to delay the whole endeavour. And delay could mean real trouble. Which major car company would say it is happy to be 5th or 9th to market? Which car company thinks it could survive this structural transition, if was that late?
Oh dear…, you might be thinking. My company is a long way behind this kind of thinking. Most of my executive team still have little or no idea what will happen to our industry as its products and services become digitally remastered. They certainly don’t understand that they must be personally very involved. Perhaps they still believe the CMO ‘does’ digital. Or that it’s a techy thing the CIO alone can handle. What can you possibly do to fix this sleepy malaise? The answer is to become a true digital business leader – one who leads the other leaders.
To acheive that, you will need to examine your own personal leadership skills very carefully. You will need to amplify certain traits and behaviours in order to move the group forward. That’s what our webinar was about. Graham and I have identified six leadership ‘personas’ for digital business. They come from observing the behaviours of some of the most successful digital business change leaders in major business and government organisations around the world. There are six personas: Adventurer, Ambassador, Clarifier, Educator, Attractor and Cartographer.
You can find out more about the six personas and how they work in our book, which is available in print, e-book and audio book formats. Or you might like to try our new online digital leadership personas self-test, it takes only a few minutes and will help you think about what you could do to up your game.

In early March 2016 one the business world’s most admired companies introduced something rather special. 40 years after the invention of the Nespresso machine, the latest models are going digital. It’s a pivotal example of digital business in action.

[ Listen above or continue reading below – the same content ]

The Nespresso business of Nestle is one loved by all management schools and MBA students. It’s the gift that keeps on giving. It’s a great example of disrupting your own industry, of disintermediation, of e-business, of design thinking and a whole lot more. Some have suggested the gross margin on a Nespresso capsule is around 85% (source). Over 80% of Nespresso coffee capsules are sold direct – evading the control of big supermarket retailers – half by e-commerce and another 30% through its own boutique stores (source).  Just like other great “academy” firms such as P&G and GE, Nespresso is one that everyone watches and many copy. Whatever will they do next? Well now we know. It’s called Prodigio and it makes your Nespresso machine a loosely affiliated part of the internet of things.

Nespresso’s latest kitchen counter pod coffee machine connects to an app on your
phone via Bluetooth LE – but you should not be impressed by that. In fact you should initially be quite skeptical. After all, the world is awash with pointless failed big brand apps and the internet fridge is second only to the flying car as a symbol of failed futurism. The question in your mind should be – what is that app for and how does that help Nespresso’s business? “It’s cool” isn’t sufficient value proposition. The new generation of millennials just setting up home won’t be impressed by a superficial novelty app. This app solves a simple but real problem. We forget to reorder.

Source: https://youtu.be/yAxVcAhoT7A

The app will alert your phone when the coffee machine needs service maintenance or needs a water tank refill – hmm, that’s fairly useful I suppose. The app will also let you set a time for the machine to make coffee – that’s more useful – for early morning starts. These are quite good ideas. But the killer is coffee capsule reordering. Nespresso want and need you to depend on them alone for direct supply. However their target market is full of classic cash-rich / time-poor people with very busy lives. Going to the Nespresso store, or even remembering to go online to order by e-commerce is yet another of life’s small and easily forgotten chores. How many millions of un-caffeinated consumer business moments slip by each year because machine owners didn’t have enough of the right capsules, right there, right then?  That’s the revenue opportunity Prodigio goes after.

The machine keeps count of how many capsules you used. The app ‘knows’ how many you ordered. The app alerts you when you are running low and offers a one touch re-order button. Your own perfect little sensor enabled kitchen supply chain management system.

This is digital business. It is a piece of new business design that blurs the digital and the physical. It is digital remastery at work – taking digital to the core by making it part of the product itself.

You can read all about such powerful business ideas and how to lead the change in your own company in our book. Its called Digital to the Core and it’s available in all the usual formats, from all the usual places.

My local McDonalds is closing. Only for a week though – they are doing a refit. The printed flyers (leaflets) that explain the reasons to customers, make two promises. First, the food will be fresher. Second the customer experience will be more digital. Through this simple, clear marketing the company is demonstrating how the digital elements of the restaurant experience are becoming part of its core proposition.  McDonald’s is a fast food company that sells you two things: fast and food. The upgrade will help make the food fresher and hopefully – the service faster and more time effective for the customer. That second part is achieved by taking digital to the core.

After the restaurant upgrade, customers will find that the store has touch screen self-service ordering kiosks near the entrance and web surfing kiosks at the tables. So hopefully they will spend less time queuing and they can get stuff done online in their busy lives, while eating their Spicy Mayo Chicken Legend sandwich, washed down with a Berry Burst iced Fruit Smoothie. They may also find there is a digital interactive game area for kids. If you have visited a McDonalds in the last couple of years, you might have seen these things already. These digital innovations are hardly bleeding edge news are they? So why am I calling your attention to this case, when perhaps you crave more hype candy about drone delivery, AI robot waiters or 3D printed food?  The reason is that anyone can do cool digital experiments and flagship projects. Making digital a core and systematic part of your whole business is a lot harder.

In the research for our book, we interviewed McDonald’s chief digital officer Atif Rafiq in September 2014. Two things he said back then really stand out to me, now that I can see this McDonalds digital transformation rollout in action. Atif moved from a powerful position leading efforts like Kindle at Amazon, to McDonalds – a direction of career travel that  might surprise some people. So we asked him why. He told he us he viewed McDonalds as a platform  – one with a powerful brand and global reach.

“It’s very unique and to me it compares to doing something big .. on the scale of creating a tablet at Amazon or on the scale of creating a social network for Google.”

His perspective underpins our view that really successful digital leadership isn’t about playing with a few ideas in a sandbox – its about taking those ideas and getting them to run everywhere in your business, to create a true digital platform.  Atif Rafiq told us about some of his aspiration for McDonalds. He had already seen good digital progress, but it was in isolated pockets. For example he noticed that McDonalds France had been delivering a world class customer-controlled digitally-led experience for a while. The challenge he told us, was “How do we do that in a way that actually scales and can come to more of the world because our customers around the world would love that.”  

Nearly two years later, the refit at my local McDonalds tells me that maybe he is succeeding. The key issue is scaling up digital across McDonalds 36,000 restaurants world-wide, most of them operated by franchisees. Big change doesn’t come overnight and it doesn’t come easy. Rafiq and his colleague Jim Sappington (EVP of operations and technology systems) are working together to build a global digital platform across the whole of the McDonalds world.  That is complex, deep, structural leadership work. It takes tenacity. Is what you need to do to take digital to the core of your company too.

 You can read all about such powerful business ideas and how to lead the change in your own company in the book that Graham and I wrote. It’s called Digital to the Core and it’s available in all formats, from all the usual places.

The average age of large company chief executives is over 50. That means they have seen and navigated quite a few global economic and macro environment shock moments through their managerial careers and several in this century already – such as 9/11, the $145 oil spike and the Arab Spring.  CEOs will rely on patterns and experiences from those prior episodes to help find their way through the unfolding repercussions of the Brexit vote. However, from a technology-related viewpoint, one thing makes Brexit rather different; this time we have ‘big data’.

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Perhaps it would be better to say that this time some CEOs have access to data science. ‘Big data’ is just a loose name for an asset or resource – the mountain of rich, high fidelity data from disparate sources that is amassing as a result of all internet-connected and digitally recorded activity. That resource is inert until you choose to do something with it. In recent years some companies have got their act together. They have assembled the tools and more importantly the people who can analyse and exploit the new data resources to see better – what is going on in the world. If you can see what others can’t yet see – you have the opportunity to penetrate the fog and confusion of an economic shock and find a way through it faster. At a time like this, such capability should be a potential source of competitive advantage.

Most business leaders and commentators seem to agree that Brexit is the biggest shock since the Lehman collapse of 2008 (though not quite as bad). We have to remind ourselves that most of the banking crisis that followed, played out before we really invented ‘big data’ or ‘data science’. As a Google Trend graph shows – these concepts we regard as so important today, just weren’t part of general business consciousness back then. Indeed the keystone technology that first made big data exploitation possible for most enterprises – Hadoop – wasn’t publicly available until 2011.

But what can a chief executive really do with big data and data science?  How can these complex tools help right now with the problem of navigating the Brexit crisis?  I can think of three things CEOs can call for, from their teams – if they have invested in the capabilities.

1. Social Listening – analysis of public social media can provide insights about trends in societal debates, markets and political mood shifts that can help inform business leaders about key transition points between different business scenarios.
2. Impact similarity comparisons. If you have historic data from prior market insecurity episodes such as the financial crisis, you could run detailed comparisons. Are people reacting the same way or differently? Are the dips and recoveries  – in ordering behavior or sales cycle times – sharper or shallower? Are they trading up and down between price points and products faster or slower?  Where are the correlating factors and how can you predict recovery tipping points better?
3. Machine data analysis. What can connected machine data tell you about what’s really going on?  Urban public transport usage patterns, equipment idle time, shipping movements and many other kinds of sensor data from the connected machine world could provide critical trade flow and economic activity insights.

We are not really very far into the data science age. Techniques are raw, experts are in short supply and the methods of today will no doubt look quaint a decade from now. But Brexit is the first big business test of a new emerging data-driven strategic management science.  This time, smart CEOs will rely on more that just the accumulated human experience and standard commercial transaction data gathering from a cabal of their closest colleagues. If you have invested in big data and data science capabilities in recent years – this is the moment to give them a real test.

Brexit is fairly drastic economic and political surgery. In the long term it might be good for UK business. In the mid-term, it will hurt.

Gartner is not an economic forecasting house. Our goal is to provide the technology-related insight necessary for our clients to make the right decisions, every day.  But of course to do that well we must make assessments of how broader macro environment factors will impinge on the world of technology. For example Gartner’s teams of analysts who measure the technology provider markets, create forecasts of expenditure in many technology categories. Our chief forecaster John Lovelock integrates their models and develops global tech industry forecasts. You can read about John’s initial post-brexit assessment on Smarter with Gartner.

Those of us who provide advisory research for business and technology executives outside the IT industry itself, must act as scenario thinkers to understand how the application of technology might change inside those corporations. We need to understand the stresses and strains a macroeconomic shock event might place on organisations, how it might deflect current business strategies and how that will impact on those leaders who were planning to apply technology enabled change in various ways to achieve particular business outcomes. Thinking through the cascading chain of events and the most probable scenarios ahead can often give us lead time to think and to plan.

So how will Brexit impact the internal corporate use of IT and those involved with it?  The answers will be complex and we will work through them with our clients over coming months – and years. Our initial advisory research notes to clients are here and here. However one thing is very clear to me. The impacts will unfold relatively slowly – and that in itself is an important thing to think about. There will be relatively few short term, sudden severe impacts. Because of that, over the next few months leaders might be tempted into thinking that it was all a bit of a fuss about nothing. That the sky isn’t falling. I think that would be a big mistake.

I live in the vicinity to Heathrow where the line of big longhaul aircraft  – 747s and A380s coming into land is a regular sight. The bigger they are, the slower they seem to move. From some angles it seems as if they are almost hanging in the sky and will never come down. Its an illusion of scale. Brexit is a bit like that. Yes indeed, to some extent the economic sky is actual falling, but its falling slowly.  Here’s why.

The next UK prime minister probably won’t be in office before September. She or he will have to assemble a team and agree an approximate strategy before invoking article 50 that triggers formal exit negotiations with the EU. Those negotiations could take up to 2 years. If we are lucky they might take only 6 months but very few people would be so optimistic. Whichever way you look at it, business leaders involved with UK trade, inside or outside the 5th largest economy in the world – face massive uncertainty for at least a year and very probably a lot longer. Uncertainty is the enemy of decision making and investment.  In many cases, CEOs won’t be able to know the terms of trade, the tax rates applicable or even some of the laws under which business operations might be conducted. Acting in good faith towards their investors, they will probably have to sit on their hands – just as they did for a couple of years after the banking crisis. Do nothing, wait and see will become the new default setting for many kinds of corporate investment projects. The combination of unknown unknowns will probably get worse – during the exit negotiations – before it gets better.  After all, the UK is placing 40 years of complex negotiated regulation on the table for reconsideration – everything from distance selling to data privacy to patent protection could be up for change.

If you doubt there are hard business impacts, I can tell you that already in the last week I have spoken with contacts in the UK who have told me about falling online sales, hiring freezes, M&A project cancellations (some in mid flight), and recently agreed cross border contracts with Brexit break clauses written into them, that are now imperiled. If you want to hear, in their own voices, how some UK CEOs reacted to Brexit over the first week – I recommend this edition of the excellent BBC business interview program ‘The Bottom Line‘

That’s just the short term direct UK impact. There is also a risk of secondary political impacts in other countries as politicians and populations weigh up the precedent that the UK has set – and either decide to harden their stance against similar effects, or to emulate some version of the separatist the idea.  There could be a significant anti-globalisation, localism and protectionism trends as a result. We just don’t know how far those might extend. We do know it will take many months or some years to unfold. Unlike a banking confidence crisis, international popular political contagion tends to move more slowly and corrosively. Like rust rather than like dominoes.

So yes Brexit was a Lehman moment. This time we knew when and where it would come. It could have turned out to be a Y2K ‘false alarm’ – but it wasn’t. We had time to brace ourselves a bit better, but that didn’t stop it happening.  Just like the banking crisis, the effects will run deep and they will run on for years.

After they place big decisions on ice, I think many UK business leaders will ‘head off to the beach’ for the summer. There’s not much positive action to take yet. They know there will be a huge amount of work ahead to reset strategies and reorganize companies – so best rest and recharge now.  They know that work can’t really commence until the politicians get their act together and start at least sketching out what a post-brexit landscape will look like. CIOs and other business executives with significant UK business technology-related project plans should expect strategy change impact to start from this Autumn. Expect a difficult budget planning season.  Sadly I fear, the economic sky is indeed falling – but this time its in slow motion.

“We got through the Great Fire of London, The Plague, The Blitz and Lehman Brothers and I’m sure we can survive Brexit” – it is reported that the deputy major for business said at a London Fintech conference this week. Gosh, does it really warrant those comparisons – in a technology related business context?

I’ve been amazed lately at some of the hyberbolic language used by normally quite calm and measured people about the business and economic effects of Brexit. Which made me wonder – is it going to follow a hype cycle?

First we have to test whether hype cycle thinking would apply at all. Is it an “innovation”? – yes, an unusual one, but nonetheless I can see it qualifies. The UK is the first country to try deliberately exiting a regional major trading block in the apparent pursuit of self interest. Is there a “market” adopting this? Yes – its forced to. Was there a clear trigger? For sure – a vote in June. So it looks like hype cycle thinking might be applicable.

However, we also have to acknowledge that this is a very unusual episode in severe negative  hype. For that reason the graph would need to be inverted. The Y axis variable is “future expected value”. For most innovations expectations operate in the net positive. But that’s not what’s happening here. If the curve is inverted, the usual names of the stages no longer apply and we need to find alternative descriptions. Here’s what I sketched out

It kind of makes sense. The market hysteria gets very bad – the effect of social contagion and press amplification. But then it turns out the sky isn’t falling quite as quickly and severely as first feared. Stock markets are doing OK. UK unemployment is relatively low. The pound is down but not at dollar parity as some suggested. So a lot of rational reality sets in. Some might think the whole episode was a false fire drill – like Y2K, and they might then ignore it too much.

But in the end, Brexit probably does have an moderate enduing negative value expectation effect in the minds of the many. A ‘low lander’ plateau is likely. There could be a sustained slightly negative global business perception – the idea that the UK outside of its closest major regional trading block just doesn’t quite make sense.

So what’s the hype cycle takeaway for management decision making?  Hold your nerve and do not overreact to the massive negative hype. It will pass. Things will correct. They will probably over correct for a while. Then we will get to a settled view – that Brexit was indeed a negative for the UK economy – though not nearly as bad as first feared.  And then remember something else – its just one part of the picture. Other innovations – such as new trade deals with commonwealth countries might yet compensate for that enduing loss of European integration benefits.

I once helped the inventor of the hype cycle write whole book about it. I believe it is a widely applicable and powerful management thinking tool  – a way to stay oriented and work out what will really happen.. particularly when the world around you seems to be losing its rational poise.

Over the past couple of months I have been in a few executive conversations where a new digital business strategy thought has been coming up. Some business leaders think their company is so far behind it may never be able to catch-up and should not try. Instead they wonder if they could skip a digital development level and leapfrog both traditional and born-digital competitors. As an abstract strategy idea, it is hopeful and attractive – but how would it work in practice and what might it look like?

[Listen above or continue reading below – the same content]

First, let’s look at the digital laggard problem that some CEOs are facing.  At the start of this century everyone was talking about e-business: taking the company online to sell, to market and perhaps to dis-intermediate. But once the dot.com crash came, the fear-based energy that had propelled rather premature and uncomfortable corporate change, dissipated. E-business initiatives were sometimes shutdown; more often placed on a go-slow. Starved of funds and talent, obstructed by the politics of internal change resistance and a lack of real drive from the top, progress was at best – pedestrian. By the mid 20-00’s CEOs and boards had switched focus to other ‘easier’ ways of finding business growth. For example they milked advanced economy consumer markets that were awash with credit. They took their companies to the BRICS countries where  double digit economic growth rates helped all corporate boats to rise together. Even when social media and smartphones arrived to great fanfare circa 2007, CEOs mostly ignored the growing digital trend in favor of more immediate and obvious, growth producing business strategies.  Then inevitably the growth tear ended – with the financial crisis and the great recession.  So for a decade, between around 2003 and 2013, many business leaders did relatively little to invest and build up a strategic internet enabled business model shifts and internal capabilities.

Now, in 2016, surrounded by a wall of market noise about digital business, concerns about disruption and pressure for action from the board of directors, the CEO faces a dilemma. He, she, or more likely his or her predecessors simply didn’t do enough to bring the company up to bench strength in the first waves of internet enabled change. At the time it seemed wise to hold back and wait for consumers and more laggardly B2B customers to mature and really demand digital interactions, services and experiences in volume. The trouble is, now that demand has arrived, it often comes with exponential growth both in volumes and in expectations. Companies that under-invested for so long, find it hard to catch up. It is not just the technology investment – but the key talent recruitment, organisation designs, culture changes, market relationships and all the other things that have to be done. Even acquiring an existing online business might not fill the strategy gap fast enough. The CEO can see that a catch-up transformation, no matter how well executed, might take 3 or more years. But the idea target operating model will have moved on by then – which creates the risk that the digital business horizon will outpace the rate of company transformation. So what is to be done?

A leapfrog strategy maneuver  is a possibility. Perhaps the business should skip the old e-business ideas altogether and move directly to the next stage of evolution. Of course there will still be a huge amount of change work to do, but in some areas there may be less to ‘unlearn’.  Here are some example ideas.

• A retail bank that has only a basic, stale PC web presence and no transactional mobile app could move directly to a ‘reinvented banking’ model – exploiting ideas such as p2p lending, AI robo-advice for savings and investments and social media data insights for small business advice.
• A wholesaler or CPG distribution intermediary, seeing that producers could use e-commerce to sell directly – could switch itself into an Uber-style sharing economy platform to help customers access fragmented ‘wasted’ stock – for example the many small amounts of paint in consumer sheds and garages, or the stationary supplies in office cabinets everywhere.
• A fast-fashion clothing retailer might skip e-commerce and move directly to a clothes-as-a-service model.  Some fashionable young people often only wear items once because they are so scrutinized by shared images posted on social media. So, what if they subscribed to a fashion supply model that was the modern equivalent of suit hire? They could regularly borrow and return clothes that were better made and reused a few times. This would replace today’s reality of of badly made clotes that go almost straight to landfill. The whole model would be mobile app based of course.
• A fast moving consumer goods maker might create an IoT enabled version of their product with cloud based data enabled value adding services. Examples like Babolat’s “play” connected tennis racquet or Nestle’s “BabyNes” baby formula system come to mind.
• A contract manufacturer might move directly to a 3D print service where short runs of specialized and uniquely tailored parts are made dynamically in response to online orders – perhaps in reaction to demand that has become very volatile and needs to be ‘re-onshored’.

Going digital to the core, doesn’t mean using the internet to support your traditional business – it means reinventing your product and your business model based on what the internet has made possible. We explain how to navigate and how to stay oriented during this huge strategic change in our book. Digital to the Core is available in print, e-book and audio book formats from Amazon or your favorite local book store.

Over the years, since the end of the financial crisis – like many others I have been watching and analyzing the digital awakening of the conventional corporate world.  First they pondered the Kodak case, then they started to move. Gradually – and sometimes frustratingly slowly and clumsily, they started to act. Leaders amongst leaders in the fortune 500 – Like Jeff Immelt at GE, Maurice Levy at Publicis and Francisco González Rodríguez at BBVA started to speak openly about the risk and opportunity of digital disruption. Then they made digital a part of business strategy. Now they are going Digital to the Core. These and other companies like Ford, Volvo, Babolat and Quicken loans – all featured in our book of that name – are determined to make digital business work for them. Even though they must import strange new technology competencies and Silicon-valley-esque management belief sets – they have realized what is at stake and they are determined to succeed.

(Image CC BY 2.0 Anders Sandberg) [Listen above or continue reading below – the same content]

I see another set of companies following very closely behind. But there’s a large pack at the rear – still thinking and talking. They do limited experiments but they don’t really commit. If they leave it too late they will never catch up because digital is exponential and its almost impossible for a linear thinking management system to catch up with exponential disruptors.

The ‘born digital’ companies often start with advantages. They have a green field with no legacy systems, trading relationships, products or management thought. They have investors who will forgo short term profits for higher long term capital growth. They capture the emerging talent and apply the new digital tools. One of their biggest advantages is the complacency of traditional industry giants. But eventually those giants do wake up. They copy, they embrace and sometimes extend. In my last blog post I suggested they might even be able to leapfrog. Every industry will be digitally remastered… eventually, but there is no reason to suppose only the likes of Google, Amazon, Facebook, Tesla, Baidu, Alibaba and Tencent will rule in all domains. A good number of big traditional firms will eventually adapt and become digital in their cores too.

At some point in the future, the advantage of being a born digital company, founded after 1995, will deplete. Talented staff move from born digital companies to more traditional ones  – taking their knowledge, insights and methods with them. Many other companies will apply the same ideas, the same technology competencies, the same cultural concepts and ‘new rules’ and they will do so equally well.  We know this kind of pattern is possible because companies like Microsoft and Cisco have made a long term strategic practice out of spotting disruptions, copying or absorbing initial leaders and avoiding being caught out with yesterday’s thinking.

The eventual point of equivalence between the born digital companies and the converted traditional companies will be some kind of business ‘techquilibrium’. The new players will become as big and complex as the old ones. The remaining old players will have absorbed and copied the new capabilities. This is an inevitability. No kind of business strategic advantage can be sustained indefinitely. Of course, between now and that time many traditional larger corporations who woke up and acted too late, will suffer and some will wither away entirely. They will be attacked from both sides – the born digitals and the digital converts will move into adjacencies as they blur the boundaries between old industry categories. They will carve up the highest value economic spaces between them into whatever is the natural minimum number of dominant platforms needed to operate the future economy.

I  dislike blog titles that end in a question mark – don’t you? We all do it, but it seems like cop out – raising an issue without taking a position or suggesting a point without owning it.  This post started with a question. My best guess at the answer is about 10 years from now. This game is truly strategic. It can’t play out quickly but it won’t take too long either. Does 10 years seem like a long time off to you as you struggle to cope with next quarter and next year?  Remember nearly a decade has passed since the financial crisis. Ten years ticks by faster than you imagine it will. If your board and executive committee are still dithering about taking Digital to the Core – then your company might already be falling dangerously behind, on the inexorable march towards techquilibrium.

We explain how to navigate and how to stay oriented during this huge strategic change in our book. Digital to the Core is available in print, e-book and audio book formats from Amazon or your favorite local book store.

Economists across the world are both puzzled and concerned about an apparent dip in long term productivity growth. Their worries are giving rise to frequent business news editorials about the issue. It matters because the long term advancing wealth and prosperity of nations can only be based on improved productivity. If we can make and provide more output value, using the same amount of inputs, by superior methods and ingenuity, we gain.

Image: CC frankieleon flickr.com/photos/armydre2008/3471119299
[ Listen above or continue reading below, the same content]

The issue of declining productivity growth has become so perplexing that some economists are re-examining the measurement system itself. They wonder if significant amounts of economic value are simply not being captured. Perhaps the “stuff” we create today in Facebook pages or customer experiences is so ephemeral that it eludes conventional measurement and valuation. However I’m not sure they have to tear up the counting rule book to find the causes.

Here are some ideas as to why we might be seeing a lack of productivity growth in business, based on observations of business behavior, particularly in the context of technology investment. Technology is a form of capital we most often associate with productivity growth, so it’s worth reviewing.

1. CEOs have not focused hard on productivity in recent times.
Our most recent CEO survey placed productivity and efficiency in 11th place, in a category list of CEOs top priorities. I know that might sound surprising to some, but what they are really looking for is growth. If they think there are easier short term ways to get top line or bottom line growth without investing in productivity, they may take those simpler paths. Financial engineering with low interest rates and global tax optimization, taking the same operating model to emerging markets, or taking chunks out of other players margins via disintermediation are all examples of ways to make financial results progress, without really investing in underlying productivity. Also, in the years since the banking crisis and great recession, many businesses could grow by just soaking up cheap labor. High unemployment rates made human workers low cost and flexible. Globalization made remote, low cost labour increasingly accessible.  None of that is an incentive to invest in complex, expensive new machines.

2. The new technology pathways to productivity are confused.
In the late 20th century we all became very adept at using the lens of business process management to convert ever more powerful computing into higher business efficiency. Techniques such as BPM and Lean Six Sigma became well codified, teachable and repeatable methods. But the new crop of Internet and digital technologies often eludes that simple conversion method. How do we convert “social” or “mobile” or “cloud” into productivity? On a craft basis, a relatively few gifted leaders and business architects may be able to do so intuitively. But we lack abstracted general theories and codified methods to fuel repeatable productivity engineering practice on a mass basis. Digital era technologies are capable of creating momentous improvements in productivity but we don’t yet have a BPM equivalent for social, or a lean equivalent for Data Science. Simply put – management science methodology is lagging behind technology advance.

3. We lack measures for intangible value creation and intermediate work product.
Imagine a marketing creative team slaving over a fizzy drink re-branding exercise and then executing it via social media. Customers are delighted. They believe in the product more and their consumption experience is enhanced. What kind of additional value was created and how was it measured? Was it just more SG&A overhead? Or did we deliver more customer value output? So much of our modern advanced economy operates in these more abstract value areas. And what about all the email that flowed between the people involved in the re-branding? It would be nice if we could simply say more email processed means more value outcome, but everyone knows its not that simple. It’s sad but true that today’s CEOs can’t be sure if email, our oldest and most mature collaboration technology, is a net contributor or a net inhibitor of productivity in their organisations.

Until IT professionals come up with structured repeatable methods for taking the new digital era technologies and converting investment in them into productivity – CEOs will tend to drag their heels. They will often prefer to leave cash on balance sheets or even give it back to shareholders rather than invest it internally in what seem to be high cost, high risk, vague outcome, craft projects. However the new management technologies, experiments, proofs and methods we need, can only be evolved creatively inside real world companies like yours by people like you. There is no secret Silicon Valley lab that will solve it all for us.

As GE CEO Jeff Immelt said to 6000 CIOs at our Symposium last year:

“… I urge everybody … to look at yourself in the mirror and ask … “What role have we played to make productivity really take off and continue the way it should?” Clearly, the tools in the 1990s worked … but we need to find the next big driver.”

I believe we are on the cusp of a new period of productivity focus. Recent political shifts, lower unemployment and a switch of direction for interest rates will compel business leaders to take a fresh look at the problem.

However, much of the new technology enabled productivity will come to us in a different form this time. Instead of using information technology to improve the way we make traditional products and services, we will use digital technology to fundamentally remaster our products, services and business models. We won’t just be trying to figure out how to make the old things more efficiently; we will design new kinds of things altogether. Autonomous vehicles, e-cigarettes and voice interaction intelligent assistants are examples. Taking digital to the core of of our companies and what they make, could be a source of radical productivity improvement.

Digital to the core is the name of our book that explores some of these and other themes. It is available now in all formats: print, e-book and audio-book.

As we have said many times over the last few years: every industry will be digitally remastered. That means its products and services will become significantly digital. The digital proportion of what customers buy from you will rise, not just how those customers were attracted to you (digital marketing) or how they transact (e-commerce). This applies to physical products like cars as much as to information products like news. Of the top buying features you choose your next car on, half might be digital (HUD, stay-in lane, media integration, wireless connectivity, self parking etc).  Think about that for a moment – more of what you really care about is made of data and code; less is made of glass, rubber and metal. This remastery of products and services is what digital business is really about. It is why we talk about taking digital to the core. However it can be hard for people to believe this is really happening without examples – especially when we assert that every industry will be impacted – in due course.

Often, I find the best way to bring this strategic reasoning to life, is to show videos that illustrate the trend at work. This can make the discussion more tangible and it helps to spark creative discussions.  Here are ten good examples. They are links to short public videos you can access without a paywall. I have placed them in no particular order. I hope you find them as inspiring and thought provoking as I do.

How do you digitally remaster coffee?
Paulig Muki

How do you digitally remaster office furniture?
(and a provocative example of the boundary blurring force)
Nissan Intelligent parking chair

How do you digitally remaster tennis?
CNN Babolat

How do you digitally remaster baby formula?
Gerber BabyNes

How do you digitally remaster trash collection?
Bigbelly Bin

How do you digitally remaster physical retail?
Amazon Go

How do you digitally remaster industrial machines?
GE Predix

How do you digitally remaster sports clothing?
Polo Tech Shirt

How do you digitally remaster haute couture?
CuteCircuit

How do you digitally remaster farming?
Parrott Drone Precision Agriculture

“What do you think is the single most important factor for digital business success?”. I was asked that question recently. It was half way up a mountain, at an executive retreat in a beautiful meeting room with large leather armchairs, windows looking out at snowy peaks and a roaring log fire. Initially my mind started to go into what Daniel Khaneman calls “system 2” mode – slower, more deliberative, and more logical thought. I started assembling a list of possibilities and thinking how to order them – strategies, starting positions, funding, culture, industry structure, competencies, value chain positions … Then the “system 2” voice in  my head popped up – the fast, instinctive, emotional, reflexive response.  I was on my feet in front of a room and already running over time so I decided to trust that voice.

“The CEO” I answered. “Whether he or she gets it and is determined to drive it”.

[ Listen above or keep reading below – same content]

On the flight home I had time to think about the interaction. Did I give the right answer or an expedient one?  After some proper “system 2” thought I concluded the same thing. Both modes concurred. It really does come down to the CEO.  I can’t think of an example where a company is succeeding at strategic digital business change but the chief executive is disengaged. In nearly all the cases of substantial progress that we cite in our research conversations with clients – the CEO is a visible and obvious protagonist leading from the front. In those where the CEO is not so overtly visible from the outside, they just have a quieter personal style but are no less involved.

Recent examples of individual CEOs I’m thinking about would include, Mark Fields at Ford, Jeff Immelt at GE, Howard Schultz at Starbucks, Maurice Levy at Publicis, Eric Babolat at Babolat, Susan Cameron at RJ Reynolds,Francisco González Rodríguez at BBVA,  James Dyson at Dyson, Mark Wilson at Aviva and others. I can also think of other situations where senior staff and executives keep trying but are ultimately  frustrated by the lack of digital progress they can make. In those cases they will often open up after a while and say privately “the trouble is our CEO doesn’t really get it.”

It should not surprise us that the CEO is the critical factor. Real digital business change is deep, strategic, all encompassing and difficult. Resources must be redeployed, new ventures created, markets opened and exited, investor expectations changed. This is so important that handing it over to someone else just isn’t realistic. Some CEOs will try to delegate the issue away from their desk towards a chief digital officer – but that alone won’t work.  The creation of a CDO role can be very powerful but the CEO still has to actively, support, shape, protect and direct that power. A CDO cannot substitute for an un-involved CEO – unless the kind of digital change being pursued is really only surface level.  As Bill Ruh, CDO at GE said in an S+B interview recently: “I have the title of chief digital officer, but the real chief digital officer is CEO Jeff Immelt.” 

Recently I read a business news article about a techquisition. A large traditional model company bought a smaller online-only company that had invaded its sector. They paid a high price. The writer suggested this could represent a ‘leapfrog’ digital strategy for the acquiring company. To my eye it was not that – not at all. It was a late catch-up move by a management team that had allowed a web based e-commerce company to grow fast, under its feet, for several years, gradually stealing its lunch. The acquired startup was founded more than a decade after web based e-commerce became a big thing in business and had grown in plain sight of its eventual acquirer.

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It’s 2017, not 2007. You can’t win the future of your industry by playing late catch-up e-business. Re-badging that strategy with a D, doesn’t change what it is, or fool anyone. Digital business is a different evolutionary stage beyond e-business. As I explained in a recent post – it should offer your company the opportunity to take control of the game and truly leapfrog to the next big industry disrupting idea. But what would that idea be?

Finding it is often highly creative and non-trivial work but there are questions that CEOs and Boards can ask themselves and others to help uncover the big new opportunity spaces.

1. How could digital technologies be used to reinvent the products and services of  “our” industry?
2. Who will win the biggest share of platform control over those digital, connected products and services?
3. What value can be generated from the data created and captured in all that activity?

First – as we have said – every industry will be digitally remastered.  Entrepreneurs will re-examine fundamental customer needs, finding gaps and weaknesses in all of today’s offerings. They will then use the creative, functional power of digital technologies to invent far superior products. It has happened to media, music and books. Now it is happening to payment, cigarettes and cars. In the end there will be no exceptions. All products and services can be transformed – sometimes with previously unimaginable new value features and customer utility.  I recently posted some example thought provoking videos. If your company and your existing industry does not take up the opportunity to radically reinvent products by applying digital capabilities to them – someone else will. Digital creates what we call “boundary blurring” effects. It melts away previous barriers to entry and allows invaders to easily slide into adjacency opportunities that were previously impregnable.

Second – as products become digitally re-imagined and redesigned, they inevitably become connected. They rely on access to cloud based services. Your new Nespresso coffee maker connects to your smartphone app and that phone app connects to the cloud to access services such as capsule reordering. Your car gets over-the-air self-driving software updates. Your travel luggage is wirelessly tracked. As this happens customers are expected to register and sign-up. But as we all know, people don’t want hundreds of individual system sign-ons and relationships for little points of daily utility. They want one place where their stuff happens – at least around big themes like money, health or construction. So after a while, we prefer to move to aggregators who bring together lots of digital services in one place. Big, integrating platforms emerge and it’s clear by looking at early examples such as ride hailing, professional networking and photo sharing – that in many domains we end up with one, two or three big platforms controlling most of the activity in an industry. Often these controlling platforms win by working directly for end users – who are not only consumers but also workers – such as accountants or tractor drivers. In this way the big controlling digital platform phenomenon applies equally in B2B. Intermediaries are squeezed and dis-empowered by this. They have to work harder to justify their existence in a value chain, or take a smaller payment as their part of the total service offer is eroded.

Third, connected products and services operating on a moment by moment basis can digitally record activities in immense detail, in the cloud, in perpetuity. Over time we create a vast resource pool of activity data. Not just commercial data about how and when a product was created and sold – but usage activity throughout its life-cycle in the hands of its customer or user. All of the activity of all of the products gives us statistically meaningful analysis possibilities that could not have been dreamed of before. By analyzing the data we can discover – and play back to customers, valuable insights into how they can improve their work and their lives. Increasingly, learning algorithms can help to do this more effectively than an army of humans alone ever could.

The only limitations to finding your own high-value creative answers to the three questions are the limits of your imaginations.  A leadership team doesn’t just have to think outside the box, it sometimes has to dare to wander off-planet. The data from the digital services additions to the reinvented products you make, might be valuable to others way outside your industry. Your business model might even give up selling products directly, instead giving them away “free” – in order to monetize the insights they can help you create from the data that they generate.

All of this creates opportunity for you to seize the future and set the next new rules of competition in your industry before someone else does. Yes, it is challenging, argumentative and disconcerting original entrepreneurial work. The alternative is to toil harder and harder to maintain position with the existing product offer, while watching customers start to ebb and then flood away. Then in a few years find yourself emptying the corporate coffers or borrowing beyond your means to grit your teeth and buy a capricious upstart business, for an eye watering market premium, as the last roll of the dice.

Much of this analysis is based on our book Digital to the Core. It is available in all the formats, from all the usual outlets.

Reading the tech news today, I learned that it is the 10th anniversary of the launch of the first Apple iPhone. That decade really did fly past quickly didn’t it?  I remember the decade before that as well –  as we got better and better at mobile devices.. Palm Pilot, Nokia 7110, iPaq, Blackberry.  Nowadays whether Android of Apple – mobility is highly capable, fast, powerful and ubiquitous. When I strolled across London’s Blackfriars bridge during rush hour this morning, so many people were staring down at their phones, I had to concentrate to avoid a collision.

Now that this technology is so mature and a big part of everyone’s life these days, here are the three questions I think CEOs should ask about their own companies.

1. Are our customer apps really good?
2. What have we done to exploit the amazing sensor data these devices can collect?
3. Have we reinvented our processes to take full advantage of mobility – or just shoved the old process down a new pipe?

The sad truth is that you can still find many apps from big brand name corporations that are either mediocre, bad or unusable. What excuse can there be? The technology is mature. User interface design has become a well practiced art. If you think your company is customer-centric, then how can it be ignoring that publicly visible 2 star app store feedback rating?

A modern Smartphone from Samsung, Apple, Huawei or elsewhere will have over a dozen sensors. It can collect high resolution camera images and detailed data about light level, sound, acceleration, temperature, humidity, orientation, compass bearing, finger print and more. What has your company done to exploit that amazing data in the way it serves customers and the way it manages the efficiency of daily operations? Think about it this way – you paid for all those phones your staff are carrying and the apps your customers are using. All those machines are collecting amazing new kinds of information every minute and if you haven’t taken advantage – then that data is just your opportunity pouring down the drain.

In our CEO survey this year we found that “ease” is a rising keyword on the minds of senior business executives when they think about digital business. And no wonder – just look at how easy Uber has made it to get a ride or Tinder has made it to find a date. But those companies didn’t just take the old way of doing things and put them on a phone. They took what a smartphone can uniquely do and redesigned a whole new process to take best advantage. Uber’s process relies heavily on location sensor data and maps. Tinder’s relies heavily on swiping a touch screen and being able to take a selfie.

Mobile is a mature technology. By now, your company’s apps should be… as Steve Jobs would say.. insanely great!