Digital Economy Dispatch #0786th March 2022

Ensuring a Colourful Future: Digital strategy in an uncertain world

It’s been a tough week to focus on work. Or anything else, for that matter. With so much happening around the world, the deep impact of the on-going pandemic is now joined by destruction and devastation in Ukraine with many people caught up in the struggles. For those directly affected, these are life-changing events. For everyone else, they emphasize the massive uncertainty and volatility we all face and highlight the importance of preparing ourselves for a future that may differ significantly from anything we have experienced in the past.

Looking into the Crystal Ball

Such uncertainty reminds us that we must constantly review many aspects of how we see the future. In addition to these unpredictable catastrophes, we can already see a number of key megatrends that will shape the environment for living and work in a digital age. Amongst the most prominent of these are:

• The continual impact of technological breakthroughs automating manual tasks and reforming markets.

• The demographic shifts that will bring older populations and workforces to some geographical regions and large younger populations to others.

• Rapid urbanization growing our largest cities way beyond their current boundaries.

• Shifts in global economic power toward emerging countries with growing working populations and low labor rates.

• Resource scarcity driving demands for new energy sources in new places.

All of these shifts have the potential for reshaping our world. At a macro-level, such megatrends bring to the fore the opportunities and challenges all organizations face in our digital world. How these major themes will play out in practice remains to be seen. Regardless, it is essential to spend time considering their implications and how they affect our approach toward building sustainable, resilient digital strategies.

The Colour of Money

Yet, without a clear framework to guide our thoughts, it is difficult to make sense of these megatrends to drive organizational strategy. Consequently, to understand this further I was drawn to an analysis by consulting company PWC. By focusing on the human elements that are essential in any organizational perspective, PWC considered two dimensions in their analysis: the collective versus individual approach to organizational structures, and the forces for integration versus fragmentation that dominate businesses. In their review, they considered future scenarios in which four primary categories of working environment emerge. The result is a set of “future worlds of work” that they label “red”, “blue”, “green”, and “yellow”.

In the Red World, where individualism is strong and there is a great deal of market fragmentation, organizations innovate to create personalized solutions that serve emerging niche markets. This is something we see frequently in organizations who view their digital technology leadership as core to their future. The workforce must be highly innovative, supported by digital platforms and technologies which enable workers with the most in-demand skills to be successful. To deliver the outcomes they require while maintaining momentum, more mature organizations find themselves chasing talented individuals and partnering in competition with smaller, more agile companies.

Blue World organizations value individualism but ensure this occurs within a larger corporate setting integrating a wide set of services for consumers. These organization focus on leveraging their size and market position to dominate the markets in which they operate. They need to identify their key-performing individuals and support them by surrounding them with teams that amplify their impact. Non-essential activities are increasingly automated to focus efforts on where they can differentiate value for their customers. Digital technologies are particularly useful in managing and optimizing internal processes, and in guiding managers to identify important signals in the mass of data they receive.

In the Green World there is a collective approach to meeting market needs in an integrated organizational structure. There is strong motivation to build a trusted environment that prizes social responsibility with a deep understanding of ongoing demographic changes driven by a responsible social agenda. Digital technology is important as it can reduce the need for travel, improves innovation in communications technology, and supports promotion of a social agenda that is integral to the organization’s internal and external relationships. Employees value flexibility in the workplace and collaborate in creating a learning culture across the organization.

Yellow World organizations work collectively to address the needs of a highly fragmented operational environment. Innovation in business models and practices is essential, centred on a strong ethical framework. Workers participate in the funding and support of new ideas via crowdfunding schemes and shared personal commitments to use their free time to support projects to which they feel strongly connected. They are incentivised and rewarded through cooperative ownership models and social impact. Adoption of digital technologies is encouraged, but only when workers have considered their potential negative impacts on individuals and society. They must be satisfied that digital transformation schemes are being introduced fairly and transparently. Employee skills development is particularly critical for the longer-term interests of individuals and communities.

The Human Dimension

Despite their differences, there is a common factor to all four of these perspectives. While business leaders have invested significantly in digital technology, there has also been a recognition that success requires an intense focus on understanding the future workforce and their needs. The PWC report may have highlighted the different worlds that are emerging, but the challenge now is to ensure that digital transformation sufficiently addresses the structure, skills, motivations, and evolution of their future workforce. Digital technology can play an important role, but companies are realizing that the differentiator is not the technology per se; it is a talented workforce enabled with such technologies that remove friction, augment human creativity, and extend reach and impact.

While many factors may be considered important in creating a digitally-enabled workforce, three initiatives are particularly notable:

• Widely deployed digital technologies offer new insights into customers, marketplaces, production processes, operations, and much more. Such information is vital not only for efficient business operations, but also in understanding, supporting, and predicting the organization’s future workforce needs. Turned inwards, such predictive analytics can offer a foundation for improved decision-making across talent management functions and differentiated workforce strategies.

• Digital technology is expanding the footprint of today’s workforce, redefining who can be classified as a worker, what is shared across a partner ecosystem, and how tasks are carried out by teams of workers from both within and outside a company’s traditional employment boundaries. Far beyond simple remote working schemes, tasks can now be outsourced to partner organizations, shared across geographically distributed teams, issued as challenges to broad communities and crowdsourced. The ability to source talent in new ways is becoming a key competitive area for many companies.

• Traditional notions of learning and development in the workforce are being swept away by digitally-enabled learning management systems consisting of on-demand access to materials that combine classroom activities, multi-media content, games and simulations. These capabilities not only support improvement of existing skills, but they are also being used to prepare workers for the digital future by encouraging continuous re-skilling that helps to differentiate and sustain the organization’s workforce through unpredictable changes.

Back to the Future

These unsettling times look set to continue. Beyond the substantial direct impact on individuals and communities, organizations are also struggling to create digital strategies that will be successful in the short term and adaptable for the long term. How they define and develop their workforce is seen as a fundamental component.

As organizations look to the workforce of the future, they are increasingly using digital technology as a critical enabler. The most successful companies in the digital economy are not only hiring the best digitally-aware talent, they are using digital technologies to augment their impact and sustain their value to the organization. Such activities are increasingly seen as a competitive advantage in a talent-scarce environment. Whatever your organization’s agenda, its future will depend on how you manage the relationship between the digital technology you adopt and the people on whom you depend.

Digital Economy Tidbits

4 Lessons from Levi’s Digital Transformation. Link.

Perhaps no earth-shattering insights here, but it is useful to be reminded that digital transformation in large established organizations (LEOs) requires a focus on the fundamentals: Getting on with it, using data to drive decisions, and building a tech savvy workforce (including the leadership team!).

Digital transformation can be tough for legacy businesses. Take Levi Strauss & Co.: The challenges at this iconic retail and apparel company are different given the company’s more than 168 years of deeply rooted habits and traditions. But when the pandemic hit, the company was forced to change, and learned for important lessons in the process: 1) Test, learn, fail fast, and move on. Repeat. 2) Focus on leapfrogging over the competition, not catching them. 3) Everyone should be data-driven. 4) Pushback is normal, and an opportunity to have open conversations.

Where did IBM Go Wrong with Watson Health? Link.

The failure of IBM’s Watson Health gives us some useful lessons about the immaturity of largescale deployment of AI and the challenges of getting carried away by the excitement of digital technology and taking your eye off some of the fundamental questions: What problem does it solve for users? What are the broader implications of moving to digital and automated solutions in health? How does it change the relationship between experts and their clients? What barriers to adoption need to be overcome to scale these solutions? Sounds like a mandate for the DIGIT Lab to me!

IBM spent more than a decade trying to make a go of Watson Health, its moonshot to apply artificial intelligence in healthcare. Watson was supposed to revolutionize everything from diagnosing patients and recommending treatment options to finding candidates for clinical trials.

Now, after billions invested and a series of high-profile setbacks, the company is effectively selling Watson for parts to private equity firm Francisco Partners.