Digital Economy Dispatch #141 -- Riding the Digital Technology Wave

Digital Economy Dispatch #141 -- Riding the Digital Technology Wave
23rd July 2023

I’m sure we’ve all experienced one of those moments. You’re aimlessly wondering around a second-hand junk shop when you are stopped in your tracks. In front of you is an example of the technology that you once used every day as the latest state-of-the-art in digital solutions, now hopelessly out-of-date and abandoned to the darkest corners of the store. It might be a large screen mobile phone or a calculator with dozens of tiny buttons. Perhaps it’s an old home computer or an early MP3 player. In any case, the feeling is the same: How quickly things change.

The past 50 years has seen an astonishing evolution in digital technology. For individuals this includes a range of devices for education, entertainment, and personal productivity. In business the changes have been even more profound. Every aspect of the workplace has been affected, from front office to back office, often in quite significant ways. And the advances seem to just keep coming.

Digital Fever

The digital revolution we’re now experiencing has changed the face of the business and society. While the pace of progress seemed unstoppable even just a few years ago, the past few years have seen even more rapid evolution and innovation in digital technologies. This relentless pace of progress shows no signs of slowing down, with new advances reshaping the interaction between the business world and the public, and redefining business-to-business relationships. This has immense implications for business and society alike. It also raises important questions about how organizations and individuals can keep up-to-date with advances in digital technology, and how to manage their adoption into current ways of working.

Regardless, it is essential to place this endless flow of digital technologies into perspective. The power of digital technology to transform our lives is undeniable - we've all seen first-hand the massive potential that digital can bring. Yet as with any kind of technology, it's easy to focus on the obvious short-term changes to working practices and overlook the deeper longer-term implications. As Roy Amara's Law neatly summarizes, “we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run”. This phenomenon has proven true time and time again, with digital advances proving the point. Despite the obvious day-to-day changes, organizations of all sizes are still waking up to digital transformation’s disruptive impact on their future. In the face of this disruption, they are simply trying to survive.

Staying Alive

But standing still is not enough. In today's rapidly evolving business landscape, making use of digital technology advances is no longer optional but imperative for organizations aiming to thrive and remain competitive. Embracing and integrating cutting-edge technology into their operations can lead to significant improvements across various aspects of business, from enhancing efficiency and productivity to attracting and retaining key staff. There are several important reasons why organizations need to keep up to date with digital technology advances.

First and foremost, adopting the latest digital technologies enables businesses to streamline their operations and improve overall efficiency. What we have seen is that automation and AI solutions, for instance, can optimize routine tasks, reducing human errors and freeing up valuable time and resources. Through the implementation of cloud-based services, companies can scale their operations more effectively, minimizing infrastructure costs and improving accessibility for their workforce.

Moreover, staying current with digital technology advances can significantly boost an organization's competitiveness in the market. Consumers' expectations are continuously changing, and technology plays a pivotal role in meeting those demands. Companies that integrate digital tools and platforms into their customer service, marketing, and sales processes can deliver more personalized and convenient experiences, fostering loyalty and gaining a competitive edge over rivals who are slow to adapt.

Furthermore, attracting and retaining top talent is increasingly dependent on an organization's tech-savviness. In the digital age, skilled professionals seek opportunities with forward-thinking companies that invest in their development and provide a dynamic work environment. Modern employees value flexibility and access to digital tools that enable collaboration and remote work. By staying up to date with digital technology, businesses can demonstrate their commitment to employee well-being and productivity, making them more appealing to job seekers and reducing staff turnover.

Additionally, digital technology can unlock new revenue streams and business models. Companies that create outcome-based approaches and employ data analytics can gain valuable insights into customer behaviour, market trends, and operational efficiency, allowing them to make informed decisions and identify untapped opportunities. This data-driven approach can lead to the creation of innovative products and services, opening doors to previously unexplored markets.

Lastly, staying ahead of technology advances is crucial for ensuring the security and resilience of an organization. The ever-evolving digital landscape brings new cybersecurity threats and challenges. By keeping up to date with the latest technologies and security measures, businesses can better protect their data, systems, and reputation.

And Still They Come

With so much attention focused on the development of digital technologies, it is easy to be overwhelmed by the variety of directions and be overtaken by events as new products come to market. Which ones are essential to drive near term operational impact? What are their long term implications for organizational strategy?

The latest set of opinions on these questions come from McKinsey. Released in June 2023, their review of technology trends for 2023 makes interesting reading for those interested in guiding their organization’s digital transformation journey. Based on a substantial review of data from a variety of sources, the McKinsey technology trends review for 2023 identifies 15 technology trends grouped into five broader categories.

It is a comprehensive review of technology directions in which each trend is examined by considering activity to advance innovation (based on patents and research) and subsequent customer interest (based on news and web searches). These are supported by assessments of the investments being made in relevant technologies and their level of adoption by organizations across a wide range of industries. The result is a comprehensive perspective on the technologies that form the core of today’s digital transformation portfolios. Briefly, their review makes these broad observations:

  • The AI revolution. Broad application of AI is now been seen in almost every domain. McKinsey estimates the potential economic value at stake from applied AI to be $17 trillion to $26 trillion, and the share of companies pursuing that value has been increasing. Industrialization of Machine Leaning (MLOps) is adding to this potential by scaling ML models and greatly reducing the cost of applying ML. By adding the excitement of generative AI solutions to this mix, the AI revolution has now moved into a higher gear.

  • Building the digital future. Our digital future relies on effective ways to create, deploy, and maintain the software that underpins it. Next-generation technologies are transforming the capabilities of engineers at every stage of the software development life cycle. The software stack is also evolving. Beyond cloud and other communications technology, a particular focus is infrastructure for digital identity management. It particularly important to realize ongoing investments in bringing web3 solutions to fruition.

  • Compute and connectivity frontiers. More effective advanced communications stands and infrastructure tools are driving interaction and collaboration. They are critical to enable immersive technology solutions such as virtual and extended reality systems. Additional improvements in cloud and edge technologies are increasing speed and capacity to allow compute-intensive AI solutions to be viable in today’s competitive market. Quantum technologies promise yet more compute power and may soon allow completely new ways to solve problems.

  • Cutting-edge engineering. Several engineering domains are the focus of intense digital innovation. On-going advances in autonomous vehicles and aviation, bioengineering, and space communications domains are driving important engineering advances that are being leveraged in other industrial domains. They are bringing a range of systems engineering improvements and highlighting how digital ways of working can redefine traditional industrial processes at scale.

  • A sustainable world. As the world becomes more sensitive to environmental impacts of technology, there is more attention on renewable energy sources, efficiency of energy use, attempts to reduce carbon emissions, and circular business models. All aspects of digital transformation must now contribute to an organization’s sustainability goals in both direct and indirect ways.

One of the most important messages from the report is is a reminder about the severity of the digital skills gap being experienced by many organizations. Sourcing digital talent is described as the major barrier being faced today. Not only are organizations challenged in finding the right talent, the report states that they foresee 20 to 30 percent of the time that workers spend on today’s tasks will be soon be transformed by automation technologies, leading to significant shifts in the skills required to be successful. Over coming months, the combined disruption from these two challenges will require a great deal of attention from managers and leaders ate all levels in the organization.

The report is well worth reading in full. It is highly recommended as its findings provide a welcome perspective on the changing priorities facing digital technology developers and consumers. Something we all require in these crazy times.

Surfing the Wave

All organizations must prioritize keeping up with digital technology advances to thrive in the current business landscape. By embracing these advancements, they can enhance their operations, remain competitive in the market, attract and retain key staff, explore new revenue streams, and strengthen their overall security. The latest McKinsey Technology Trends report explores 5 categories of technology advances disrupting today’s ways of working and opening up future opportunities: The AI revolution, Building the digital future, Compute and connectivity frontiers, Cutting-edge engineering, and A focus on sustainability. The ability to adapt and innovate with technology in these areas will determine which businesses flourish and which ones lag behind in the dynamic and fast-paced digital world.