It’s a Mad, Mad, Mad, Mad (Digital) World
Two years ago, the soothsayers at Gartner rightly predicted that we were entering a new era: the age of the Digital Industrial Economy. Digitalization is changing commerce, they said. No matter what industry you're in, every company is becoming a technology company, and we're going to build the future on a combination of cloud, social collaboration, mobile, and information.
Well, two years later we're in the thick of doing just that. And the importance of the Digital Economy has leapt off Gartner's pages. Everyone's talking about it – from the Wall Street Journal to huge industrial conglomerates to the city of Cleveland, Ohio. It's a seductive idea - if you can transform industries through digital technology, there will be so many more opportunities for innovation, revenue, and efficiency. After all, just look at the consumer world.
Apps and social networks have utterly remade civilization and earned a lot of money in the process. New ideas have more access to investment capital than ever before. Today's dream is to create a business that will propel you to incredible wealth. And a lot of people are reaching those dreams. So it's natural for industries and governments to want do the same.
The Digital Economy is where all the action's going to be. But the quest to get there is absolutely herculean. It requires the right combination of talent, infrastructure, willingness, and luck. And even then, like in the consumer world, it doesn't always pan out.
But the way some institutions are moving toward a digital economy today seems a little odd. They're treating the digital economy like it's a form of competitive advantage. Maybe it is, in the short run. But as more companies go digital, that differentiator won't last, nor will being digital simply be enough to sustain growth.
Instead, there's a far bigger picture to grasp. And it has to do with the dramatic way concepts like “competition” and “collaboration” are changing.
The Madcap Race to Treasure
In the 1963 Action-Comedy, It's a Mad, Mad, Mad, Mad World, a bandit wanted by the police for robbing a tuna factory veers his car off a mountain and crashes. As he's dying, five drivers stop to help him, and he tells them that he has a loot of $350,000 buried near the Mexican border. That sets them all off on a spectacularly crazy race to the treasure, each party trying to reach it before the others do, making alliances and breaking them.
Right now, the transition to the digital economy feels a bit like that overcaffeinated bonkers comedy. Everyone's scrambling to get to the treasure.
In fact, Professors at Tufts University (in conjunction with MasterCard and DataCash) recently developed the Digital Evolution Index. It shows where various countries are on their progress toward a digital economy. The results grouped countries into one of four categories:
- Stand Outs - Countries well on their way to digital economies
- Stall Outs - Countries who made a lot of progress early on, but have stalled
- Break Outs - Developing countries that have low but growing scores
- Watch Outs - Countries who have potential but also significant challenges
The Digital Evolution Index provides a really interesting insight into where the world is today. But it's also far too easy to take the wrong lessons from these kinds of reports.
The digital economy is not a madcap race to the finish. It's an inevitable change that's going to happen, no matter what. Treating it as a sprint isn't setting up for sustained growth, it's performing a hasty makeover that will ultimately create more problems than it will solve.
The Era of Gray Relationships
It's all too common to apply the classic notions of competitors or suppliers or financial backers to business today. What's becoming overwhelmingly clear is that in this age of digital transformation all those definitions and relationships are different. They're less clear-cut.
In the consumer world, for instance, it surprised many people to see Apple bring Microsoft on stage at its recent iPad Pro product announcement. Apple referred to Microsoft as experts in productivity, and let them show off a new version of Office made for the iPad Pro. Once sworn enemies, and in many ways still competitors, Apple and Microsoft are now also partners.
In the supply chain world, we've seen competing logistics providers like UPS, DHL, and DB Schencker accept that they share customers, and need to work with one another to make things run smoothly for everyone. Ditto for shippers who compete in the same industries, but collaborate on logistics innovations. And for buyers and suppliers and financial institutions who realize they need to help each other to succeed. They've all adopted technology platforms designed to help them collaborate better. And those various technology platforms themselves are learning to work together.
One of the amazing side effects of the cloud has been its ability to integrate well with many other clouds and types of software. There's a lot more flexibility and room for customized solutions than ever before.
Businesses can treat a single platform as a one-stop-shop for all their needs, or they can adopt a multi-tier solution that works for them. Even with something as organizationally-embedded as ERP, there's now a chance to have multiple systems work together - which, again, Gartner seems to suggest makes sense.
These kinds of solutions and partnerships do require some thought and consideration, certainly more than the quick, madcap thrust into the digital economy. But thought and consideration is exactly what you need if you want to succeed in the era of the digital economy.
It's not about a dash to the prize, it's about building a new marketplace with a strong foundation. And to do that requires understanding who your partners are, being open to new kinds of collaboration, and figuring out what tools you can use to move into the digital economy together, and prosper.