by Mark Schwartz, Enterprise Strategist at Amazon Web Services
Every Board of Directors should be asking their executive team how they plan to deal with digital disruption. Even if a company is not yet facing disruption, it soon will be. Leaving the outcome up to chance or just doing the bare minimum to ride the wave is not a viable option.
Your competitors may have an upper hand when it comes to speed or access to new technologies, data, or business models, and customers are changing their tastes and expectations, which will bring about a shift in the industry dynamics. Additionally, the increasing importance of digital interactions, changing consumer preferences, and product extensions from competitors are already at scale … well, there are numerous factors that can threaten an established enterprise.
While every one of these changes represents a potential hazard, it also opens opportunities. If consumer tastes are changing, figure that out faster than your competitors and adapt your product line. If customers want digital interactions, outclass your competitors with better digital offerings. There is no reason why you can’t respond to market changes better and faster than your competitors, whether they are established enterprises or bright-eyed startups.
Hang on – actually, there is. As an established enterprise, you’ve probably done a great job of setting yourself up to do what you did yesterday, and to do it well. You’ve optimised your processes, hired the right people, built the right culture, and set up the right controls—for doing what you’ve done until now. In the present climate, all of that can hold you back from seizing new opportunities, responding to competitors’ moves, and swatting away pesky new players in the scene. It seems to be a law of nature that established enterprises will need to reconfigure some of their practices if they want to be able to change quickly in the future. That undoing and redoing is what everyone has been referring to as ‘digital transformation’. And it’s tough.
To survive digital disruption, you need just one thing: agility. Agility, in my definition, is your ability to anticipate the market changes you’ll need to respond to (either because they present an opportunity or a threat or both), quickly formulate innovative responses, test those possible responses to select the right one and to refine it, and get it to market quickly. To put it another way, you need to make change cheap, fast, and low risk so that it’s something you can do over and over again.
Enterprises are usually optimised for stability; now they need to be optimised for agility. You need to learn to mitigate risks through fast experimentation and hypothesis-testing. Instead of hiring specialists in the areas that were important to you in the past; now you need generalists who can adapt to new situations quickly and efficiently. You’ve built a governance process to control your investments that’s slow and heavyweight (costly); now you need a bias for action within guardrails that maintain compliance, security, and financial responsibility.
Then there’s technology. It’s odd that we’ve gotten used to technology initiatives taking years and running over budget and behind schedule. It’s odd, because of all the investments you can make, software is the one that’s fastest and lowest risk. Writing software doesn’t require capital-intensive upfront costs, like building a factory does. You can begin using new technologies like machine learning, analytics, or augmented reality in just moments by procuring them in the cloud. Software is easier to change – or produce – than hardware. Or should be.
Even IT hardware has become fast, inexpensive, and low risk to procure. The cloud makes it possible for an enterprise to provision the physical stuff it needs in moments, and change that infrastructure at any time, again just in moments.
So, it’s a bit surprising when IT initiatives hold enterprises back from having the agility they need to survive disruption. This is perhaps less surprising when you realise that the IT systems companies are using are decades old, based on antiquated technologies, and patched together over time as incremental changes were made to keep up with changing needs.
There are a few more subtle reasons why technology is often the limiting factor in organisational agility. The first is that, traditionally, companies have organised their IT initiatives into large projects with heavy governance. McDonald’s built a home delivery mobile application in the cloud in just four months. Could your company even have collected and documented requirements, built a business case, had it approved, set aside a space in the office for the project team, made a project plan…and done all the other things you require before starting the technology work, in just four months?
A second business reason why technology might limit agility is that agility itself has never been much of a value before. The business case for agility has always been a hard one to make – it’s an investment in being able to make future investments at low cost, low risk, and high speed. After many years of downward pressure on IT budgets, agility is the source of value that has probably suffered the most.
Today, technical agility is on sale. You now have the cloud available to you, well-established methodologies like DevOps, lots of open source options, and programs that might help you extricate yourself from vendor relationships that limit your agility. The return on your lowered investment in agility is likely to be impressive.
Technical agility is one thing – you still need to build business agility by adjusting the way you manage IT business cases and governance; that is, your ability to direct resources quickly and flexibly to respond to market events. And you need to deeply involve your technologists and their creativity in addressing changes in your business environment, because many of those changes have to do with digital technology and responding to them requires masterful and inventive use of the tools now available.
How do you survive disruption? There is only one way: by becoming agile.