By Paul Budde
My involvement in the ICT industry over the last 40 years has always been to look at the strategic advantages that new technologies have to offer.
I entered the industry through a proto-internet development called videotext. I looked at this technology, at what organisations could do with it, and assisted, for example, in the 1980s when the Commonwealth Bank introduced the world’s first national online banking service called Telebank (based on that videotext technology). From the 1990s this evolved further through internet-based technologies and beyond.
For approximately half of those 40 years, the technologies were basically used to improve existing businesses, services, business models, etc. However, from around the year 2000, it became clear that this was no longer good enough and that organisations would need to start looking at totally different business models. In those years I talked about the need to use these new technologies to build totally new products and markets.
Some of you might remember my persistent advocacy with companies in the telecommunications and entertainment industries to make such quantum leaps. Telstra, for example, talked about regulations to stop the internet, claiming it would undermine the reliability of the telecoms network (AT&T protested along similar lines in the USA). In the 1990s I predicted that Foxtel would never reach its goal to achieve 75% penetration by the year 2000. I challenged Telstra to combine their Sensis business (Yellow Pages) with BigPond and Foxtel to create a truly Australian digital media company. I also criticised the walled-garden online services that telcos and broadcasters launched during the late 1990s.
What I basically want to highlight here is the difficulty that organisations experience in really using new technologies to transform themselves — not using them to just improve their existing business but to create new ones. It is for all to see what the digital giants have been able to do. They disintermediate, disaggregate and dematerialise value chains and have disrupted traditional models of production and distribution.
What has disappointed and frustrated me is that the traditional companies which most certainly had the expertise to similarly benefit from these new technologies have largely been unable to create new values for them.
Key reasons for this are that they were more focused on protecting incumbent businesses and did not have the culture to allow for more risk-taking; nor did they have enough internal people empowerment that would have allowed for this, as well as for increased innovations (e.g. by accepting that at least 50% of these would fail) and embracing community and crowd engagement. The enormous shift alone in skills required for this new environment should be addressed with great urgency by enterprises, educators and government, and draconian immigration rules are creating a significant global competitive disadvantage.
These negative factors are still largely driven by the current economic and financial structures that are focused on short-term shareholder returns rather than long-term, broader stakeholder returns, apart from delivering a positive performance, in order to prosper over time, a company will also have to deliver a positive contribution to society.
Based on progressive forward-thinking company strategies and government policies, over time the value gained would result in higher values for the organisation. For instance, compare the declining values of the traditional telcos, broadcasters and retailers with the skyrocketing values of the new digital companies.
As a country, we would reap the economic benefits of this, and this, in turn, would provide for the taxes needed to run a modern society.
I was triggered to review the above when attending a very interesting brief from Optus Business on its recently launched report ‘Enterprise 4.0: a blueprint for success in the fourth industrial revolution’.
What worries me is that in this report, published in 2018, we still see the same problems as described above — problems that I have been reporting on for the last 20 years. According to its author Rocky Scopelliti: ‘A discord between digital perception and priorities widens the gap between Australian enterprises and consumers’ shifting expectations’.
The digital giants of today such as Google, Apple, Facebook, Amazon, Microsoft (GAFAM) and Baidu, Alibaba, Tencent, Xiaomi (BATX) — which I mentioned in a recent analysis — are described by Singularity University in the USA as exponential companies, with a disproportionately large impact (or outputs) — at least 10 times of their traditional peers — and this exactly what I mean about the benefits of true business model transformation. The operations of these companies are totally led by data. Analysing, managing and successfully using that data is what has made them so successful. Interestingly it is cyber surveillance that has been the key commercial driver behind this development (I will come back to this later).
With such strategies in place these companies have been able to achieve — according to the report:
- Multi-sided markets;
- Hyper-scaled platform orchestration;
- Network market places; and
- Next generation communication infrastructure.
The tools to achieve this have been available for about 20 years, when these new digital companies started to appear. True, they have become more sophisticated over time and have developed into what the report now describes as:
- Big Data, Analytics and Algorithms;
- Application Programming Interface (API);
- Artificial Intelligence (AI);
- The Internet of Things (IoT); and
- Advanced wireless networks.
Interestingly, the report also states that the traditional companies clearly understand the problems they are facing, and they also are well aware of the technologies that are needed and available; yet, sadly, they have been unable to carry out the transformations necessary to bring them up to par with the digital leaders. Typically, the traditional enterprises are trying to be new businesses while still operating with traditional methods, and as a result, they miss out on speed to market, scale of operation and market impact.
While I would argue that the main reason for the ineptness of traditional companies to truly transform themselves is the fact that they are kept hostage by the current neoliberal economic model that favours short-termism and punishes strategies based on broader stakeholder returns, long-term strategies based on risk-taking, business model transformation, disintegration of company structures, and all the other elements that are crucial for change.
It is also important to mention that digital transformation based on neoliberalism (instead of broader stakeholders return) could also pose a threat to society. It can equally be used — as we saw in the recent Banking Inquiry in Australia — to undermined internal processes.
Additionally, in the rush to face off competition risks were taken that destabilised markets and more industry concentration could lead to an increase of too-big-to-fail companies (especially in the financial and ICT sectors).
We also need to listen to the 116 global leaders — including the late Stephan Hawkins and people like Bill Gates and George Soros who urged the United Nations, governments and society against the threat of weaponizing AI and robotics and act before the tech world opens this box of Pandora.
These are very serious digital governance issues and action is required, but at the same time, I would argue that on the positive side there is a new opportunity for organisations to become exponential organisations and provide societal returns through digital transformation.
High on the agenda of almost all enterprises now is cybersecurity and there is a clear link to cyber surveillance (data analytics, etc) that as I mentioned was a key driver in the development of these tech giants, so lessons can be learned both positive and negative. On the one side we have the transformational power of our hi-tech tools and on the other side the need for cybersecurity including privacy and insurances to deliver positive societal outcomes. As we already see at some of the financial institutions, they are now dramatically overhauling their total ICT systems partly as a result of the Banking Inquiry — in order for them to adhere to their societal obligations and other sides to increase cybersecurity — including better privacy protection — these issues have now risen to the attention of the highest levels in these organisations and this is positive as true digital transformation will have to be led from the top.
There is now a golden opportunity to use this momentum to truly transform underlying business models and operational structures, all enterprises — not just the banks — should carefully consider these developments as there are indeed indications that some serious transformations are starting to happen. See also: Cybersecurity is failing big-time and this is hard to fix.
Written by Paul Budde, Managing Director of Paul Budde Communication
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Read more here:: feeds.circleid.com/cid_sections/blogs?format=xmlPosted on: January 31, 2019