The scale of the digital challenge is daunting – so much so that business leaders can be forgiven for feeling like rabbits caught in headlights. But freezing is not an option. The digital revolution is firmly underway, as just a few statistics confirm: as of October 2019, almost 4.5 billion people now use the internet and nearly 3.7 billion people are active on social media, according to a report by We Are Social. In turn, the impact of this revolution has already been seismic. High street stores are shutting as shoppers switch online; newspapers have been eclipsed by digital media; and, according to CNBC, the five biggest global tech companies are now worth a record $5 trillion.
The risk of not planning for the future in this new world is that your business suffers its very own “Kodak moment” – the ill-fated company went from being the largest photography business in the world to filing for Chapter 11 bankruptcy in 2012, after failing to embrace digital technology, despite having been a pioneer in the field.
An agile approach
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How do you begin to plot a course through these unchartered waters? Business leaders are constantly promised that digital transformation will help them “do it better, cheaper and smarter,” enabling them to unleash exciting new growth potential and to accelerate past their competitors. But they’re also warned about the breathtaking pace of change – and in an unpredictable marketplace, the idea of committing significant resources to new technologies and business models is nerve-wracking: what if they are rapidly proved obsolete?
The answer lies in agility. In this new world, the most successful businesses will be those nimble enough to adjust quickly as the market changes around them. Growth in the digital age will come from qualities such as adaptability, creativity and responsiveness rather than from a big bet on any one technology or new direction.
The scale of the challenge
Digital disruption is an omnipresent threat and one that’s now on the agenda of every business leader, no matter their industry. Sectors such as retail and telecoms, where digitalisation has already resulted in the demise of big-name companies with long histories, have been in the front line, but this is just the beginning: the incumbents of every other sector must heed the lessons to be learned from the likes of Blockbuster, Kodak and Nokia.
One key threat is from disruptive new start-ups that are challenging conventional assumptions about what it means to operate in a particular industry, with completely new business models. But in addition, some incumbents are moving more quickly than others and becoming disruptors themselves. For every Amazon or Uber, there are myriad more established names changing tack and contributing to digital disruption.
It is worth reflecting on how much the marketplace has already changed. According to a 2018 Innosight report, in 1965, corporations in the S&P 500 index of leading US companies could expect to remain within this flagship benchmark for an average of 33 years. By 1990, the average tenure in the S&P 500 had narrowed to 20 years. It is now expected to shrink to 14 years by 2026. At the current churn rate, about half of today’s S&P 500 firms will be replaced over the next 10 years.
Something similar can be seen in the UK, where leaders of businesses in the blue-chip FTSE 100 are moving on more rapidly than ever before. Chief executives in the UK now spend, on average, fewer than five years in their jobs, down from more than eight years a decade ago, the Financial Times reports.
What’s behind this accelerated turnover? A great deal of it can be accounted for simply by the pace at which new technologies are evolving, and the sheer number of these technologies. Many business leaders have simply not been able to respond quickly enough to keep their businesses on track for future prosperity, or even survival. They've paid the price – and so have their companies.
Long-term planning in the digital age
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The need for holistic change
The problem for many business leaders is that they have not yet thought broadly enough about the future. To be effective, planning will have to take into account the most fundamental questions. Top executives may even need to consider whether or not they are still operating in the same business sector: which problems are they solving for their customers? They will certainly need to look at the opportunities that emerging technologies are creating and the business problems they might solve. And they will need to think about the capabilities they’ll require to realise these opportunities.
The bottom line is that digital transformation is not really about technology. It’s a challenge of strategy, leadership and new ways of thinking. The most difficult task facing businesses today is acknowledging that the strategy book they’re using – rules they may not even realise they have been playing by – is now out of date.
Moreover, while many organisations have begun to confront these issues, they’ve very often addressed only one element of their business, typically the customer experience. And while the emergence of new sales channels, for example, is certainly exciting, simply adding an e-commerce operation to your traditional business is not an adequate response to digital disruption, as many retailers have found to their cost.
Rather, the most forward-looking organisations are thinking more deeply. These businesses are considering how to digitalise their operating models, harnessing emerging technologies to improve the way they run their enterprises. Some are going back to basics - completely rethinking their core business model for the digital marketplace.
Time may be running out for less advanced competitors to make this shift. The most disruptive businesses are already using emerging technologies to remodel the very essence of what they do. And in almost every sector of the market, these firms are already having a huge impact.
To find out more about long-term planning in the digital age, download our in-depth report
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