The Next 5 Years: Leading Digital Transformation

In his speech and conversation with Christine Miles, Rob Wolcott explains how we have crossed the digital Rubicon as a result of this crisis, and the urgency and essential nature of digital transformation is right now. When Julius Caesar had crossed the Rubicon River, he had practically declared war on the people of Rome and everyone knew that day, that there was no turning back, and with this current crisis we too have an example of no turning back. As a result of this crisis, we have crossed the digital Rubicon. If before, anyone was unsure about the urgency and essential nature of digital transformation, that must be over right now. Scott Galloway referred to this event now as the great accelerator, so it is not that these trends are new. These things were all developing for some time at various rates but this crisis accentuated it and punctuated it. In this crisis, many companies have been able to experiment at scale. For example, Underwriters Laboratories (UL) gives standards-compliance certification and recertification on a regular basis through unannounced random audits. This has always been done in person, but a few weeks ago, the UL teams realised that in-person auditing was not always possible. They decided to put online as much of the operations as was possible and were able to deliver audit certificates to customers in two weeks. From the point of the inception of the idea to the point of customer-delivery was a mere two weeks. Even though there were initial pushbacks from team members, they recognized the urgency of the situation, they decided to try it, and through their experience discovered that they liked it better. Secondly, the customers too preferred the online audit. As UL’s CEO Jennifer Scanlon explains, in normal times, it would have taken more resources, more time, and more doubts troubling people about how things could go wrong, and even after a year, things wouldn’t have been getting any farther. Hence, in this crisis, they have been able to experiment at scale. While experimenting in small ways to gain knowledge and resolve uncertainties, and then scaling up after resolving uncertainties is the right thing to do, the reality of the situation is that we are forced to experiment at scale now. During this environment, all the leaders should think about the things in their lives, their companies, and their teams that they can actually attempt to improve, make more resilient, more customer-responsive, and experiment with that at scale. As a result of this crisis, we have crossed the digital Rubicon. If before, anyone was unsure about the urgency and essential nature of digital transformation, that must be over right now. The next five years will define the winners and losers across industries because of the role of the 5G telecommunications technology. They are a step-change that will bring about a paradigm shift across all industries because of the radical increase in speed, which unlocks a range of opportunities that never existed before. Extending this Rubicon, I present a little bit of foresight as to where digital technologies will take us, which is something I call ‘Proximity’. It is driven by digital technologies writ large like the internet of things, artificial intelligence, data analytics, 3D printing, and rooftop solar energy generation. These are not digital per se but definitely digitally enabled. As a result of the distributing nature of these digital technologies, we can push the production and provision of value (of products and services) ever closer to the moment at which they might be demanded. Customers would naturally choose those that can provide them with whatever they want, wherever they want, and whenever they want and digital technologies help us do that efficiently. It is because as we go up the learning curve, we’ll be able to use these technologies more effectively to respond to the moment’s demand, and over time, it will become much more efficient. Amazon is a great example; for the past few years, they have been doing anticipatory shipping wherein they watch the online behaviour of customers and send the most looked at product to the distribution centre near the customers’ house before the order is even placed. This is one of the reasons they are able to deliver some of their products in 24 hours. Now, tweaking your processes to reduce the distance between value creation and consumption is not enough. Someone can always swoop in with an innovation that outruns yours and all your time and efforts would be wasted. Incremental steps will never take us to transformational change, no matter how long we do them, so we have to figure out how to be far better at this. In terms of manufacturing, there is a global supply chain optimised for scale manufacturing at a distance. Generally, the larger the plant, the lower is the cost and this has been true for the most part, for a couple of hundred years now. Gradually, this model of high-efficiency large plants at a distance will be ripped apart. Of course, there will still be large plants 30 years from now where that is most efficient and effective, but we will also start to see mid-sized instantiations closer to man. We are already seeing versions of this with reshoring; automation is enabling it as well. We’ll start to see productions of various things in neighbourhoods and closer to home and eventually, on our counters at home for certain kinds of products at least. 3D printing is a concept that people will eventually start to try and the idea of producing a product at the time of consumption would eliminate the need to produce it at a large scale and storing them at a warehouse, which only increases the working capital cost. This way, 3D printing or value creation at the time of consumption will create more economic sense. This is how the paradigm starts to shift. Paradigm shifts are enormously difficult. Electric vehicles, for example, failed for 120 years. For long, people said they would buy an electric vehicle when there’s suitable infrastructure, when there are charging stations at every corner. However, by the year 2025, electric vehicles like the Tesla X will be able to get 1000 miles on one charge. It may or may not come to fruition by that time, but when it does, no one would care for charging stations. We humans take a new thing and cram it into an old paradigm, and we have done it over and over again. In fact, the first TV show was a radio show on TV and it took 15 years to figure out that a show could be staged and edited, and then be telecast on the TV. It was not a technology constraint but a mindset paradigm constraint. So, what can we do now? There are a few things we can each do right now to help prepare for the future and navigate through the crisis. Firstly, consider this notion of proximity, and pick an offering from your organization/company. 25 years from now, that value (not to be confused with the product or service) can be produced and provided the moment at which it might be demanded. What insights might that generate about opportunities that you might have for change in the future? A second thing I’d recommend is to focus attention. The most limited resource we all have is the attention of our best people. Choose a person or a team depending on the size of your organization whose responsibility explicitly is to think about post-crisis and not only make it their responsibility and share that with them and support them in that, but also make it clear to everyone else at the organization that that is what they are focused on. They obviously need to keep in touch with crisis response but the people need to know that they are focused on what’s next so we don’t get too focused on the near term and miss what comes after. As a result of the distributing nature of these digital technologies, we can push the production and provision of value (of products and services) ever closer to the moment at which they might be demanded. Finally, consider your people. State Street Bank’s Chief Marketing Officer Hannah Grove and Chief Resiliency Officer James Hardy came up with the 5 C’s to help navigate this crisis – Care for your people, Communication, Clarity about what we are going to accomplish and why we are doing it, Collaboration which comes from the previous three points and finally, Calm. Christine Miles in Conversation with Rob Wolcott Christine Miles: What do you think is the greatest mistake that people could make amidst this crisis? Rob Wolcott: There are many but we can’t be too hard on ourselves because these are unprecedented times in our lifetimes. One big mistake though is the inclination to fall in on ourselves, to protect the core, to cut to continue on to live, to fight later. We do have to do a lot of that, but if we do only that, then we are utterly behind when things turn in the future. We have to allocate some of our attention, some of our people’s attention, and some people dedicated to that because if you have 10 people on the team, for instance, and each has 10% full-time equivalent (FTE) on something, that is actually not equal to one time FTE but a negative FTE, because now we are all distracted. We need to therefore make sure that at least some of our great people’s attention is on what comes next. Miles: Where do you envision holographic technology going? Wolcott: Holographic technology is not so business-focused right now but it will start to have some business-relevant applications over the next three to five years. In the area of holographic technology, Moran Cerf, a neuroscientist at Kellogg and I have been working on this notion of post-virtual for a while. Post-virtual is defined as the point after which we cannot tell experientially the difference between virtual reality and default realities. It is not yet a possibility two years out, but in 10-20 years, we could reach this post-virtual inflection point. Miles: Do you think CEOs are wired to think about the proximity concept? Wolcott: A few are. Usually, the start-ups are trying to transform the industry or the world, but most incumbent company CEOs are not. Some are getting better at it, but a CEO of a large incumbent organization doesn’t get where there are by being crazy all the time. They get there by knowing the business, doing it really well, building it, and optimising it. The problem is we do too much of optimising, thereby eliminating all of our optionality on the future, and so, to think about transforming a business process for proximity requires building optionality and protecting that even in the face of optimisation, and especially in the face of a crisis. Miles: Is there a negative consequence of proximity of supply? Does it reinforce deglobalisation that we should be worried about? Wolcott: It could, but it is too early to say for sure. Proximity itself is a notion and a capability set and as with all technology, how we use it is the question. In the case of a crisis like this, most of us would agree that we need more production of pharmaceutical drugs here in the United States. That’s clear to us now if it wasn’t before, but does that also cause a sense of caution and the ability to shift production away from this global system? It does, but I want to be cautious about that notion. It is a much more complex dynamic. To give a historical example, when PCs were first catching fire in businesses and all the documents became electronic, people talked for years about the paperless office. After people had PCs and printers, they actually printed more documents, and we ended up with more paper. Now, we are coming back around and starting to see things move to the cloud. Sharing DocuSign, for instance, has mercifully eliminated the requirement to print something out, sign it, scan it, and email it back. These factors are very dynamic and it is not a unidirectional process. Miles: Do you see any specific breakthroughs in the home-building industry? Wolcott: Absolutely nothing. There are few industries that have been less disruptive than the construction industry. There are some exceptions and there are some glimmers of hope or threat, depending on your perspective, but home and industrial construction look very similar to the way it did during the Roman empire. However, a lot of innovation is happening in developing countries that we don’t think about or worry about and it is coming back to us. For example, prefabrication of components or portions of a building has always been considered as a cheap option, but there is no reason why they couldn’t be luxury components. We can use them and then increase the efficiency. Furthermore, with 3D printing, you can carry more and more of the made-fit-to-order, so I do see glimmers of hope. Very little has happened at scale yet. 3D printing is not ready yet. There are a lot of things standing in the way, like building codes and union-vested interests, etc. but that is an opportunity for people to take on. Miles: How do you envision people finding their place in the future, after this crisis? Wolcott: I’d like to see a return to the notion of love during this crisis and beyond, and not just with our families and loved ones, but with our colleagues at work, with customers, with each other in civil society, which is breaking down. Let’s re-find and redefine what love means in each of these places. If all of us, or even many of us try to do this, the future will be quite a bit better than it looks today.

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The Next 5 Years: Leading Digital Transformation

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