We are all familiar with Kodak, its incredible invention, and its not-so-incredible fall. The heydays of Kodak selling films earned them the well-deserved ‘Kodak moment’ glory. The glory that defined how success looks like. However, times change.
The digital era began, cameras went digital, and photos were being transferred and viewed digitally. Kodak witnessed the change. Attempts were made to cope with the changing times, but they fell short, the condition worsened, and the downfall began.
The situation was chaotic at the time. However, in the hindsight, the reason behind the downfall is clear; it’s the decisions that did not respond correctly to disruptive technologies.
If one thing to learn from this debacle, it’s that Digital Transformation is a must for organizations to stay relevant. It is mandatory for organizations to increase their agility and find a way in the fast-changing landscape of functional demand and value chains orchestrated in complex global ecosystems.
But what about the whirlpool of chaos that Digital Transformation could lead to? Should we enjoy the peaceful moments left, or is there a way out of this chaos? Let’s start with understanding the chaos.
Chaos, simply put, is ‘not knowing’.
Change from chaos to complexity
Let’s take a look at a cup of coffee. We have little idea about its exact temperature without a thermometer. Touching the mug or sipping the coffee (experience and insight) makes the temperature a bit more predictable, transitioning us from not knowing to knowing a bit. Thus, changing the situation from chaotic to complex, because we have a vague idea of what is going on, but still have to figure out how to determine the exact temperature
Dave Snowden defines this journey in his Cynefin framework. From chaos (cause and effect are unknown) via complex (unknown unknowns) and complicated (known unknowns) to simple (known knowns).
Digital Transformation will speed up the inevitable embarkment of your organisation into the domain of chaos and complexity. In the digital world, it is impossible to see all the cause and effect relations there for a complete journey back to the ‘Simple’ context of Cynefin will not be possible.
The need to be(come) digital
Be an espresso bar or a bakery, digital presence is a must to thrive. You will need debit card payment, Wi-Fi, power sockets, regular Instagram postings to create a vibe. Everybody, even governmental bodies, need an app, a website, a webshop and a brand experience.
Digital transformation is changing industries: internally through operational excellence and externally through customer experience, helping them reinvent their purpose and business model, all digitally.
Guess it’s evident: the need to be digital is paramount. If anything, we are perhaps already late.
See Capgemini’s report: “Changing rules of digital transformation”
See also the great book of Jean Ross: Designed for Digital
Entering the fast sea of emergent possibilities by Digital Transformation
Today, end-users are one mouse-click away from another service provider resulting in digital bank runs, also called silent bank runs (and also applicable for stock trading (2014) and ordering physical goods).
The freedom to switch between service providers and the free global movement of knowledge, technology and capital are facilitating swiftly (non-stop) changing organization ecosystems.
This results in Amazon podcasts threatening Small-and-Medium-Enterprises (SMEs), Estonia intimidating other European countries with their e-residentship and being a (safe) haven for their identity and tax. The world is going digital in every aspect, with both up- and down-sides. And unforeseen events can and will keep on accelerating the push to be digital.
The upside: your organization starts digitizing the touchpoints with the end-user and digitizing the value chain (for example, business processes) thus facilitating to reconfigure and implement change inside your company. The best example would be the companies that deploy an update in the app store every week and redistribute their load over cloud suppliers based on the best offer of that moment.
The downside: end-users have the same ease of reconfiguration with no novelty. Customers choose which of the four grocery stores will be selected to deliver the food at their doorstep along with deciding which bank will have their savings for the next week.
Everything is fluid. This makes the revenue and service usage forecast and the certainties in your business very unsure. A high influx of the usage of your services will have an enormous impact on your processes and systems. Are you ready for dynamic up and downscaling? Are you ready to switch the business functions of your organisation?
Editor Note: the content of the blog was written far before the corona Covid-19 virus pandemic.
Chaos is the result of connections
When enjoying a campfire, the random movement of flames and sparks can be chaotic, yet mesmerizing.
Digital transformation introduces a plethora of interconnected graphs. When your organization uses all the information in the world, it also connects the world. For example, basing the price of your flu-medicine in your webshop on the combination of the weather forecast. The flu trend from google seems very sophisticated, but also enables unpredictable behaviour.
The same is true on a business model level. Remember the Kodak scenario towards the beginning of this blog? The same scenario could arise for Netflix now that Disney has entered the digital streaming arena. Connecting the world is surely creating chaos, but it is also opening up new possibilities and opportunities. Understanding the need of the hour and taking corrective action is the right thing to do today.
When your companies embark on a digital transformation (sooner, rather than later), it is crucial to reorganize your organization and prevent chaos.
Change is not only constant, but it will also be frequent as we increase our connections. Creating a resilient organization to keep adapting is the only answer.
After two years of efforts, I am finalizing my thesis and research on antifragility and organisational design, and in the coming months, I can share the lessons learned on this topic on Sogetilabs.