Digitalisation is a mega trend that will influence the building of future society. As a mega trend, digitalisation has the ability to find ways to bypass any obstacles and resistance in its path to influence tomorrow. But many companies and organizations try to resist mega trends in different ways with the illusion that it is possible to contain the digitalisation. History tells us that this is not possible, and any such attempts are doomed to fail.
During the last couple of hundred years, there have been several global mega trends and events that changed the world order. Liberalism, founded on the ideas of equality and liberty, evolved in the Age of Enlightenment and was defined by John Locke in the 17th century. The mega trend of Liberalism travelled quickly in Europe (and to the rest of the world) through secret meetings, newspapers and general word of mouth. The force of liberalism was a grass-root movement that erupted and could not be stopped – despite attempts by various rulers and governments. Attempts to contain the mega trend liberalism resulted eventually in revolution, great wars and the crash of empires eliminating all resisting forces. Most mega trends cannot be contained. Those who quickly grasp the potential and find new ways to leverage the new ideas will thrive. Those who try to resist (or don’t acknowledge the shift in market/society) will by all certainty be phased out. History tells us this and current mega trends are no different.
Digitalisation is not a technical evolution but rather an industrial and social revolution driven by citizens and customers. There are endless possibilities to change the way we live, work and communicate with new technology. Change is appearing at a speed we have never seen before. Even our social and political structure will be adjusted in some way by digitalisation, globalization and urbanization mega trends. What is important is that is that the mega trend force cannot be stopped – it will find new ways to disrupt. One interesting example is the streaming or peer-sharing (bit torrent) of media. It is a movement enabled by new digital technology and challenges the social, legal and economic structure of the society. People can share protected content through the internet without any cost. Media content became worthless overnight. The over-mature media industry is severely challenged by new digital movements. The question I ask myself, without going into the ethical dilemma, is whether this movement can be contained by legal actions? Sites can be closed, but if the force is great enough, the digital movement will find new ways to disrupt. The media industry does not have a chance stop this mega trend. We can see the same trend with other movements in Uber, Airbnb, Ryanair, Skype, Spotify, etc. We saw taxi companies in uproar against Uber demanding legal actions to stop the new digital company. The result was taxi companies adapting new digital business models and focusing on customer experience to compete with Uber. The “traditional companies” decided to follow the digital movement to survive. The traditional players trying to protect a status quo in the industries does not stand a chance. Why resist?
When studying companies (in various industries) in detail, we notice that “digital companies” differ from “traditional companies” in the way they are managed and governed. The “digital companies” have customer experience and the rapidly changing market as starting points for corporate governance. These are vital characteristics of corporate governance to survive in digital markets where change is fast, fierce and the future. Speed is built into the company’s DNA to quickly respond to new customer demand, competition or trends. The question is often how to minimize governance to allow for innovation and creativity in product units working close to customers. Too much bureaucracy, processes and control will have the opposite effect. However, “traditional companies” have been built in a different, predictable and slow, market condition, one where productivity, stability and control are the starting point for the corporate governance. Bureaucracy, processes and control are its vital management system to survive and give the shareholders and market analysts a predicted performance. When the “traditional companies” clash with the digital market, with “digital companies, ” the outcome is uncertain. In fact, most of the “traditional companies” will not survive the digital revolution because they simply cannot handle the speed of change.
It takes a “traditional company” 18-24 months to react to a digital trend. What can happen in that window of time? What can Google do in that time?
Business has no sentimentality. Companies that cannot compete will be phased out without mercy. Companies that learn how to align with the new market prerequisites will prosper. What is remarkable in this industrial revolution is that many “traditional companies” resist the digital mega trend, often by legal actions in order to keep their “traditional” corporate governance or pretending that it is still 1985. We all know how that is going to turn out. Even though companies acknowledge the need for speed and agility, most companies keep their traditional corporate governance system. Digital transformation is not about technology but rather about leadership, change and governance all captured in corporate governance. Those who understand this paradigm shift have a chance to survive. Still most “traditional companies” regard digitalisation as a technical evolution and not a management and governance revolution. They should be ready to be phased out!
To transform one’s corporate governance system is probably to most a daring and challenging task to undertake. I fully understand that many senior executives resist any change of the corporate governance system as it might jeopardize the company’s performance and their own position. Why embark on a journey into the unknown when the current system works quite well? What if the market predictions are wrong and we embarked on a devastating journey for no reason? How can we motivate our staff to be part of the change journey after decades of heavy control and demotivating positions? These questions are relevant, but I would probably ask myself, what if we don’t change?
There is always short-term resistance to mega trends that might pause the movement for a brief moment of time but will never be able to stop the movement in the long-run. Rhetoric to make countries or companies great again are only attempts to stop or pause a mega trend from changing the world community. What we have learned from history is that going back to the old ways never succeeds, it is not possible. Only those accepting changes and the new pre-requisites (and deal with the fear and frustration of change) of competitiveness and society will succeed. Will you?