Jack Welch, former CEO of GE, once predicted, “When the rate of change outside the company is greater than the rate of change inside, the end is near.” Yet in my role as business advisor, I often see companies naively ignoring this reality.
The smarter ones look outside regularly for evidence of impending change, and treat these as opportunities to jump ahead of competitors.
Today, the move to digital technology is driving marketplace change at a seemingly ever-increasing rate. The pervasive internet and mobile device access allows instant communication of new options, total sharing of customer experiences, and mass customization, on a world-wide scale.
No more hiding behind a cultural stereotype, a well-built brand, or a geographic wall.
The question every entrepreneur and business executive should be asking is what are the drivers of the digital transformation, and how can you make them opportunities rather than costs.
I found some real guidance on these questions in a new book The Digital Helix by Michael Gale and Chris Aarons, who have helped change the strategy of dozens of companies around the world.
I endorse their list of the seven key drivers of digital opportunity, how to recognize them, and examples of how forward-thinking companies have capitalized on them, which I paraphrase and summarize here:
1. Compression of supply and demand enables near instant fulfillment.
Historically, many businesses profited from the time lags between supply and demand by exploiting geography, relationships, and buying habits. Today people can find and switch brands based on delivery, prices, and new features, with one or two clicks and minimal risk.
2. Shifting demographics changes customer needs and expectations.
With simpler and cheaper access to information and alternatives, the cultures and generations are rapidly becoming more homogeneous. Demands and expectations change regularly as people learn from others who share their experiences in this new digital age.
3. Access to more information is leveling the market playing field.
Almost anything and everything is available online, and the amount and depth of information is growing exponentially every year. This means market changes in the world today are instantly available everywhere, and quickly change the way we buy, sell, interact, and live.
4. Pay-as-you-go provides infinite ability to scale every business.
Due to the efficiencies of digital, it is now commonplace to have companies with billions of dollars of revenue and valuation, with few employees, and without years of building infrastructure. Witness the exponential scaling of Uber, Pinterest, Airbnb, and other recent unicorns.
5. New competitors are built to be digital from day one.
Think about the up-and-comers during the past decade that have either created new business models or stolen share from established players. Digital gives startups the same power to understand, engage, and look for new opportunities that traditional brands have spent decades building.
6. The rate of change is extremely exponential.
In the past century, the benchmark for disruptive change was about thirty years or so. Now evolutions and even revolutions are happening within years, or at most a decade. In this digital age, you need a business capable of listening, assessing, and adjusting to the early nature of these changes.
7. The trade-offs between price, efficiency, and innovation have disappeared.
Basic business theory states that businesses have three clear paths to success: cut prices, be more efficient, or invest in sustained technological advantages. Digital enables you to do all three simultaneously, and you must build a plan to do so to compete or die.
The message here is not about recklessly abandoning what you have, or taking huge steps into the unknown. Rather, it is much more about building a strategy to recognize change from early signals, and quickly transform your company to gain significant benefits from the change.
The alternative is continual catch-up, and your eventual demise. How tired are you feeling today?