Digital transformation and the age of abundance
The age of digital resource abundance is something that’s difficult for many leaders to really comprehend and embrace. We need to change that.
I’m basically a dinosaur.
The good news: I realised a couple of years back that I was a dinosaur, and I’ve been evolving furiously.
Let me explain.
I’m 47. I started playing with computers in 1981, and started earning money from computers in 1990.
Everything I learned in my first years of playing with computers, and then through all of my formal studies and most of my subsequent employment, was rooted in one fundamental assumption:
Digital resources – CPU cycles, memory, network packets, disk space – were ‘expensive’. Nothing was to be wasted.
Analyse and design exhaustively before programming. Create a formal spec.
Verify code by eye before compiling.
Encode and compress data as far as possible before storing it, sending it over a wire or passing it to another process.
Once you’ve got something agreed and working, resist changing it for as long as possible. When things change, they usually break – and fixing them is slow, complicated and risky.
Keep things simple. Minimise the number of moving parts.
And so on.
Everything I knew and felt, right to my bones, was rooted in that assumption – even if I no longer really thought about it consciously. Digital resources were scarce, and human resources (developers, admins, analysts, and also the resources of all the people who would be using our software) were by comparison abundant.
The battle of two mindsets: scarcity vs. abundance
You know, it used to be said that the modern world of business competition was about “the big vs. the small”. And then Jason Jennings and Laurence Haughton pointed out (in their 2011 bestselling book) that no, it’s really about “the fast vs. the slow”.
I think it’s a bit more subtle than that. In this era of digital disruption and with interest in digital transformation all around us, the new competitive dynamic is about a scarcity mindset vs. an abundance mindset.
One one side are those organisations where the default assumption underlying how things get built and run is that digital resources are scarce (and human resources are comparably abundant).
On the other side are those organisations that have flipped their thinking – organisations that by default build and run things based on the assumption that digital resources are abundant (indeed, in many cases they’re approaching infinitely available) and by contrast, human resources should be treated as if they’re scarce.
The big challenge here is that the vast majority of technology and business leaders of sizeable organisations the world over are my age or older. Trained dinosaurs.
Thinking radical thoughts
When you really embrace the idea that digital resources are abundant, you start to find it natural to think thoughts like these – thoughts that for many, still seem radical:
- We can scale out infrastructure as much as we like. Replicate our platform services and our application services and if any instances fail, well… no stress.
- We should create and manage APIs for many of our internal resources, not just public services we want to offer – even though we know it creates a lot of system and technology overhead… because we’ll get more agility that way. With APIs we can create our own internal platforms that we can iterate around.
- Let’s experiment. Rather than building one thing, let’s build multiple variants, run them in parallel and see which works best.
- Let’s log everything, analyse them continuously and mine them for improvement opportunities.
- Let’s build things in the full knowledge that we will throw them away.
- Can we procure ‘digital environment’ data (from the public domain or from other commercial sources) and combine it with our own data that might get us new insights or power new products?
- Rather than imposing change on an unsuspecting organisation, let’s instead look for emergent strategies that come from engaging our workforce.
Netflix is not the answer
Now you might have completely internalised all these kinds of ideas already, but I’m here to tell you – based on recent conversations I’ve had, an awful lot of organisations haven’t got that far. It’s easy to say “we want to be like Netflix”, but very few people are prepared to embrace what that means (quite apart from the salaries involved).
Now of course, as well as embracing the reality of what’s technically possible with the economics of new digital technologies and platforms, it’s vital that you also balance this with an understanding of your natural limitations – organisationally, culturally, and financially. This is about taking into account everything from your organisation’s existing skills, resources and business model, to its industry context.
Not everything makes sense everywhere, when this balance is taken into account. For example: some capabilities in your business need to be supported by systems that are primarily managed for stability (anything where the execution of operations is directly impacted by industry regulations). But an awful lot of ‘digital thinking’ makes a lot of sense in a lot of places.
The kicker is that the places it makes sense are not universal. What makes sense for your organisation is not what will make sense for the next organisation we work with.
For your organisation, the most line of strategic enquiry might be around taking advantage of the resources of your customers: perhaps building a multi-sided platform business model or perhaps outsourcing work or processes to them. For the next organisation, the best tack might be to explore how you can enable a new kind of partner program. Or to create digital complements to your physical products, and use the data generated to build products with a better market fit and improve your market position. Or to radically increase the visibility of flows across your supply chain. Or something else.
Every organisation’s (and leader’s) evolutionary path will take them in a different direction. There is not one destination.
Nevertheless, despite the uncertainty involved, I don’t recommend waiting long before starting your journey.
Footnote: thanks to all the other MWD Advisors analysts, who reviewed a draft of this note and helped me improve it significantly.