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Digital Disruption: Sounds Like Just Another Buzzword—Until it Happens (Part 1)

Roland Alston, Appian
April 4, 2019

Mike Wade, Professor of Innovation and Strategy at IMD, Lausanne, Switzerland

(This is the first installment of a two-part series featuring Mike Wade @mwade100, author ofDigital Vortex: How Today's Market Leaders Can Beat Disruptive Competitors at Their Own Gameand Orchestrating Transformation.In this timely series,Wade reveals how to deal with digital disruption and successfully execute a digital transformation strategy.)

The internet is full of horror stories about disruption which is killing off big companies faster than ever before. In fact, we now have a situation where the lifespan of a company on the S&P 500 has dropped from 60 years in the 1950s to less than 20 years today, according to Credit Suisse.

Everything from products and services to the entire value chain is being digitized by disrupters. Surviving and thriving in this volatile environment means getting digital transformation right which brings us to Michael Wade,a Professor of Innovation and Strategy at IMD Business School in Lausanne, Switzerland and Director of the school's Global Center for Digital Business Transformation.

Drawing on years of research and many conversations with thousands of senior executives, Wade takes us to school on why traditional approaches to business transformation don't work and offers pragmatic tips on how to build agility to anticipate threats, sense opportunities and take advantage of disruption before your rivals do.

Hope you enjoy the interview.

Appian: So, give us a quick rundown of IMD and the Digital Business Transformation Research Center.

Wade: So, IMD is a business school based in Switzerland. Within the world of business schools, we're focused almost exclusively on executive education. So we have a few thousand executives coming through the school every year doing short-term training on strategy, marketing and leadership. So I'm involved in a lot of the digital transformation programs that are offered. I also direct the research center that you mentioned.

Appian: You've talked to thousands of senior execs. What are they saying about digital disruption? Are they worried, skeptical?

Wade: So, it's a moving target. When we set up our research center four years ago, executives were curious and interested in learning more about disruption. They'd heard about it and seen the effects of Uber and Amazon. So, they wanted to learn more about the potential impacts on their organizations. But they were cautious. But that has changed quite a bit in the last two years.

Appian: In what way?

Wade: We don't have to convince them anymore that disruption is a potential threat or opportunity. We don't need to convince them that they need to transform. They're not coming to us with those questions anymore. What they're really concerned about today is how (to get transformation right).

Appian: So, you're not hearing a lot of skepticism?

Wade: No, they (senior executives) know they need to transform, change and adapt and become more agile. They just don't know how. So a lot of the questions we get today are around implementation and execution. And that's where we're really spending most of our time these days, helping executives understand how to respond to the opportunities and threats that digital disruption brings.

More C-Suites Eyeing Disruption

Appian: So, sounds like you're seeing lot less skepticism today than in the past.

Wade: I wouldn't say that's true across the board. There are still plenty of executives who are skeptical and rightly so because there's a lot of hype. So, most of the smart ones are trying to figure out what digital transformation really means for them.

Appian: Which leads me to my next question. I was fascinated by the arguments you make in your book: Digital Vortex and How Today's Market Leaders Can Beat Disruptive Competitors at Their Own Game. What motivated you to do the book, and what are the key takeaways for senior executives?

Wade: The research really compares attitudes towards digital disruption over a two-year period. And what we see in the results is a really big shift between 2015 and 2017 in attitudes that executives had towards digital disruption. In 2015, companies weren't really feeling the impact of it head on unless they were in industries like retail, media or telecom.

But by 2017, things had changed. Sometimes executives were feeling disruption head on and sometimes peripherally and so their attitudes were changing. For example, we asked executives when they expected to feel the impact of digital transformation.In 2015, only 15% thought digital transformation was already happening. In just two years, that number jumped to 49%. So, almost half of executives felt like digital transformation was happening now. That s a big change.

Appian: What else did your research reveal?

Wade: We also asked about the significance of the impact of disruption, and less than one percent thought the impact would be transformational. In 2017, that number jumped to 31%. In 2015, only 23% execs thought the impact would be minor. In 2017, that number dropped to just 4%.

Appian: So, what do you make of that shift in mindset?

Wade: Well, I certainly think there was a lot more media coverage of digital disruption. It's difficult to pick up a newspaper or go online without seeing a story about disruption. So, I think disruption is more "in your face" with executives than ever before. So, they're now seeing the real impact of it.

Back in 2015, industries really weren't impacted by disruption industries like pharmaceuticals and life sciences, automotive, utilities and oil and gas. But today, these industries are seeing much more impact and are getting pulled into the middle of what we call the digital vortex.

Appian: So, what's the digital vortex? Break it down for our non-tech execs.

Wade: The digital vortex is where the heavy impact of digital disruption happens.

Appian: You also write about the next wave of disruption. What did you mean by that?

Wade:I think the first wave of disruption was around product and the digitization of products and services. I think what we're seeing now is the second wave which is more of the digitization of business models, processes and the value chain. And this wave impacts all companies.

The Hardest Part of Adapting: Organizational Change

Appian: So, what comes next?

Wade: So, I think the second wave is more of an all-encompassing threat or opportunity because it impacts all industries. And I think that's where the big change is.

Appian: Speaking about big change, how will the rise of emerging technologies like artificial intelligence, machine learning and blockchain for example drive the change you're talking about?

Wade: The foundation of change is driven by new technologies, that's for sure. Some are more impactful and disruptive than others. The point is that technologies are the impetus for much of the change we're seeing. But transformation is about much more than just technologies.

Appian: In what way?

Wade: For most organizations, when you get down to it, the hardest part of transformation is not the technologies you mentioned. It's transforming the organization, the structure, the people, the culture, all of those things that have to change to adapt to a new reality. That's the hard part for companies.

Appian: That's a good segue to my next question. Talk about the human impacts of digital transformation and how disruption impacts the workforce. How does workforce transformation fit into the digital disruption narrative?

Wade: So, there will inevitably be workforce impacts at the macro and micro level. We're seeing the rise of the gig economy, a huge increase in the number of people working in a freelance capacity rather than full-time. So, we're seeing those kinds of macro trends.

But also seeing change on a micro level. We're seeing changes in the way people work in terms of how they get work done, how they interact with digital technologies. Not everybody's able to make this shift. So companies that are forward looking need to spend lots of time and energy communicating about how disruption will impact their organization. And companies also need to think about helping affected employees to retrain and retool so they can continue to be productive.

Don't Reward Complacent Behavior

Appian: All of that sounds pretty obvious.

Wade: But I hear a lot of executives complaining about their workforces, saying that they can't get them to change. That may be true, but I think the fault may lie more with executives than with employees because business leaders set up organizational systems that reward complacent behavior.

Appian: So, from an organizational standpoint, change is about putting the right incentives in place.

Wade: Yes, if you really want your people to change, you not only have to help them learn the new skills they need in the future. But you also have to adapt the organization so that your employees have incentives to change.

Disruption, Moving Up Workforce Stack

Appian: We've been talking about the impact of technology on blue-collar labor. But how will digital disruption affect white-collar jobs? And do you see this as a near term or more futuristic trend?

Wade: That's a good question. I do see white-collar jobs being impacted. As machines get better and better at doing the things that people do, there's no question that it will impact white-collar jobs, especially with advancements in deep learning (computers learning without human supervision). So, it (white-collar disruption) is going to happen and it's going to happen faster than ever before.

You know, if you think of the industrial revolution where machines replaced blue-collar work. We're seeing the same impact now with the artificial intelligence (AI) revolution in terms of replacing white-collar jobs. And so far it's unclear where the new jobs will come from.

(Tune in next week for the final episode of our two-part series on how to beat digital disruptors at their own game.)