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The Dark Side of
the Digital
Revolution
Digital technology puts pressure on businesses to
fundamentally change their strategies and cultures. And most
leaders aren’t responding well. Gerald C. Kane Reprint #57308 http://mitsmr.com/1PFnvor MIT SL
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JOHN HAGEL III (DELOITTE), INTERVIEWED BY GERALD C. KANE Digital technology puts pressure on businesses to fundamentally change their
strategies and cultures. And most leaders aren’t responding well. for the Edge co-founder John Hagel III considers this
window dressing, and fears many executives aren’t
recognizing how business is changing at a fundamental
level.
“I think there’s a tendency to look at digital technology
and think about it more as an opportunity, a choice,” he
told MIT Sloan Management Review. “The mounting
performance pressure in our shifting business landscape
turns this from an opportunity and choice into an
imperative. The longer you wait, the more marginalized
you’re going to become.” Deloitte Center for the Edge co-founder John Hagel III Everywhere we look, companies are “going digital” —
adding mobile apps, making customer service available
online, solving problems via Twitter. But Deloitte Center Copyright © Massachusetts Institute of Technology, 2016. All rights reserved. The irony, Hagel notes, is that same digital technology
that’s creating all this pressure also creates a very different
approach to transformation that can help large companies
to really become very different entities over time. “I’m an
optimist,” he adds. “I actually view this ‘dark side’ and
mounting performance pressure from an optimistic view,
in the sense that the old approaches are just not
sustainable, and some senior executives have seen the
need for fundamental change driven by this technology.
The big issue for them is how to get that change to
happen in a large traditional organization.”
Hagel spoke with MIT SMR’s guest editor Jerry Kane. Reprint #57308 http://mitsmr.com/1PFnvor MIT SL
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developing their digital strategies? Oh, I still think they’re way behind. Generalizations are
always risky, but most of the executives I talk to are still
very much focused on digital largely as a way to do “more
of the same,” just more efficiently, quickly, cost effectively.
But I don’t see a lot of evidence of fundamentally stepping
back and rethinking, at a basic level, “What business are
we really in?”
Why do you think that is? Well, I think there are a number of factors. Part of it is
just what I call the “dark side” of digital technology, which
is mounting performance pressure, in part enabled and
precipitated by the digital technology. In a world of
mounting pressure, there’s a natural human instinct to
stick to what you know. Don’t go out of your comfort
zone because things are really scary out there. And so
there’s a tendency to just hold on and just squeeze harder
on what you’re currently doing.
The excuse that I get from executives all over is, “Well,
we’re prisoners of Wall Street.” Investors just want
quarterly performance and a little bit more money to the
bottom line, and that’s what we’re focused on: short-term
efficiency improvements. Those are probably the two big
factors, when I talk to executives, as to why they’re not
thinking more ambitiously or creatively about what this
technology enables.
Are there any out there that you’ve talked to
who are thinking about it creatively? It would be hard for me to highlight a company that I
would say is really embracing this at a fundamental level
and rethinking their core business. I mean, every large
company in the world has an outpost, an innovation lab, Copyright © Massachusetts Institute of Technology, 2016. All rights reserved. here in Silicon Valley. And they’ll always point to those
innovation labs as evidence that they’re really embracing
this technology and doing very creative things with it. But
so far, these are just outposts, and have very little impact
on the core business.
Why do they struggle to think about how
these technologies can transform the way
they do business or their customer needs? Do
you think they know the answer and they’re
just not able to execute on it? No, they’re still largely in avoidance mode, dodging the
question and putting it on the back burner. Nobody’s
creative in a time of mounting pressure. You fall back.
You hunker down. You do what you need to do for the
next day, and then fall back on this excuse — I believe it’s
an excuse — that Wall Street won’t tolerate any long-term
transformational thinking.
And I think that the other piece is the curse of success.
Large companies that have created enormous wealth and
generated incredible market positions on a global basis —
who’s going to argue that what they’re doing today is
wrong? I think they lose the creativity and become
complacent and assume that somehow, whatever’s going
on today is a blip or an aberration, and we’ll get back to
where we were and things will be back to normal.
Those who know me know I tend to be provocative. I will
make the assertion that there is an unstated agreement
between these outposts and the core business. And the
unstated agreement is, “We’re going to give you some
money, and we’re going to give you some space and
resources and people. You can do whatever you want in
those sandboxes. Just remember one thing; don’t ever, Reprint #57308 http://mitsmr.com/1PFnvor MIT SL
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crush you.” relevant performance metrics that would tell us whether
we are, in fact, accelerating our movement? And these are very reasonable, rational people, and they
understand the rules of the game. They’ve got a little
sandbox. They can play all they want. They’re not going
to come back to the core. I know many of these people
and they are playing by the rules of the game. Those are totally different. The time horizon in
traditional companies is the one- to five-year plan. And
that’s totally irrelevant in the zoom-out/zoom-in. They
spend almost no time on one to five years. So, if one of these executives came to you
and said, “Okay, you convinced me. I need to on the 10- to 20-year timeframe? think more creatively, but I’ve got these
performance pressures.” Do you have any
advice — Yeah. I’ve got a lot of advice!
One of the things that we’ve ended up focusing heavily on
is an approach to strategy that is very prevalent within
Silicon Valley and the high-tech community, but very
alien to large, traditional companies. It’s what they call the
“zoom-out/zoom-in approach” to strategy — they focus
on two time horizons, and they do it in parallel. One key
question is: What is our relevant market or industry going
to look like 10 to 20 years from now? And what are the
implications for the kind of company we need to become
in order to be successful in that market or industry?
That’s the “zoom out” part.
They “zoom in” to a totally different time horizon, which
is 6 to 12 months. And on that time horizon, the key
questions are: What are the two or three business
initiatives — no more — that would have the greatest
impact in accelerating our movement towards that
longer-term destination? Do we have a critical mass of
resources against those two or three business initiatives
today? And how would we measure success? What are the Copyright © Massachusetts Institute of Technology, 2016. All rights reserved. Isn’t it hard to predict the future accurately Some of the pushback I get from executives is, “You’re
talking about a detailed blueprint 10 to 20 years from
now. I have no clue what that looks like!” And I give them
Bill Gates in the early days of Microsoft as an example of
a much higher-level view of the future. His zoom-out, 10to 20-year view of the computer industry could be
summarized in two sentences: One, computing is moving
from centralized mainframes out to the desktop. Two, if
you want to be a leader in the computer industry, you
need to be a leader on the desktop.
Not a lot of detail, but enough detail so that when he got a
call from IBM one day asking him to develop an
operating system for new desktop computers, he took that
phone call that day, versus the 10 others that would have
been distractions.
It’s challenging, there’s no question about it. I don’t want
to pretend it’s an easy task. I think that part of the art is
focusing on what are the fundamental forces that are
reshaping the business landscape and taking a high-level
view.
One key question is: Do you have a clear and shared 10to 20-year view of how digital’s going to transform your
business? A lot of individual executives have actually
thought about this and have a point of view, but they’re Reprint #57308 http://mitsmr.com/1PFnvor MIT SL
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how the market’s going to evolve. And so, have they
aligned around a shared view of the 10- to 20-year future?
Another key question, in terms of talent, is: Have you
been applying digital technology to accelerate learning
and performance improvement in the work environment
on a day-to-day basis? With the mounting performance
pressure and the accelerated pace of change that digital
technology is bringing about, our view is that the learning
that’s going to be most powerful is not by accessing what
other people already know. It’s driving new knowledge
creation through practice in the workplace itself, rather
than in a training room, by addressing challenges and
business situations that have never been confronted
before.
And that’s a very different approach to learning. And
digital technology, we think, can be very powerful in the
work environment. But it’s rarely being used for that
purpose.
Do you know any companies that are being
successful with digital as an ongoing learning
platform? One is Intuit in the financial services software business.
They’ve been very focused on how to use digital
technology to create experimentation platforms for
workers throughout their company. The whole notion is,
how do you reduce the risk of failure? Because if you’re
going to learn faster, you’re going to fail a lot. And one of
the things holding workers back is the fear of failure.
Failure gets punished.
But you can create experimentation platforms where you
can try out things, test things, with very low risk — if it
fails, it’s not going to bring the company down. That’s a Copyright © Massachusetts Institute of Technology, 2016. All rights reserved. huge enabler of accelerated learning in the work
environment.
A company called LiveOps, which outsources call center
operations for larger companies — they have 20,000
people who work for them, and they’ve done some
interesting things. One is they gave each one of their
workers a real-time performance dashboard that fed back
to them how they were doing on multiple dimensions of
performance, which is something they borrowed from
World of Warcraft. Most companies who do that would
have used it as an instrument of punishment: You’re
falling behind these three metrics, you’ve got six months
to get your act together or you’re out of here.
What LiveOps did was, they actually invited workers to
ask for help, and they created an online digital discussion
forum where workers could come in and say, for example,
“I’m having trouble handling this kind of customer call.
Anybody have any ideas?” Then they started to watch,
recognize, and reward the workers who were emerging as
helpers and advice givers. So they’ve created a powerful
peer-to-peer learning environment for their workers.
But that seems to point also to culture. Are
there certain characteristics of companies
that you see are more digitally successful or
not? I’d say most large company cultures are shaped by what
we call the “scalable efficiency” model of business. The
whole focus on scalable efficiency is predictability,
reliability, and everybody’s supposed to know exactly
what to do and when to do it. In that kind of culture,
acknowledging that you don’t know something is a sign of
great weakness and puts you at risk of getting fired. Reprint #57308 http://mitsmr.com/1PFnvor MIT SL
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AL We see a shift from “scalable efficiency” to “scalable
learning” as the core institutional model, enabled by
digital technology. A key foundation of scalable learning
is a culture where actually it’s not only okay, but it’s
expected that you’re not going to know and that you will
ask for help. That’s a huge shift. Copyright © Massachusetts Institute of Technology, 2016. All rights reserved. And it goes to the leadership question. Leadership in the
future, I believe, is actually around being able to frame
the right questions, the highest-impact questions, where
the leader is actually saying, “I have no clue, but this is a
really important question. And if we could figure it out,
we would do amazing things.” That’s a completely
different model of leadership. Reprint #57308 http://mitsmr.com/1PFnvor MIT SL
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associate professor of information systems at the Carroll School of
Management at Boston College and
the MIT Sloan Management Review
guest editor for the Digital Business Copyright © Massachusetts Institute of Technology, 2016. All rights reserved. Reprint #57308 Initiative. He can be reached at
gerald.kane@bc.edu and on Twitter
at @profkane. http://mitsmr.com/1PFnvor MIT SL
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AL PDFs Reprints Permission to Copy Back Issues Articles published in MIT Sloan Management Review are copyrighted by the
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