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The new world needs a different kind of innovation

What's Better Than Having A Digital Strategy?

It is one of those questions I get asked occasionally, and in my view, there are bigger and better things than just having a digital strategy. 

Worrying about your digital strategy is like worrying about a small cog in a large wheel. And, yet, this term has been beaten to death. Several consultants and vendors use this term as a gimmick. Because after all, it helps them to sell their services. But, what does it mean to you? How much digital strategy is enough? And what can you do about it? 

What is better than digital strategy? I will get there in a bit. But first, let us understand, "What is strategy?" Because we often hear this word, HR strategy, digital strategy, technology strategy, etc. So, what is strategy? 

If you think deeply and see what strategy is all about, then you may come to an answer. "Strategy is understanding or thinking through the path. It is the "method" and "how" of your business to become or stay in a leadership position." It means, if your business is in a leadership position today, you want to maintain that position. If your business is not in a leadership position today but wants to be a leader, you want to do that in the coming few years. Whether you want to stay in a leadership position or get there, you need a method to do so. That is what any strategy is about. 

Now, here is the challenge. We know a little bit about today. However, nobody knows about tomorrow. Knowing anything about the day after tomorrow or the next year is out of the question. In a world that is constantly changing, it is getting more difficult. 

And this is why leadership in the future necessarily depends on how quickly and swiftly you adapt to the change. Any change is thrown at you, whether social, technological, economic, environmental, political, or legal change or multiple of them coming at once. How do you gain and maintain your leadership position? Do you think that can be done by adapting to the change? 

Adapting to the change sounds simple. And only if it were that simple, everyone would have been doing it great, don't you think so? 

Think again, what does adapting to the change means? It means being innovative. And so here is the first keyword you need to remember - "INNOVATION."

A digital strategy is one little part of all the innovations you may have in your organization. So, if you think about innovation, everything else will fall in place, including digital strategy. 

Then again, you still may be wondering, "Digital strategy is more important." 

Yes and no! 

Let me give you an example. An example that I constantly use because it comes from arithmetic. One of the acclaimed professors in mathematics, Dr. Albert Bartlett, put this in perspective many decades ago. He says that one of the limitations of the human race is to understand exponential function properly. And that is where I think most strategies fail. 

Once Dr. Albert Bartlett made a profound statement, "The greatest shortcoming of humanity is our inability to understand the exponential function." The logic is simple and irrefutable. Exponential growth cannot proceed indefinitely within a finite system, whether on earth or in an economy.

To explain, Bartlett gives an interesting example. Suppose we put one hypothetical strain of bacteria in an empty bottle at 1100 hrs. Bacteria grow by dividing themselves, thus doubling at a finite rate. Let's assume every minute they double. Then we observe that the bottle is full at 1200 hrs. With this information, he asks two questions.

The first question here is: what time was the bottle half full? If you think carefully, the answer is 1159 hrs, just a minute before 1200 hrs. And, that is because they double every minute. The second question is: if you were one of the bacteria in that bottle, at what time would you realize that you are running out of space? Let's first see how the bacteria population was for the last few minutes in that bottle. At 1159 hrs, the bottle would be 50% full; at 1158 hrs, it would be at 25%, and thus, it would be only 3% full at 1155 hrs. For most people, this may not be a cause for alarm. If that is the case, how many of you would realize there is a problem just five minutes before it's full? When is the best time to take some action?

There is no correct answer to it. To the question, "When should you take action?" The only appropriate response is — today and now! This example explains how exponential growth works and tells us the gravity of disruptive innovation, which often results in exponential growth in the market.

Thinking beyond just digital strategy

It will be a big mistake if someone thinks that quick action is the best defense against disruptive innovators. I would argue otherwise. Let's extend the example given by Bartlett and expose the real problem.

Suppose a few smart bacteria in that experimental bottle decide to take quick action, just 2 minutes before 1200 hrs when it goes 100% full. Since they realize that they are running out of space, they start searching for new bottles. Assuming they are very fortunate in their endeavor, they find three new bottles. Now they have four bottles in total. Do you think they have everything under control now?

Now, here is the third pertinent question: With the discovery of three more bottles, how long can they continue? We already know that by 1200 hrs, the first bottle will be 100% full, with three more to go. At 1201 hrs, the second bottle would be full, with still two to go. And at 1202 hrs? All four bottles would be full, and that would be the end of it!

Even if you act just a few minutes before, you will only be able to buy a few more minutes before things go out of hand; this is the main problem!

Now, I am giving you this example because it is the beaker and the bacteria in the beaker or whether it is a digital strategy. In any finite ecosystem such as this world, they work just the same. We are seeking finite growth in a finite ecosystem. And it cannot keep going if you merely keep adapting to your digital strategy. 

Working on a digital strategy is equivalent to trying to find another beaker. And you may have realized by now, finding another beaker does not solve the problem. It only extends the time to solve it. You are only buying a few extra minutes. In a normal timescale, it could be a few extra years you are buying. However, the problem that a business will eventually face is not going away. 

Then what is the answer? What is the solution? What can you do to not fall into this trap of working on a hamster wheel of digital strategy? How can you do something to enable your organization to grow sustainably, continuously?

To do that, you need to develop six fundamental aspects of your organization. They are first principles thinking, resourcefulness, agility, foresight skills, experimentation skills, and speed. 

The first three things are part of your skillset. It is something you want to have for every single employee. Starting from your CEO down to your youngest employee, you need to have these three skills imbibed in them. People need to learn how to think on a first principle basis. And as a classic example, you might see many people who have taught on a first principle basis have a thriving business. Tesla, for example, and SpaceX, both run by Elon Musk, and he's a fan of first principle thinking. Think about it. 

Resourcefulness. We always think that having resources is necessary to innovate and progress to enable certain strategies. The year 2020 was a great testament to resourcefulness, where you saw a significant lack of resources. Yet,  people have shown creativity. People have shown innovation in doing something that pushes them ahead. Being resourceful is something that you would want to imbibe in every single employee. 

But then, what is the point if you are a first principle thinker, and resourceful, yet you don't move faster. If you don't change your direction when the market changes, you will soon hit the wall. Probably only a part of your digital strategy can help. Because to change things quickly, when the market changes overnight, or maybe within a few days, you want to know or want to have certain things up your sleeve to change and implement quickly. That is where technology can help you. 

Then there are other three skills or strategies, which are infrastructure-based strategies. Foresight skills enable you to see what is coming ahead of you. It is something that makes you think not just about tomorrow, but the day after tomorrow and day after day after tomorrow. We have departments that work for today, such as production, sales, accounting, etc. Other departments work for tomorrow, such as R&D, marketing, futuristic sales, and futuristic growth. But we do not have any department that thinks about the day after tomorrow or the day after tomorrow. And that in today's VUCA world is a big problem. 

Having a digital strategy is not going to help you in doing that. You have to think even bigger. And that is why I gave you the bacteria example before. You also need to develop an experimentation culture. When you see something coming, you see certain opportunities, and you say, Hmm, let me try and grab those opportunities. Let us see if they work for us or not. So how do you design an experiment at an organization level, which is cheap, fails-fast, or succeeds fast and gives you results without much damage? How can you execute that experiment at such a level? The building that experimentation culture, experimentation machine, and process in your organization is paramount. If you fail to do that, I'm sorry to say; the future is bleak for you. 

And third, it is about speed. Speed and agility are different. Agility is all about making small moves, going through the curves, much like driving through the traffic how you navigate. Speed is about how fast you go, when you execute a project, on the highway, if you will. How can you enable speed in an organization? How do you design those experiments and run those experiments efficiently? That is where technology is going to help you. 

How do you become foresighted? How do you develop foresight skills? You need some data, some experimentation, some ideas, and some bit of training. It is the infrastructure that you need to build in your organization. 

So the technology is part of your infrastructure, and digital strategy is one of the many elements in that infrastructure. That is why I say the digital strategy is not everything. 

Type of problems you are dealing with

Here is something you want to look at - The Cynefin framework. Dave Snowden developed it in 1999, and it is an excellent guide to categorizing different kinds of problems. 

There are four kinds of problems. The first problem you see in the bottom right-hand side of the quadrant is simple. If you come across a simple problem in an ordered system, the answer is often easily available. There is a sequence of operations that you can do, and you solve the problem, simple! We are not living in that kind of a world anymore, are we?

The second kind of problem is ordered, but it isn't very easy. Answers to these kinds of problems are often found in good practices (so-called best practices) such as Six-Sigma, Lean, or Agile, etc. They help solve these complicated problems in a structured manner because we know we can solve them, just that we don't know exactly how. 

The other two types of problems are somewhat wicked. They are unordered. We do not know what connects to what. What is the cause, and what is the effect? We don't know that. The bottom left is something which I want to bring to your attention first. The chaotic type of problem. The best example of chaotic problems is COVID-19. Last year, it was all chaos, literally. There was no order. However, there was a prescription, and the prescription was very clear -  call the lockdown, get people inside their homes, start testing, and locate the problem. Almost all countries followed this prescription. Then everybody needed a novel solution, a vaccine, a novel vaccine, and a novel way of working. We know these kinds of problems. Fortunately, these problems do not happen too often. 

Then on the top left, the complex issues are where I want you to pay attention. These are the problems of the VUCA world for an organization. That is where the "C" of VUCA, complexity, comes from. These issues are not ordered. You do not know what the cause is and what the effect is. You must explore. Therefore, you need emerging solutions. Solutions that are constantly changing and can change based on the circumstances. 

The point is

Here are a few key questions for you. What type of problem do you think your organization is facing? Are you facing simple problems or complicated problems? If you face simple or complicated problems, you probably can get away with just having a digital strategy. You may need good project management, Lean, Six-Sigma, Agile, and digital transformation. All those sorts of things in your organization. 

Think again! Everybody knows that today's problems are anything but simple or complicated problems. Today's problems are on the left-hand side of the framework. They are unordered. They are complex and sometimes chaotic. That is why the kind of solution you need is not just a simple business strategy or a simple digital strategy. You need emerging solutions. You need innovative solutions. And you also need a different kind of innovation.

The question is - What are you doing about it?

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