Three Forces Shaping the Digital Future

For companies trying to plan their digital future it can often feel like jumping onto a speeding rollercoaster...afraid to miss all the 'fun' yet keenly aware of the tremendous risks of doing it wrong, and with few reliable examples to follow as a guide. 

Consider the incredible change taking place:

• Apple's App Store has some 250,000 applications, downloaded more than 5 billion times to some 100 million devices. All in just 2 years.
• There are more than 400 million active users on Facebook. There were barely 1 million just 5 years ago.
• Time spent on social media sites has doubled from this time last year. 1 in every 4.5 minutes online is spent on blogs or social networking sites.
• This year digital music sales will equal CD sales.
• The number of AOL subscribers dropped from over 25 milllion down to 5 million in just over 6 years.

Forrester Research has even begun referring to the next phase of the Web as the "Splinternet," describing the rise of powerful connected devices, the spread of social technologies and the end of the golden age of Internet standards.

Too often companies' lack of clear direction results in an expanding series of loosely connected tactical reactions without needed organizational commitment to a specific strategy.  And while each initiative may generate positive results, this approach leads to ever-increasing complexity in execution, lack of needed alignment and support, redundancies in costs and effort, and minimized total benefit to the organization.

So, how can leadership possibly commitment to a long-term course of action when faced with this increasingly complex and blurry future?  The first step is to recognize the three primary forces driving this change.  

The Three Forces:
Fragmentation, Convergence and Acceleration

Force #1. FRAGMENTATION: This is Forrester's Splinternet. Yesterday's internet-enabled global Web community is quickly becoming a vast network of individual (and often highly separate) experiences, interactions and devices. And with the explosion of mobile capabilities, these digital experiences are increasingly untethered and triggered by and integrated with real world activities through location-based capabilities.

In short, the virtual world is now racing to catch up with the real world. Experiences and interactions are expanding beyond the two dimensions of computer screens to include the  dimensions of space and time.

Even the ubiquitous nature of search is transforming from today's algorithms that sift through a global bucket of public information to infinite, discrete social/community-driven recommendations based on user-generated content that (currently) is often not visible to search engines.

Force #2. CONVERGENCE: Think back just a few years ago and consider the choices of electronic devices--cameras, PDAs, computers, phones, CD players, DVD players, video game consoles, GPS systems, remote controls, calculators and even pagers. Today, one device will do all these tasks and more.

Apple CEO Steve Jobs spoke directly to the impact of convergence when he introduced Apple's "Digital Hub" strategy at Macworld 2001.

 

As another example, video game consoles don't just create new ways to play games. Through integrated Web capabilities and social tools they create a completely new way to participate and engage. Digital technologies—once accused of pulling kids away from human interaction—are now enabling people (not just kids...today's average gamer is 34 years old and over 40% are women) to socialize with each other in completely new ways. In the process they continue to create important new centers of gravity in the digital space.

Force #3. ACCELERATION: Question: What do iPhone, Android, Facebook, Hulu, YouTube, Twitter and Google Apps all have in common? Answer: None existed five years ago. And this pace is only accelerating:

• Of the 5 billion App Store downloads in 2 years....4 billion were in the second year alone.
• It took Facebook over 4 years to reach 100 milllion users. They added the next 100 million in just 8 months, and the next 100 million in only 5 months. 
• Projected sales for the iPad in the first quarter after launch was $1billion.

However significant the impact of the first two forces of Fragmentation and Convergence, their influence will only continue to increase in speed and intensity, fundamentally changing everything from how we go to market to the ways Moore's Law meets Generation M (or is it I? or Z?)

So Now What?

No matter the dramatic changes Digital is driving, the basics of business still apply. Strategic success requires long-term commitment. As Amazon's CEO Jeff Bezos notes: "If we have a good quarter it's because of the work we did three, four and five years ago."  

And there's the rub:  
How can businesses stay competitive in an environment that changes by the week when the company requires months and often years to adapt? More to the point, how can leadership possibly decide on and commit to a strategy that may be obsolete before it can ever be realized?

• Only commit to short-term strategies? Minimizes risk and is responsive to the market, but is often highly reactive and lacks needed resource to generate any significant impact or sustainability.
• Fully commit to a longer-term strategy? Critical to ensuring needed organizational momentum and advantage, but has a high risk of missing not only the long-term mark, but also numerous short term opportunities along the way.

Certainly, there are no silver-bullet answers, but here are some keys to help your company prepare:

• Think People first...then Technology: Trying to stay ahead of (or even keep up with) the latest greatest digital shiny object is a high-cost, high-risk game that offers slim opportunity for sustainable success. Instead, keep focus on the fundamental needs of customers, employees, partners, etc., and then think about how technology helps satisfy these needs. Social media may seem new...but people being social isn't. 
• Focus on alignment with corporate strategy: Start by looking at how Digital enables the organization to achieve established goals. Think through the business opportunities (and possibly new risks) that Digital capabilities could create. 
• Look upstream: As I wrote about in The Risk of Competitve Benchmarking, many companies become so focused on competitors that they miss important learnings from other industries that are early Digital adopters.  It's a unique opportunity to literally see into the future. B2B companies in particular are in an excellent position to watch and learn from B2C companies and leapfrog the competition. Unfortunately few do and continue to waste valuable time and money on lessons already learned by others.
• Build your Digital DNA: To compete in the Digital space a company needs Digital DNA, meaning Digital needs to be more that just marketing tactics...it needs be a part of the culture for everyone in the organization. It's not always easy, but it's rarely optional.

Predicting the future is always challenging...particularly in the Digital space. But the price paid for inaction continues to climb as Digital continues to transform the landscape. By understanding the underlying, long-term forces at work, companies can move from disjointed, reactive efforts to establishing a clear path forward that drives consistent, sustainable success.