1. The Essence of Digital

Similar to the terms “the cloud” and “big data,” the term digital is often misunderstood and seemingly limitless in scope. It can impact business strategy, user experiences, marketing channels, technology platforms, product development, human resources, communications, customer services, operations, and so on.

In short, any technology that connects people and machines with information or each other is digital, which means digital has become essential to every department in every business. When you’re defining digital, it’s a broad business concept, not just an emerging technology concept. Digital impacts most aspects of most businesses, including sales, marketing, customer service, operations, finance, supply chain, human resources, and so on.

History is repeating itself, doing the same thing to the world with the “digital revolution” that the Industrial Revolution did with machines. The thing about the Industrial Revolution and the Digital Revolution is that while technologies change, people don’t. The same dynamics that brought about the Industrial Revolution have brought about the Digital Revolution.

What most people know about the Industrial Revolution was that it created more products faster, more economically. Sound familiar? As we mentioned before, digital is about immediacy and satisfying what people always want—“faster, better, and cheaper.” Even in the 1700s people wanted things faster, cheaper, and better.

The Industrial Revolution of the 1700s was similar to the Digital Revolution of today in that it impacted practically every phase of people’s lives, created a higher standard of living, and brought about a lower cost for manufactured goods. It impacted social and economic change. Most importantly it forced people to think differently about how they engaged with the world. Before the Industrial Revolution, life was hard—it was about subsistence 24/7. One of the user needs that kick-started the Industrial Revolution was a pretty basic human one—clothes.

Prior to the Industrial Revolution, the average person may have owned a fraction of the clothing the average person would after. Cloth was a real luxury because cotton or wool had to be carded by hand, then spun by hand on a spinning wheel, and then put on a loom and woven by hand, before becoming fabric which was then sewn by hand. The entire process was very labor intensive.

Along the way to the birth of the Industrial Revolution, a series of innovations in the cloth manufacturing and thread spooling process were invented. These new technologies required less human energy, making fabric production easier, faster, and cheaper. Perhaps the greatest innovation at this time was the invention of a spinning engine called a Jenny (short for engine) in 1764. The Jenny enabled sewers to produce multiple spools of threads simultaneously, making the weaving process easier and faster because with more thread more people could weave more because they weren’t spending weeks spinning thread. This gave them time to sew. In modern terms, we’d call this, “enhancing the consumer’s experience.”

Only 10 years later when James Hargreaves, the Jenny’s inventor, passed away, there were more than 20,000 spinning Jennys in use across Britain. From here, other inventors improved upon Hargreaves’ Jenny—producing bigger, faster, and cheaper models to operate spinning engines. Around the same time, someone else invented the power loom that mechanized the process of weaving cloth.

Someone else invented the steam engine and the process for casting iron, and then there was the invention of the telegraph, the stock exchange, and the railroad system. All these fantastic innovations ultimately contributed to what would become not only the fabric industry but the start of the Industrial Revolution. Everyone who invented something did so to solve a problem they were experiencing in their particular industry. But one person, Sir Richard Arkwright, an Englishman, saw the big picture and used what he saw to transform the world. Today we call him the “Father of the Industrial Revolution.” Why?

Arkwright combined new technology, power, machinery, semiskilled labor, and the new raw material (cotton) to mass produce yarn. The fact that Arkwright combined new and existing technologies to produce what essentially became the first factory is why he’s called the Father of the Industrial Revolution. This is a simple but, critically important, fact to remember because the ability to see, combine, and implement different technologies and processes is exactly what drives digital transformation.

Like the inventions of the Industrial Revolution, digital technologies are enabling businesses to transform themselves and do things in better way than before. The combinations of digital technology along with the new creative thinking around business that digital enables, allow us to create faster, cheaper, and better services and products. Companies can now replicate what Arkwright did for the world within their own industry—leveraging emerging technologies to create a better company. By creating their own industry-wide revolution, they bring innovation to a static economic ecosystem.

Just as the “Jenny” didn’t exist in the early 1700s, the Internet didn’t exist in the 50s. Someone invented the Jenny, then a mechanical loom and a way to cast iron tools, a transportation system, a delivery system, and so on. A couple of hundred years later someone invented the Internet, RFID chips, and then the smartphone and social media. The technologies kept changing, but the people didn’t.

People always want and do find a way to do things better, faster, and cheaper. That was true 250 years ago during the beginning of the Industrial Revolution, and it will be true 250 years from today, arguably the early stages of the Digital Revolution.

People have to be involved in it on a day-to-day basis. When people say, “What is digital?” they don’t know because the term is so broad, so generic, so all encompassing. We could be talking about marketing channels and digital business strategy and somebody else is talking about the design of the website. Digital is all of those things and so much more. Even though many people mistake it for a faster record keeping or tracking system (two-dimensional) that’s not what the Internet of Things (IoT) or digital is. It’s more than that.

What Sir Richard Arkwright saw in the 1700s was what today’s digital transformers are seeing as well—the third and fourth dimensional potential of technology. The ability to digitally transform a company means going beyond just collecting big data. It means interpreting it, understanding what it’s telling us, and seeing new ways to help end users interact with and engage with your company, products, and services as a result.

Customers are in control today because they can talk to each other about your brand through digital channels, where it’s publicly visible to everybody. They can even be louder than the marketing division of that brand. They’re the ones who are going to choose who they follow, what they buy, and what their experience will be. If you don’t understand their pain and know how to give them what they want with the great customer experience they expect, they’re going to find someone who will. Pre-digital, it was easy for a giant company to just drown out any of that negative noise with marketing. Because there wasn’t a forum or social network for consumers to voice concerns, or a way for people to come together and really get their opinions out, a bad customer experience wasn’t a big deal unless the person managed to get the attention of the media.

Even then, the screams died pretty quickly. With the Internet, those screams and issues are preserved for eternity—along with your responses even down to the letters you write and actions you take, or don’t take.

What happens in times of disruptive change is that traditional metrics like quality, durability, and longevity are either challenged or thrown out, and values like speed, low cost, efficiency, and immediacy become the bar by which all challengers are measured.

New innovative companies initially come into the competition in a small way, and traditional businesses may not see them as a threat because they don’t have the established brand awareness. Traditional businesses may feel safe and underestimate the new company’s potential by comparing their offering to what’s already there. Then the new company expands their initial business model and leveraging their technology platform, or combines technologies and quickly become a clear threat.

What we see are many companies although successful, mistakenly value the things their customers don’t particularly care about, instead of focusing on the things their customers really want. When the gap between what a company values and what their customers value gets too big, that’s when competition move in. That’s why digital leaders put their customers in more control. That’s not a bad thing.

Remember the almost dominance of stand-alone GPS systems like Garmin, Magellan, and TomTom? They thought they were the only game in town and were just competing with each other—until every smartphone on the market came with GPS and free map apps like Google Maps. In an article, they wrote for the Harvard Business Review, Larry Downes and Paul F. Nunes, consultants at the Accenture Institute for High Performance, wrote: “But now entire product lines—whole markets—are being created or destroyed overnight. Disruptors can come out of nowhere and instantly be everywhere. Once launched, such disruption is hard to fight.”

Digital technologies level the playing field and accelerate the pace of delivery of large scale innovations. Gordon Crovitz, writing for the Wall Street Journal, agrees. Crovitz said, “Powerful new technologies like cloud computing and big data allow entrepreneurs to develop products and services that are ‘simultaneously better, cheaper, and more customized,’ ‘This isn’t disruptive innovation. It’s devastating innovation.’”

Few industries, if any, are immune to disruption. If your business is going to survive, you need to accept this reality. Twenty years ago who could have predicted that something as simple as a mobile phone would turn industries like home phones, pinball and arcade games, GPS devices, casinos, cameras and video, flashlights, travel agents, restaurant guides, and newspapers upside down?

Customer demand is also going to force changes in heavily regulated industries like pharmaceuticals, transportation, and energy. We’ve already seen regulated services like education, medicine, and law face change.

Innovation changes not only the way people do business but the rules about how we do business. It always has and it always will. Just about the time we learn the new rules, they change again. In 1995 Joseph L. Bower and Clayton M. Christensen’s wrote an article for the Harvard Business Review, “Disruptive Technologies: Catching the Wave.” The article taught us what we know about how to spot disruptors before they cripple or kill our business.

Bower and Christensen told businesses to “be on the lookout for upstarts that offer cheap substitutes to their products, capture new, low-end customers, and then gradually move upmarket to pick off higher-end customers.” When disrupters do appear, like a few lone ants strolling across a kitchen counter, it’s time to act quickly—either by acquiring them ASAP, or embracing similar technology and business models.