Digital Risk and Reward

In the last few weeks, I was back on the planes meeting with clients and investors in London, New York, and San Francisco. We often talked about how the role of digital is changing for businesses and investors. How the early digital experimentations have all grown up,  real value is created now and many companies are becoming digitally reborn. 
But not all. 
Some struggled to take advantage of the digital revolution during the pandemic and may not be quite ready for the digital-first competition ahead. There were common themes I heard across geographies and industries. 
For example: In past disruptions and uncertainty, leaders could just ”throw people” at those problems. Not anymore. With talent shortage, the great resignation, and great migration - digital tools became to go-to remedy for all problems in business. How is the digital remedy working out? 

Transcript

In the last few weeks, I was back on the planes meeting with clients and investors in London, New York, and San Francisco. We often talked about how the role of digital is changing for businesses and investors. How the early digital experimentations have all grown up, real value is created now and many companies are becoming digitally reborn. 
But not all. 
Some struggled to take advantage of the digital revolution during the pandemic and may not be quite ready for the digital-first competition ahead. There were common themes I heard across geographies and industries. 
For example: In past disruptions and uncertainty, leaders could just ”throw people” at those problems. Not anymore. With talent shortage, the great resignation and great migration - digital tools became to go-to remedy for all problems in business. How is the digital remedy working out? Let’s take a look…
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No one can say that the last few years were business as usual. Far from it. Crises and disruptions happened almost constantly and unpredictably. Companies were solving multiple unknown problems. And in the constant shortage of talent, more and more digital technologies were deployed. The last 2 years became the new renaissance of digital, companies and venture capitalists investing in the trend at a level seen before.

• Supply chain disrupted? - bring in AI-enabled supplier analytics
• Talent shortage? - more automation and digital recruiting bots
• Cost pressures? - cloud migration and digital offshoring
• Increasing cyberattacks? - AI-enabled threat modeling and security tools. 
• Remote work? - more digital collaboration tools
• Digital-first business models? - the digital kitchen sink (analytics to social tools)

Suffice to say, all competition is getting digital. It may be making all customer experience a digital experience. Or improving the cost structure of the business. The profitability of digital business models will outperform traditional businesses. 
And the ultimate digital two-punch of better customer experience with lower operating costs has corporate boards and even private equity doubling down on the digital trends.

No business is ignoring the trend but change is hard. I have heard this at several digital conferences. Companies are puzzled why some are winning in their digital transformation and others are struggling. I’m puzzled too. They all have access to the same talent, technologies, advisors, and cheap capital. Yet the scale of digital transformations varies from a trickle to the birth of new digital natives. Ultimately the only pattern I realized was this. The winners take higher risks and make bigger bets. But high risk is not always a winning strategy. But risk avoidance in digital seems to be a guaranteed losing strategy. In a world where transformation is accelerating there is no path for laggards to catch up. It would take exponential investments at a later stage and trying to attract talent from digital leaders. A highly unlikely bet. So maybe what looks like a low-risk strategy becomes a very high-risk one. 
Leaders set the agenda, the velocity, and the boldness of the digital plans. They need to take a short-term hit on performance to recalibrate the business around a new digital business vision. And hire the right talent. And empower them to take the same risks. It is hard and it is bold. This is why the ones that do will come out of this new digital renaissance as market leaders.

There is an interesting talent shift happening in the executive ranks too. CEOs and CFOs are becoming more involved in technology strategy and CIOs are shaping the new digital business models. And that brings me to 5 digital priorities I see leading companies implement today:

**Digital Leadership**
 Companies are bringing in digital experience across business functions from sales and marketing to supply chain. Experience with digital-first or digital native businesses is at a premium. Many companies are realizing that they can’t expect consultants to have the answer to their digital strategy. It needs to come from within.
**Hyperautomation
 There are winners and losers in the automation game as well. Some have truly scaled. I have seen thousands of digital assistants deployed for call centers and hundreds of processes automated end to end. Others got stuck with endless pilots, digital experiments and their processes and people stay in the past. It’s happening in the same industries for similar companies. I’m not sure why. **Cybersecurity**
 You can say that nowadays cyber attacks are not a risk but a reality. Most businesses are being attacked, every day.
 Businesses also realize that just because you’re vulnerable, it does not mean hackers can disrupt the business. They need to prioritize and protect the most important assets like customer data.
 As cyberattacks are a daily occurrence, businesses worry less about reputation and more about real operational disruption
 Companies focus on mitigating the most likely paths to customer, financial, and supply chain and ignore the rest.
 Better security often hinders customer experience and that is a hard balance to manage. You need to protect your customers without making their life excessively inconvenient. 
**Cloudify Everything**
 It took decades but in 2022 cloud-first is becoming central to most IT strategies. The impact on cost, agility, resilience, and talent is undisputed. Let your cloud vendors be in the infrastructure business and not you. Like any transition, cloud migration may require short-term disruption and higher investment.
 Many companies struggle to get reduced operating costs from cloud conversion quickly. The payoff is longer term.
**Being comfortable with risk**
 Many forget that to be an innovator means you are a risk-taker. The bigger the innovation, the bigger the risk and reward. 
 From cyber threats to supply chain disruption to environmental risk and compliance. The risk profile of today’s business has increased significantly.  You need to be comfortable that you cannot manage all risks. You live with them.
 Businesses increasingly hire advisors, leaders, and employees that can operate in a more ambiguous environment. Making plans based on probabilities and not deterministic expectations is the norm.
The new world is digital, high risk, and high reward. We are all becoming venture capitalists as we take on the new world of changes and be OK with the new risks and rewards.  And this we know, most winners are risk-takers. 

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