In the first 10 years of the digital age, we have used new technologies to do the same things as the technologies they have replaced. Instead of paper and pen, we now use tablets. Rather than place a telephone call to someone, we send a text. Apply this approach to the enterprise as a whole, and it is easy to see how new technologies that support old business models are delivering at best only incremental benefits. At worst, they can destroy a significant amount of value for companies.
Digital has become a word used to describe many different, but related concepts, and so it is important to define it as simply as possible. Digital describes two inherent, fundamental qualities: information intensity and connectedness. Something can only be said to be digital when it displays both qualities.
But should this definition matter to everyone? One of the most common responses to the question of becoming a digital business is that it only really applies to B2C businesses. But while that view is understandable, it’s also completely inaccurate. Every business is a digital business. The change that digital embodies impacts equally to all businesses, because it challenges the very management and mental models on which most organizations have long based their strategies. And the single largest shift that digital creates is the move from the center to the edge.
Here’s one example that can help to illuminate the difference. In the energy industry, managing field production has been honed and tailored over many years. A deep understanding of how to maximize production through oilfield management, refinery management and so on has established widely-acknowledged leading practices for the operation of a single site. Then the rise of unconventional energy jettisoned that business logic and demanded a new approach. The need to operate a much larger number of geographically dispersed sites to achieve the same amount of energy changed everything.
The ability of digital to push power and value to the edge similarly challenges the control and command models that have dominated many industries for many years. Enforcing standardization from the center out to the periphery is no longer either necessary or desirable to realize the creative and innovative capacities of an organization’s diverse people, processes and customers.
Leading organizations, including oil and gas companies, which have grasped what it means to be truly digital are pushing control and influence to the edge. They empower their people to operate freely and with greater autonomy. And it’s digital technology that enables them to do that. It’s helping leading businesses to tap the creative power of all their people and their customers. It’s using digital’s two defining characteristics, information intensity and connectedness, to change not only the way they work, but how they manage and create value.