The UAE’s high level of digitalisation is led by consumers, with businesses lagging behind, according to McKinsey’s 2016 Middle East Digital Report, which found that only 16.4 per cent of digital potential is currently captured by the UAE economy (8.4 per cent by the Middle East on average).
What this means is that the large majority of companies (including those in the US which only had a 3 per cent lead over the UAE) could do far more to improve their digital strategies to leverage further growth.
What does going digital actually mean?
Although ‘digital strategy’ and ‘digital transformation’ are used widely, it is sometimes unclear what ‘digital’ actually means. There is, of course, the technical definitions contrasting digital from analogue, using words like ‘sine waves’ vs. ‘square waves’ or comparisons between a digital watch with one that has two hands, neither of which is meaningful from a business perspective.
For Dr Ira Kaufman, CEO of Entwine Digital, ‘digital’ is a resource that is information rich and connected that would include the following aspects:
Online and social media platforms: At the very least, companies, irrespective of size, will need a digital presence — having websites and social media platforms. In that sense, every company now has to be a tech company. Retail stores should have online marketplaces or risk facing the fate of Toys R Us. Once the largest American toy company, it had an exclusive 10-year contract with Amazon that resulted in its failure to develop its own e-commerce site. That, coupled with a crippling $5bn debt, likely led to its filing for bankruptcy protection last month. As Pierre Nanterme, CEO of Accenture, succinctly put it: “Digital is the main reason just over half of the companies on the Fortune 500 have disappeared since the year 2000.”
Mobile technology: With more than half of online searches coming from mobile phones as compared to desktops, companies should ensure that their websites are optimised for use on mobile phones and consider whether to develop mobile apps or run mobile advertising campaigns.
Customer experience: Having these digital platforms are not end goals in and of themselves; rather, they are a means to engage consumers and connect with them in more meaningful ways. Online presence is not merely about creating brand awareness or sharing new products and services with the customers, but also to receive valuable feedback. Elon Musk is a great example of how incorporating customer suggestions improves Tesla’s features while simultaneously winning them legions of loyal fans. In the digital marketplace, there are many touch points in the customer journey, starting from awareness of the brand through viewing an ad to involvement by ‘liking’ a post all the way to being a brand ambassador who actively recommends a company. All these customer touch points can be actively tracked, measured, analysed, and used in a manner that creates value for the company.
Data analytics: The Economist recently described data as the most valuable commodity, outranking oil as an asset. Illustrating this concept is Facebook, the fifth most valuable company, with a market value of over $400bn, compared to traditional companies like Exxon Mobil (market cap of $350bn) or Walmart at $220bn. In addition to personalising marketing and customer relationship management, ‘big data’ (referring to the larger variety, volume, and velocity of data) could result in the development of new products and services, more efficient operations thereby reducing costs, faster decision-making, and better risk analysis to reduce fraud and cyber security threats. Essentially, big data can tell you what is happening (which customers are buying what products when), why this is the case by studying past patterns (e.g. peak sales after social media campaign), what might happen in the future (forecasting based on past trends) and what should happen (e.g. making recommendations for certain at-risk groups in healthcare).
VUCA 2.0 catalytic leadership
The Fourth Industrial Revolution has brought with it a tremendous, exponential rate of change such that change is the new normal. Company executives need to have the right mind-set and people to manage changes and remain agile in this competitive landscape or face extinction.
In their study of S&P 500 companies, Innosight found that in 1958, the average company was on the index for an average of 61 years. This came down to 20 years in 1990, and is expected to drop to 14 years in 2026, with the average company being replaced every two weeks.
This enormous speed of change, coupled with geopolitical tensions, have resulted in the military term volatile, uncertain, complex, and ambiguous (VUCA) being used to describe the current state of affairs. It is in this world that we need to develop what Dr Kaufman, a digital transformation consultant, calls VUCA 2.0 leadership.
In order to succeed in the digital marketplace, Dr Kaufman advocates reframing VUCA more positively and becoming Catalytic Leaders by establishing these principles:
Vision: Despite, or perhaps, because of, constant change, it is imperative that management focus on their ‘why’, reflected in their corporate values, mission, and vision. It is this vision that should be integrated across all functions to avoid losing sight of their purpose of existence.
Understanding: Amazon’s customer-focused philosophy can be seen in its extensive customer review system and having its managers spend two training days in the call centre to understand their customers, something that other companies should emulate. However, businesses must expand their understanding beyond the needs and expectations of their customers, including their employees, partners, community, environment, and other stakeholders to ensure that the four Ps of sustainability (quadruple bottom line) — people, planet, profit, and prosperity are met.
Collaboration: Sharing platforms such as Airbnb and Uber, both of which lack traditional fixed assets and property, are each valued at over $30bn, illustrating the popularity of the sharing economy with people now sharing cars, homes, co-working spaces, money (through peer lending platforms), and appliances.Likewise, collaboration between corporations and their customers, suppliers, academic institutions, and even competitors as well as between departments and functions within the company, is key in the Digital Age to drive continuous and disruptive innovation.Using the currency of connectivity, companies open to cross-industry collaborations will be better able to leverage innovation through which exponential growth can be realised. Tesla released its patents to the public in 2014 to advance electric car technology not only to benefit others, but because it believed Tesla’s position would actually be strengthened through such collaboration.
Assurance: Today’s business leader has to be agile to deal with changes rapidly, flexibly, and ethically. While strategic business plans and forecasts can be useful, they should be abandoned when they impede innovation or become obsolete. Companies have to manoeuvre and act quickly to leverage opportunities or to respond to competitive threats without rigid adherence to bureaucratic decision-making structures. While being agile, however, they still need to maintain trustworthiness and be focused on their values.The 2017 Edelman annual Trust Barometer reports that ‘trust is in crisis around the world’ with 85 per cent of respondents lacking full belief in the system, comprising of media, NGOs, government, and business. What is interesting is that three quarters of respondents believed that business could make a difference by both increasing profits and creating positive social and economic impact. With the prevalence of cyber security breaches, erosion of privacy, and widespread suspicion of authority, this is the time for businesses to step up and take a leadership role by looking beyond mere profits to be transparent, trustworthy, and create sustainable change.
The catalytic mind-set
For Dr Kaufman, the VUCA era requires a mind-set that is focused on being an agent of change for the community. Here, management will need to switch their identity from Leader to Catalyser. This transformation must begin with the executive’s self-reflection, building trust through empathy and transparency, and making a commitment to change their organisation and community in the process.
Just as Albert Einstein said, ‘we cannot solve our problems with the same thinking we used when we created them’, this catalytic mind-set is about striving to anticipate and proactively co-create the desired change and sustainable future. In doing so, the catalyser recognises that while changing could mean delving into unchartered, threatening, and risky territories, the cost of not doing so is far, far greater. Just ask Kodak or Blackberry.
A former lawyer and educator, Jeanette Teh is a corporate trainer, innovation practitioner, leadership coach, and founder of the self-improvement site Kaleidoscopic Sky.