Companies will effectively navigate the challenges posed by digital disruption if they look at them as organizational and managerial problems, rather than technical ones.
Many treatments of digital disruption regard the rapid pace of technological innovation as the key problem facing organizations. It’s true that technological innovation is happening at a faster rate than ever before. Computers continue to become smaller, cheaper, more powerful, better connected, and embedded everywhere. Yet while the increasing rate of technological innovation is a significant part of the digital disruption challenge facing companies, it is not the problem in and of itself. It’s not even the most important part of the problem.
The true key problem facing organizations with respect to digital disruption is people — specifically, the different rates at which people, organizations, and policy respond to technological advances. Technology changes faster than individuals can adopt it, individuals adapt more quickly to that change than organizations can, and organizations adjust more quickly than legal and societal institutions can (as depicted in the below chart from Deloitte’s 2017 Human Capital Trends study). I refer to these differing gaps respectively as adoption, adaptation, and adjustment. Each of these gaps poses a different challenge for companies with respect to digital disruption.
Adoption describes the gap between the rate at which technology changes and the rate at which individuals make those changes a part of their daily life. In his seminal work, Everett Rogers labeled innovation adopters based on various rates and phases: innovators, early adopters, early majority, late majority, and laggards. The result is a logistic function of cumulative adoption by which innovation occurs rapidly as the early and the late majorities begin to adopt. This adoption curve is certainly still relevant to technology companies and IT functions that are trying to drive the implementation of certain types of technology by employees in the marketplace or across the enterprise.
Despite the variability, with a significant portion of individuals lagging behind, adoption is not the most critical problem most managers face with respect to digital disruption — because individuals are generally still adopting technology faster than the organization can adapt to it. As people now have easy access to robust consumer-facing technology products (versus depending on their employers for these formerly costly devices and services), they’re able to gain quicker fluency with new technologies.
Additionally, the rapid rise of consumer-facing digital platforms such as Google, Apple, Facebook, and Amazon — all currently among the top five most valuable companies in the world — is a testament to how quickly individuals have adapted to digital change. As platforms and devices gather more data from increasing levels of user interactions, they evolve in ways that speed up the adoption curve. Platforms typically engage in A/B testing to optimize every facet of platform design to make them more usable (some say, addictive).
Adoption will continue to be an issue for organizations using expensive technologies that only organizations can afford — new medical imaging systems, for example — but for most technology innovations, the problem lies elsewhere. Most organizations don’t need to drive further adoption; they need to adapt to the facility individuals have already built with these tools.
Understanding the adoption curve isn’t entirely without value, however, because it can provide important foresight for when and how certain initiatives, whether strategic (for example, when and how customers are adopting technologies) or organizational (that is, when and how employees and partners are adopting them), will be necessary in response.
Adaptation describes the gap between how the majority of individuals want (and expect) to use technology to engage with companies and how companies have adapted to support those digital interactions.
Companies should pay most attention to the adaptation gap with respect to customer engagement and experience. If companies don’t enable effective digital interactions with their customers, then those customers will go to competitors or startups that will. Walmart Stores Inc., for example, acknowledges that its efforts for digital transformation are being pulled by customer expectations, not driven purely by executive initiatives.
As companies embrace digital channels for reaching customers, however, this effort can also exacerbate another facet of the adaptation gap — the space between employees and the companies for which they work. Employees are also customers of other companies, and they have experienced streamlined digital interfaces for interacting for business purposes. Data from our recent report on digital business suggests that employees have become increasingly frustrated by what they are capable of accomplishing with digital tools in their personal life compared with how they are forced to work with their own company through email and nonmobile computing. Software company Adobe Systems Inc. is attempting to address this disparity by uniting customer and employee experience under a single leader.
In many instances, the key problem facing most companies is the need to adapt fast enough to address customer demands for digital interactions, while simultaneously changing the organization itself to meet those demands and the demands tech advances stimulate in employees.
Adjustment refers to the gap between how many organizations use digital tools and the laws and regulations that societies agree on to govern that use. Laws and regulation almost always lag behind actual use, and this poses a different set of challenges for most companies.
The gap between organizational use and regulatory frameworks is likely exacerbated for international companies that face differences in legal governance. For example, global companies have to deal with multiple legal and regulatory frameworks; policies that may work in one country may not work in another. Regulatory frameworks also vary across industries. One manager in a regulated industry actually pointed to the regulation as a benefit for the company, as it provided clear guidance for what to do and not to do across all competitors in the industry. Some companies in regulated industries have reached out to the regulators proactively to describe the innovations they hoped to enact, seeking guidance for how these initiatives should be implemented.
For most companies, waiting for the legal policymakers to catch up to practice is not an option. Organizations must adjust fast enough to accommodate customer demand while abiding by legal and regulatory agencies, an effort that will require frequent strategic planning and top-down communication. Indeed, perhaps the biggest challenges facing such rising digital stars such as Uber Technologies Inc. and Airbnb Inc. are the regulatory frameworks that are seeking to structure their behavior.
The Problem Isn’t Technology — It’s People
The rapid pace of technological innovation is not the key problem posed by digital disruption. The real challenge is the uneven rates of assimilation of these technologies into different levels of human organization. As such, companies will effectively navigate the challenges posed by digital disruption by undertaking initiatives that are far more organizational and managerial than technical.