Companies need to engage in long-term thinking about their digital strategy.
In an interview earlier this year, Deloitte’s John Hagel lamented that most companies don’t look far enough ahead when thinking about digital strategy. Instead of the one- to three-year time frame that most companies use for digital strategy, Hagel advocates using a 10- to 20-year timeframe — at least at times. In data collected for MIT Sloan Management Review and Deloitte’s 2016 annual report on digital business, we found that only 2% of respondents say their company thinks about digital strategy on such a broad time horizon and only 10% think five years or more in advance.
It may seem crazy to do strategic planning on such a long horizon. Few people can adequately predict what digital trends will dominate in the coming years, let alone the coming decades. After all, who could have predicted the current state of mobile, social, and analytics tools in the mid-1990s, before the dot-com boom even got started? Yet the trends started then have played out according to a generally predictable path. While a smaller number of companies profited directly from those trends than expected, many more have been disrupted because of them.
Conducting a thought exercise can help highlight the benefits of long-term strategic planning about digital trends. Let’s consider the potential strategic impact of self-driving cars and other automated transportation services on business and society. It may be difficult to predict accurately exactly when or how self-driving cars will become mainstream. It’s safe to say, however, that this future will eventually become reality.
Ubiquitous self-driving cars would have a number of impacts on a variety of industries.
- Auto Dealers. Automobile dealers would be significantly impacted by the widespread adoption of self-driving cars. When cars can drive themselves, they don’t need to wait for their owners to pilot them. Passengers can subscribe to an Uber-like service that will be dispatched to pick up passengers on demand. This shift means that individual people won’t necessarily need to own their own self-driving cars personally. If so, it could undermine the current value of the network of automobile dealers who sell these cars to individuals. It may be that an Uber-like company owns the cars in a fleet and dispatches them to customers as needed. Alternatively, companies or individuals could own and maintain a small fleet of cars that plug into the Uber network. Some combination of this structure is also likely, much as Amazon now acts as a clearing house for many small retailers while also selling goods directly. In fact, due to their existing competencies of managing capital requirements and servicing cars, the dealer networks could become key players that operate and maintain the network of self-driving cars. It would, however, likely require a significant shift in strategy and competency from sales to operations.
- Auto Manufacturers. If the auto industry no longer sells primarily to individuals, it also changes the design options available to the industry. It can potentially shift design more toward utility than customer preference. It raises the possibility for designing cars that are not optimized for passenger loads composed of individuals or family units and their cargo. We could see greater development of single passenger vehicles, larger vehicles capable of customized mass transportation, or smaller vehicles designated for cargo.
- Government. The shift toward self-driving cars has implication for government services. Self-driving cars can collect data through their sensors and this data can be uploaded to the cloud and sent back to the cars to optimize routing and traffic flows. It could challenge the dependence on public transportation, as larger self-driving busses can develop customized routes to pick up passengers as needed and in response to current weather and traffic conditions. Different types of traffic control systems may be necessary in a world where cars can communicate directly with one another about routes and intentions instead of following posted rules.
- Retail and Restaurants. Retail stores could begin to use self-driving cars as a delivery infrastructure. The restaurant ordering platform Olo has recently gotten $40M in funding to expand their Dispatch platform, which integrates restaurants’ software with Uber’s platforms to enable on-demand delivery drivers. This software can also adjust delivery radius, food preparation schedules, and fees to optimize food quality through the delivery system. In this scenario, self-driving cars become available to all businesses, which has implications for store design and placement. The data generated by this delivery infrastructure can aid in location development and predictive analytics for staffing. The public’s acceptance of self-driving cars may also pave the way for a similar infrastructure of aerial drones for smaller deliveries.
- Real Estate. Self-driving cars will also have implications for real estate valuations. More urban locations may become more valuable in certain situations, because parking no longer becomes a constraint to access. Conversely, more suburban locations may also become more valuable as traffic is reduced and people can use the commuting time for tasks other than driving. These shifts have implications for where companies choose to build office locations.
Will any or all of these trends actually come true? No one knows. But it is certain that digital trends will have unexpected implications on your company’s strategy. This exercise simply represents a small set of general possible implications for a single technology. Self-driving cars may affect your industry differently than the reasons mentioned here. Other technologies — such as 3-D printing, virtual or augmented reality, Internet of Things, and artificial intelligence, just to name some big categories — all have a similar sort of inevitability and may have a greater impact on your business.
If executives don’t think through some of these possible implications, their companies are virtually guaranteed to get caught flat-footed when they do become reality. It also could mean that optimizing for short-term strategies may lead the organization in exactly the opposite direction of these longer-term digital trends. Companies should engage in similar types of thought exercises on at least a yearly basis to remain prepared to confront an increasingly digital competitive landscape.