A major topic at the World Economic Forum in Davos this year was the Fourth Industrial Revolution, what it means, and how to respond.

I am not convinced by the question mark over the start date in the image above. Personally I feel the Fourth Industrial Revolution started in the early 2000s with the advent of Web2.0, the read/write web or perhaps with the launch of the first iPhone in 2007.

Significant quotes from Davos are:

“A key trend is the development of technology-enabled platforms that combine both demand and supply to disrupt existing industry structures, such as those we see within the “sharing” or “on demand” economy. These technology platforms, rendered easy to use by the smartphone, convene people, assets, and data—thus creating entirely new ways of consuming goods and services in the process. ”

“ On the whole, there are four main effects that the Fourth Industrial Revolution has on business: on customer expectations, on product enhancement, on collaborative innovation, and on organizational forms.”

“ The emergence of global platforms and other new business models, finally, means that talent, culture, and organizational forms will have to be rethought.”

Klaus Schwab, Founder and Executive Chairman, World Economic Forum

A number of well-known Internet companies already convene people, assets, and data thus enabling peer to peer collaboration across the boundary between supply and demand.

• The world's largest taxi company owns no taxis (Uber)
• The largest provider of accommodation owns no real estate (Airbnb)
• The largest phone companies own no telco infrastructure (Skype, WeChat)
• The world's most valuable retailer has no inventory (Alibaba)
• The most popular media company creates no content (FaceBook)
• One of the fastest growing banks have no actual money (SocietyOne)
• The world's largest movie house owns no cinemas (Netflix)
• The largest software vendors don't write the Apps (Apple and Google)

According to research carried by OpenMatters they are all Network Orchestrators in that they provide a platform and set of APIs that facilitate a network of peers in which the participants interact, share and collaborate thus co-creating value for all participants.

Such companies are more profitable, exhibit faster growth, have lower marginal costs and higher market valuations than traditional companies and are much preferred by investors and VCs.

There are opportunities for innovation, digital transformation and network orchestration in the UK property market, particularly the prospect of a peer to peer collaboration platform for home movers as outlined in the following video: -

This article is a must read for any business leader. The digital imperative for digital transformation in all industries couldn’t be clearer. It is time to act.

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Numerous established and hitherto successful industries have been disrupted by new entrants introducing new and bold digital business models. Many well-known companies are now extinct and more will likely to follow. Defining and pursuing a strategy for digital transformation in your business area before someone else does is a top priority for any Managing Director, Senior Management Team or Board of Directors. It demands management action in eight key areas all of which involve fundamental business transformation, operational and implementation risk and significant disruption, but, failure to act, risks a fate far worse than disruption; extinction. This is the digital imperative.

What does this mean for you and what should you do about it?

Ask the right questions

• “How will digital technologies change how we create value for our customers?”
• “How will digital technologies help save costs?”
• “What is the overall task facing our customers?”
• “How will digital technologies better and more fully fulfil and facilitate this overall task?”
• “What business are we really in?”

Disrupt or be disrupted

Asking these questions provides the opportunity to challenge the status quo and disrupt your own business model before others do it to you. Analogue businesses risk attack from new entrants looking to do things in a different way. It follows that you must do things in a different way yourself. Be your own attacker, launch products and services that attack your current offering.

Collaborate, acquire or build

The normalisation of digital lifestyles is changing consumer expectations of what websites offer and do. Digital natives comfortable with and hungry for digital technology and services seek seamless, integrated open and transparent offerings that appear to come from a single provider. This then is about joining up end-to-end business processes so they appear seamless to end users thus enabling them to complete transactions online rather than just access information or do only part of the overall task they are seeking to complete. Rather than focus on a narrow part of a value chain, companies must either, a) secure their position in the broader digital ecosystem of their value chain by cooperating and collaborating via APIs with other digital players in the network. In this way they work together towards a common goal to achieve complete end-to-end alignment of the value chain for customers, or b) they must acquire or build those business to achieve the same ends.

Such seamless, integrated offerings create new opportunities to address unmet consumer needs and pain points and innovate around them. Collaborative platforms and online market places allow customers and providers, devices, applications, data, products and services to work together and collaborate in new ways and this is core to any digital transformation strategy.

Create value from your data

Companies sit on vast amounts of data. Companies need to mine and make better use of data to create new opportunities and achieve cost savings. The use of advanced analytical and predictive tools and technologies helps to change the interaction model with customers from infrequent and random one off encounters and transactions to more targeted personalised digital encounters promoting repeat rather than one-off sales opportunities and more durable open ended customer relationships. Personalised updated offers or services would also take previous online interactions, purchases, and digital product or service usage data into consideration providing a much richer experience and added value for customers.

Adopt an agile strategy

With customer needs and expectations, technology and the competitive environment changing rapidly, it is no longer realistic to plan for the long term. Agile methods borrowed from software development advocate frequent short iterations of creating, testing, refining and adapting. This promotes a learn-by-doing approach. Companies must rapidly and frequently deliver products and services to meet real consumer needs, try these out, scale up what works or pivot fast when they fail and try something else, This requires an organisational culture that supports agile specifically; individual autonomy, risk taking and experimentation, collaboration and self-organising team effort. It needs an organisational culture that encourages and supports its own disruption. Analogue businesses with an industrial era hierarchical command and control management culture will need to change. In an era of digital transformation, making the necessary personal and cultural adjustments are prerequisites for success. The Internet is not just about technology, people and organisations have to change too. See article: A Necessary Adjustment.

Digitise internal processes and back office

It is necessary but not sufficient to digitise your customer offering. You must also digitise your internal processes and back office to ensure to ensure leanness, agility, and lower cost. Remove manual processes and digitise them. This helps improve performance and is enabler for an agile strategy and better use of data to improve customer experience and increase value.

Foster digital leadership

Digital leaders are different from industrial leaders. They network and collaborate rather own and dictate. They participate and share rather than command and control. They ask the right questions, they disrupt before they are disrupted, they collaborate with or acquire other businesses in their digital ecosystems to provide a seamless integrated end-to-end offering for customers. They make best use of their data to cut costs and provide a richer customer experience as well increase sales opportunities and promote more durable open ended customer relationships. They prototype agile strategies learning from their experiences to do more of what works and pivot fast when they fail. They digitize their internal business processes and back offices to facilitate digital transformation across the whole of the business.

Act

To reiterate, companies that respond to the digital imperative take on fundamental business transformation, operational and implementation risk and significant disruption, but failure to respond to the digital imperative risks a fate far worse than disruption; extinction.