John Straw on Digital Transformation
Ahead of speaking at Disruption Summit Europe, D/SRUPTION co-founder shares his views. . .
What is ‘digital transformation’?
My experience has led me to form two specific opinions about digital transformation. The first is that it describes a culture where data forms the basis of business decision making and innovation. That’s pretty dramatic for most organizations where decisions are made by learned and experienced individuals, but remain subjective by nature. Data takes the subjectivity out of decision making and as a direct result organizations become a lot crisper and more informed.
The second is that it entails removing the word ‘failure’ from the company lexicon and replacing it with the question, ‘what have we learned?’ A classic example would be Google Glass. Four or five years ago, Google introduced Google Glass, then, about 18 months ago, they withdrew it and everybody assumed it had failed. However, Google simply treated it as an experiment to learn from. This July, they re-launched an enterprise version of Google Glass with lots of applications for specific industries such as the petroleum industry, retail, healthcare, etc. Unlike most corporates which regard failure as being a catastrophic event, Google actually regarded it as a learning exercise.
Which industries have been most impacted by digitalization and which are likely to be next?
Finding a business that is not being impacted by digitalization is actually quite hard, but I think the industry that has been most dramatically affected by digitalization is the advertising and publishing business. The whole business is being transformed by the fact that what was before a very imprecise art has now become a precise art driven by major technology companies such as Google and Facebook.
In your experience, how many companies are really prepared for digital transformation?
If a company is asking now whether or not it is prepared for digital transformation, it is about eight years too late and the game is close to over. The simple fact is that it is already happening. There is in fact massive appetite for digital transformation from the corporate world but that appetite needs to be focused. There are two steps to this. The first is realizing your company can save considerable amounts of money thanks to digitalization. Companies then need to put an entrepreneurial hat on and say, ‘where can I make money out of digital transformation?’ That’s where the creative work is: digital opportunity.
Which well-known companies do you think have handled digital transformation the best?
Without inside knowledge of an organization, the way to tell a company that is digitally transformed is to look at it from the outside in. I have two examples, one in the B2C space and one in the B2B space. The B2C example is Mattel, the big US toy company, which I think has got its head around digitalization. For instance, they just launched a home 3D printer, a virtual reality product range and a Barbie which connects to IBM Watson’s artificial intelligence computer. The B2B example is a business called Kern which makes weighing scales so precise they can weigh tiny differences in the earth’s gravity. Kern gamified its business and turned it into a sensational success. Take a look at Kern: The Gnome Experiment’ on YouTube here:
Given the rapid pace of technological development, how should management teams go about discerning between available technologies?
Ten years ago, companies were often forced to choose between different suppliers with lots of proprietary technology. This completely changed with the advent of open source technology. Google, for instance, puts significant amounts of the software it develops into open source. You can use it free of charge as long as you make a development contribution to it rather than a cash contribution. Companies like Microsoft, Facebook and IBM are doing the same. This means the proprietary nature of software is fading in all except legacy IT situations.
Why are technology businesses giving away their software like this?
The answer is twofold. The first reason is that when you turn your software over to the open source community, you add a significant multiplier to the number of developers working on that software. It’s like Wikipedia in concept. The second reason technology businesses are giving away their software is that they recognize the value is not in software anymore, it’s in data. Open source software allows us to use the data we hold in a more effective manner. Most of the organizations I come into contact with don’t even know what data they have. One of the first things all companies should be doing from an operational perspective is a data audit: find out what data you have, find out what data is available from third parties and then see what you can do with it using open source AI to create new products.
Is open source technology relevant for every sector?
Yes, especially around data analytics, layered data and AI. If the software is open source that means a healthcare company for example can pull AI software out of the open source community, modify it to their needs and then plug in their data. Going a step further, the real game changer companies should be looking at is something called API [Application Programming Interface]. API is a layer of technology that allows disparate computer systems to talk to other disparate computer systems, allowing all different sorts of opportunities, including cost saving opportunities.
One of the big debates about digital transformation is the potential net cost to human jobs. How real a concern should this be?
A rule of thumb here is that if you have a very tight job description, your job is threatened. If your job description is creative, you are much less threatened although even AI is becoming creative. However, this is not like falling off a cliff – to start with we are taking about job augmentation for humans, not replacement. Workers in the trucking business are not going to be replaced by [self-driving technology] tomorrow morning, although it will eventually happen. The job replacement by AI is likely to be stealthy.
In terms of what this means for us humans, I think we’re heading into an age where entertainment and enjoyment will become a much more fundamental part of our lives. The difficulty with all this of course is the economics that are attached to it – when you have that many unemployed, who pays for them? All companies should be doing a data audit: find out what data you have, what is available from third parties, and then see what you can do with it.
Is digital transformation a leveler of the playing field – for example between companies in developed and developing countries – or does it further exacerbate gaps in development?
US and European startups, probably up to a D round, will concentrate on their own local markets instead of attempting to enter emerging markets. This gives local businesses and startups in other parts of the world an enormous opportunity to copy US and European startups and be the first in their marketplace with a successful new technology. But there are going to be winners and there are going to be losers. I can normally see the winners as soon as I walk through the door. That’s what happened at SPi Global: I immediately saw a winner.
How is digital transformation likely to impact SPi Global and how, in your view, is the company positioned to take advantage of that?
Initially, my role in the acquisition was to verify the management team was aware of new technology and had some use cases and plans to be able to use it. However, as soon as I walked through the door and met the IT director and CEO, I knew they were in the right place. I had a conversation with the IT director very quickly about using machine learning and data parsing to increase the efficiency of their business. That meant my role then changed into looking for opportunities for expansion. I believe SPi can enter new markets and use its emerging digital technology to turn those marketplaces into very profitable businesses.
For example, a fundamental part of SPi’s business is the re-purposing of content for different platforms, which is a very good business. In the future, they could be using AI to perform intelligent data parsing, whereby content and data that is incompatible with other systems is made compatible via machine learning, automating a number of processes.
What emerging technologies you are most excited about?
I’m an entrepreneur; every time I get out of bed in the morning I see exciting opportunities around disruption! There are two technologies that I am extremely positive about. Firstly, Chatbots, an online technology that takes over conversations you might ordinarily have with a call centre worker. As AI becomes more powerful, the human operator will appear later and later in the conversation – and this will happen by stealth. In the end, this will make a company’s net promoter score higher because consumers will speak with one computer entity instead of a call center worker with a script. This is the future interface to the web.
Secondly, material science, which has fundamental opportunities to change every object that we lay our hands on to make those objects much more efficient, changing industries in the process. An example of this is provided by Boeing, which about six months ago launched a new metal called microlattice. This is ten times as strong as stainless steel and almost as light as air – and it’s 3D printable. In the future, they plan to make aircraft out of it. I would say that’s pretty ground breaking and has enormous implications for the transport business.