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Who will win in the digital economy? It will come down to survival of the fastest. Heres how traditional businesses can accelerate in a world where time-to-everything matters more than any other strategic imperative. By Manish BahlFAST, BUT NOT FURIOUS: THE SPEED YOU NEED TO WIN IN THE FOURTH INDUSTRIAL REVOLUTION3Fast, But Not Furious: The Speed You Need To Win in the Fourth Industrial Revolution | Executive SummaryThe pace of business change has intensified dramatically as the fruits of digital technologies expand beyond Silicon Valley to the entire economy in the Fourth Industrial Revolution.1At the heart of this new digital world order is the unstoppable rise of automation, analytics and artificial intelligence (what we call the new machine), and with that comes unprecedented levels of speed speed of doing business, generating value, making decisions, meeting customer expectations and getting products and services to market. In short, it is speed that determines whether you disrupt or are disrupted. According to Forrester Research, over half of consumers will abandon their online purchases if they cant find quick answers to their questions.2Great businesses built over decades and even centuries will be for naught if they cannot operate quickly enough. The tension between the fast pace of change and the optimal rate for established businesses to respond and adapt is growing as the leadership, legacy systems, business strategies, supply chains, organizational structures, skills and cultures of many of these established companies are simply not equipped to cope with the speed of change.Traditional companies, however, are in an excellent position to capitalize on the Fourth Industrial Revolution. They understand their markets, products and associated regulations better than anyone. They also have all the right assets to gain proprietary insights into their operations and markets. Where business leaders often struggle is in setting the right pace for their digital journey: fast enough to build the business of the future, but not so furious that they lose control. This is the mission behind this report: to help leaders adjust the speed of their response to the velocity of the changes taking place. This paper is an extension of our primary research, featured in our report series The Work Ahead, and our latest book, What To Do When Machines Do Everything. In this report, we describe a framework by which traditional businesses can assess their current speed of change and accelerate toward the right speed in a world where time-to-everything matters more than any other strategic imperative. THE SPEED MANDATEDigital disruption has something in common with Ernest Hemingways description of bankruptcy: It occurs “gradually, then suddenly.”3Market changes that once took decades now transpire in weeks and months. New digital consumers seem to be born, literally, every minute. According to our Work Ahead research, the revenue derived from digital channels is also set to explode; by 2018, digital will account for more than 11% of all revenue on average for the businesses we surveyed, up from 4.6% in late 2015. This represents, if not exponential growth, a notable has-tening of the shift to digital. As Salesforce CEO Marc Benioff rightly said, “Speed is the new currency of business. If youre not going fast enough, someone else is.”4In an age when a start-up can reshape an entire indus-try overnight, businesses must be on their A-game. For instance, Alipay, the worlds biggest payment company, had hit $100 billion in transactions in less than a year with zero branches, while DBS Bank in Singapore took 50 years to reach the same milestone.5Its not a coincidence that many shareholders reports of S&P 500 companies are littered with “speed,” “fast” and their synonyms today. | Fast, But Not Furious: The Speed You Need To Win in the Fourth Industrial Revolution 45Fast, But Not Furious: The Speed You Need To Win in the Fourth Industrial Revolution | Business leaders are already under tremendous pressure from inside and outside their organization to meet fomenting customer and market expectations. In addition, massive data volumes and the pressure to derive insights from it are creating a digital overload for many companies at a time when they need to accelerate the speed of decision-making in their organizations. In our Work Ahead survey of 500 IT managers, the number one issue reported was that their businesses were too slow to effectively capitalize digital. Very simply, if your organization wishes to meet the speed of market and technological change, it has to automate significant portions of its operations during the next few years. Our Work Ahead research shows that organizations that fail to act swiftly in leveraging digital will pay an average of $692 million in penalties the difference in both cost and revenue performance due to technology by the end of 2018. Moreover, digital leaders hold a 139% advantage over stragglers in cost sav-ings and revenue growth. If you think it will be another 10 years before digital technologies such as automation, algorithms and AI need to be taken seriously, youve already lost. Business leaders need to ask themselves some hard questions: “What does the speed imperative mean to our industry and business?” “How much is the penalty we are already paying by being slow?” “What are the needed changes in business processes, operations, people and business models we must make to respond fast enough to market changes, new developments and technol-ogy change?” Answers to these questions will set the speed context for the organization. Very simply, if your organization wishes to meet the speed of market and technological change, it has to automate significant portions of its operations during the next few years.| Fast, But Not Furious: The Speed You Need To Win in the Fourth Industrial Revolution 6MOVING AHEAD WITH SPEEDIn What To Do When Machines Do Everything, we provided a structured approach for moving forward with digital, based on our work with Global 2000 companies at the vanguard of the digital transition. The AHEAD model (detailed below) summarizes five areas in which businesses can take action to effectively compete in the new machine age: Automation Code Halos Workforce enhancement A business model based on abundance DiscoveryThe speed of change that leaders set for the AHEAD model will determine how fast or slow they grow their business in the years to come. But theres a catch: Not every company can move at the same pace because each firm has its own ambitions and priorities in the new machine age. What might be a good compromise for one may be unfeasible or even unacceptable to another. Further, trying to do too much too fast is often a recipe for disaster. Businesses need ambitious goals, but overblown promises and expectations will only lead to disappointment. Scattershot initia-tives or overly general bromides to “Just do AI,” “Just do big data,” “Just do every new shiny tech-nology” invariably backfire because those left to carry out the order dont know the difference between “fast” and “far.” According to a new study, 84% of digital transformation projects fail to meet expectations.6Companies should know when they are overreaching.Meanwhile, attempting to imitate one of the digital masters or unicorns is more often than not a mis-guided and even dangerous strategy. The chances are good that endeavoring to become “the Amazon of our space” will destroy more business value than it creates. Traditional companies have a base of existing processes, products and culture with roots in the industrial era. Perhaps more pertinently, their end goal is different. Organizations that pursue these “fake futures” are being furious and not fast in their transformation journey. (For more on this idea, see our blog post on this topic.)The AHEAD Model Heres a closer look at all five approaches in the AHEAD model, in the context of speed: Speed to automation: Software bots are critical for matching the speed of change in the marketplace. The next level of automation for human-based processes (or process work-arounds) will put organizations on a high growth path. If youve spent most of your career around ERP and Six Sigma, youll know that 3% to 5% efficiency gains were once considered big. Its a different ballgame now. According to our Work Ahead research, applying robotic process automa-tion (RPA) to long-standing core business processes can drive 30% to 60% (or even more) of costs out of a businesss operations, with error rates plummeting to near zeropanies such as Blue Prism are applying bots to risk, fraud, claims processing and loan management in banking to realize enormous productivity gains from automation.7 Rio Tinto, a large mining company in Australia, is leveraging automation to improve productivity in its core mining operations. It has already experienced a 15% reduction in the cost of operating its automated trucks, and has committed to generating USD $5 billion of additional free cash flow over the next five years, and automation will play a key role in achieving this goal. It is also trying to enhance worker safety and upskill its workforce as automation takes over a majority of its repetitive mining tasks.8Businesses should set a target to double the speed of their core processes to double their cost sav-ings and time-to-market improvements.7Fast, But Not Furious: The Speed You Need To Win in the Fourth Industrial Revolution | | Fast, But Not Furious: The Speed You Need To Win in the Fourth Industrial Revolution 8Speed to monetize halos of information. In our earlier book on Code Halos, we described how every person, place or thing is now a code generator9and that winning with data is the number-one competitive game in nearly every industry. Companies that use advanced analytics and machine learning are twice as likely to be top-quartile financial performers, and three times more likely to execute effective decisions.10For instance, Under Armour, the athletic apparel company, is aiming to double in size by 2020, fueled by instrumented shoes and clothing.11Businesses should start thinking about instrumenting all of their key products and machines and using the resulting insights to significantly accelerate the speed of decision-making and create new business value. Companies that fail to embrace this strategy are destined to come face-to-face with their own extinction event. Set yourself a target of becoming a “know-it-all” business. (For more on this topic, read our latest book, What To Do When Machines Do Everything). Speed to enhance the workforce. At the heart of enhancement is the simple idea that the new machine can improve not replace, as popular headlines proclaim the productivity and effectiveness of nearly every person and job. Businesses need to find the balance between the work of humans and robots. JP Morgan is just one example of a traditional company leveraging machine learning and automation to free up people to work on higher-value activities.12Our book confirms that roughly 75% of existing jobs will be altered or enhanced by AI-driven technol-ogies, resulting in a more productive workforce and higher business performance thresholds. For a banker, this might mean being able to see the financial Code Halo of a customer and knowing instantly what he or she needs next. Businesses should set a target to enhance every person in the organization to speed up the compa-nys performance, as well as help workers focus on the more human elements of the job (strategic thinking, leadership, decision-making, innovation, among others) to double their output or greatly increase their quality of delivery. The AI-driven machine must become workers new “colleague.” Speed to abundance. Simply put, as prices decline, demand typically rises; once a mass market is created, customers become bought into the need for the product and/or service. This, in essence, is the definition of abundance. Businesses can create markets of abun-dance by leveraging AI, analytics and automation to drive down the price point of products or ser-vices to compete and win in low-cost, high-volume markets. A good example is the success of Reliance Jio, a new telecom company in India, which aims to provide data services for as little as the cost of a postcard. The business reached 100 million subscribers in just 170 days, or roughly seven users per second per day, forcing the competition to lower their prices.13Another way businesses can create a market of abundance is by leveraging start-ups within or out-side their industry, whether through acquisition or partnership. The key is to get these innovators into the businesss ecosystem to increase the speed of new opportunity creation and drive sales up to unprecedented levels.Speed to discovery. By leveraging the new machine, businesses can conceive of entirely new products, new services and new industries for the digital economy. Companies that are trying to establish their digital strategy for triggering innovation must rip up the rule book. For instance, A3, the innovation outpost of Airbus, recently embarked on devel-opment of an on-demand service for urban helicopter transport, usable via a mobile app. This would connect passengers and operators, making helicopters more accessible and affordable.14In another example, Tesla cars use “over the air” software updates, eliminating the need for owners to bring their cars to the dealer.159Fast, But Not Furious: The Speed You Need To Win in the Fourth Industrial Revolution | THE AHEAD SPEED FRAMEWORK While the AHEAD model illuminates a path forward for achieving digital success, the speed frame-work will help organizations set the right pace. By assessing their own characteristics with the ones detailed in our speed framework (starting on page 13), businesses can determine where they are in the digital journey and what they need to do to progress to the next level. The ultimate objective of this framework is to help organizations match the speed of disruption in the marketplace. Although the ideal scenario is to accelerate speed across all five categories in parallel, that is not possible for most traditional organizations. We suggest organizations strive to be in the fast lane on one or two of the AHEAD categories to begin with, and then aim for medium speed in the others. Once theyve picked up speed, it will be clear which AHEAD category should shift into the fifth gear. Moving forward with the AHEAD model is a journey, and there is nothing wrong with taking time early on to prepare to speed up later. The speed at which a business can successfully move depends on its starting state: how change-ready it is and its speed tolerance. The goal should be to move to the next level of speed to accelerate the pace of doing busin
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