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“When studying the major technology shifts in history, we see that the winner of the technical evolution were those that could adept to the change – and create a business advantage by leveraging new technology and a creative business mindset.”

 A couple of weeks ago, I read an article about an old Swedish company lying off a couple of hundred employees to avoid an upcoming financial crisis. Its industry has been heavily impacted by globalization and digitalization, with new and more intensive competition, changing the characteristics of an industry where they have been very successful. This is not unique. We daily read about businesses affected by digitalization and globalization – and respond in the same way by reducing cost levels and employees. I happen to know that the company in question has a very traditional IT governance set-up and have during the last years focused on outsourcing, leanification, and implementation of ITIL framework. So when change comes, as predicted, the obvious answer is to cut cost by becoming more efficient – rather than adjusting its business model to the new pre-requisites. This is about meeting a new business situation with old IT governance tools (traditional governance, planning, budgeting and leadership) – it will not work!

When studying the major technology shifts in history, we see that the winner of the technical evolution were those that could adept to the change – and create a business advantage of the new technology. Those that have the ability to be creative see the opportunities and challenge their way of working to revolutionize a business. The phenomenon is called “Creative Destruction”.

Definition: “Process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” – Wikipedia 2014

There are numerous examples of Creative Destruction in history where technical advances have, together with creativity and new business models, changes the rules of an industry. Brands such as Xerox, Polaroid and IT intensive industries such as printed media have all undergone creative destruction where new technology have eroded old technology and business models.

“Companies which made money out of technology which becomes obsolete do not necessarily adapt well to the business environment created by the new technologies.” – Wikipedia 2014

What is interesting about this phenomenon is that Creative Destruction today spreads quicker and broader than ever before due to globalization and digitalization. It is fascinating that an online news site such as Huffington Post is leading the creative destruction movement in the whole newspaper industry. In the last 25 years, the number employed by traditional newspapers have fallen by 50%, and the same time, the number employed by internet publishing has increased by 400%.

When I read news, probably online, about a traditional company reducing it cost levels in panic, I see yet another unsuccessful attempt to address increased digitalization and creative destruction in the market. From my point of view, it all has to do with what tools you have to address the new situation – new or old tools? In the “old days” with high stability (high predictability), the traditional strategy of lying off people might have worked because of temporary set backs in the market. But today, there is no such thing as temporary set backs, there is only increased digitalization, globalization and high unpredictability demanding higher agility and more creative creation. Trying to solve today’s problems (digitalization and unpredictability) with traditional tools (lying off people) will not work.

I meet many CIOs, playing a pivotal role in creative creation, focusing on traditional governance excelling in outsourcing, leanification and implementing process frameworks. The problem is that these are old tools. Tools that worked in a stable and predictable business environment where there were limited movement in customer behavior, technological advances and mobility. Now it is different. When I talk to IT leaders about agile IT management methods, I sense that this is something that makes them uncomfortable. “Yes, I hear what you are saying, but know we are investing in a new IT platform or ITIL implementation”. Viewing the world and IT’s context with tainted glasses. Why is it so? My view is that many CIOs are not comfortable with change or challenging their old way of working. That is the only way they know, that is what is expected of them – that is how they traditionally make a career. But that is not good enough. In a company I worked with, we could see that IT managers with traditional management methods where quickly replaced by more business oriented leaders with understanding of the digital ecosystem. It is just a matter of time before Creative Destruction happens in your industry challenging your position in the company. Are you ready?

My recommendation:

  • Build awareness in the IT organization (and among senior management) that digitalization and creative destruction will have huge influence on you way of working. Because it will come, and it will challenge your ways of working and culture.
  • Start looking at agile IT management methods. Get a feel for how they work and how they taste. The thing is that the agile IT management methods will also work in more stable environments.
  • Get a digital coach! Someone who can help you to understand the impact of the digital revolution in your organization. Very useful!
  • Contact The Goodwind Company – we have the new tools (agile iT management methods and digital coaches) for the digital era.

Traditional governance and strategy will not be successful in the new digital ecosystem. The traditional tools are designed for a traditional environment with high predictability and certainty. Today is different! To survive in the new digital market is it of essence to understand how the market is changing and how it affects you. Also that you as a leader do the analysis and not only listen to influential consultants. It is you a leader how have to drive the digital transformation through total conviction and passion. Are you ready?

Hans Gillior

Hans Legend 1