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Digitalization has many similarities to how the Enlightenment period during 18th and 19th century transformed the society into what we see today. Great powers like the Habsburgs failed to adjust to the social development – based on the ideal of Enlightenment and were dissolved after the Great War. What can we learn from history and the Enlightenment impact on World history?

To drive change is one of the key tasks of the digital CIO. Digitalization is changing the competitive landscape and the role of technology in creating customer value. The fact is that major research companies predict that all future business models will depend on smart use of IT and new digital capabilities. Digitalization is not necessarily a technical revolution but rather a management and leadership revolution where the traditional “command and control” management style is challenged. For me, the management revolution is a natural step considering how history has progressed during the last couple of centuries.

The period of Enlightenment in the 17th and 18th century with philosophers and scientists like Newton, Voltaire and Montesquieu challenged the power of the church and ruling houses by questioning authority, legitimacy and became the ideal for liberalism, democracy and religious tolerance. We can trace revolutions, world wars, constitutional government and separation between church and government to the ideas of Enlightenment – all bases of the thesis that “all men are capable to think for themselves”. Interesting is that Enlightenment has its basis in science and greatly valued empiricism and rational thought, and was embedded with the Enlightenment ideal of advancement and progress. With the progress of the enlightenment ideals, scientific development and a stable government (separate from church and wealth) have created a fantastic economic growth creating the society we live in today (very simplified).

Digitalization is like the Enlightenment period creating a push for a new world order with new governing principle in the corporate landscape. From a historical perspective I compare the “traditional” global companies to the House of Habsburg in the early 20th century – completely out of line with the liberal and national movement in their empire. Austria-Hungary was the second largest country in Europe and the third largest industrial power in the world – but it did not help them to avoid the complete collapse following the Great War. Francis Joseph I was a traditional monarch avoiding any kind of chance or modernization – living in his own bubble of glamour. Studying the raise of digitalization we see similar behavior (leadership, governance and readiness for change) in the corporate landscape and we know history will threat powers unaligned to the movements in society.

What we can learn from history is that it is the combination of new democratic governance, scientific/technical advances and enlightenment ideals that makes countries prosperous. It is a painful journey but has made life better for all world citizens. But comparing this theorem to the business world, many organizations display the same behaviour, leadership and governance as the Habsburgs. Yes, organizations focus on technology and science but not understanding that a new leadership and governance is required to boost prosperity. New technology with old leadership/governance is bound to a “crash and burn” scenario where great corporate empires will shrink and disappear from the digital competitive landscape.

During the last five years, I have studied the progression of digitalization and how companies (especially address the new challenges). The starting point was Gartner’s attempt to define digitalization with its NEXUS OF FORCES (social media, mobility, big data and internet of things). Since then there has been a great investment in new technology to boost the corporate digital presence. 90% of all articles and seminaries relating to digitalization still have a technology perspective. Still, we see many companies confused about how to address digitalization – probably because their technology strategy has not increased the digital revenues. What happened? Well, a digital transformation requires change in leadership, governance and digital capabilities and by only focusing on one dimension many companies will fail to achieve the benefits of digitalization. Easy as that! I think that the NEXUS OF FORCES has a good start but did not grasp all the dimensions of the digital revolution.

Companies in the bank and finance industries have been challenged by digitalization a number of years. The industry is an IT intensive industry where IT and technology plays a pivotal role in making the right financial decision, and providing valuable services and advice. The banking and finance industry has been protected by national regulations but also through the large capital base needed to build a financial institution. Today is different where small start-up companies like Klarna revolutionize the industry. What is interesting is that most banks focus on technology investments (new smart IT) and reducing cost/risk as their main strategy for the digital era. As the customer ratings fall and market shares are lost – there is a confusion of what to do. Why is this not working? The answer is simple – a digital transformation requires change in leadership, governance and capabilities – not only in technology. To change leadership and governance is painful and a career suicide but necessary to conquer digitalization. The Habsburgs couldn’t do it and we all know how that story ended.

My point of view is that digitalization is a corporate revolution that easily can be compared to the revolutions or wars of the 19th and 20th century where the “old” leadership was challenged by new ideals and needs of the people. It is not only about technology (big data or mobility) but something challenging the core of business and competitiveness. The successful and prosperous nations (and companies) are the ones that continuously challenge and change their leadership, governance and (digital) capabilities to be one with the movements in the society. However, many companies (and especially IT organizations) are lost in the challenges of digitalization and hence listen to advisors – with limited knowledge of the true nature of digitalization.

I wonder how the great leader Francis Joseph I reasoned about changes in the Austrian-Hungarian society during the 19th and 20th century. Nationalism, liberalism and demand for democracy were changing the roots of the empire and threatened its existence. However, with absolute power, any uprising could be crushed and the empire could continue to prosper and participate in the political game in Europe. The French revolution and the following overthrow of European ruling house was a chock for many rulers and should be avoided to any cost. Any new social trends, and revolts that would challenge the position of the monarchy should be ignored and crushed. The Austria-Hungary was dissolved after the armistice of Villa Giusti, the Romanovs fell after the revolution in 1918, and the powerful Ottoman Empire was divided after the Great War. How did Kodak reason when digital cameras where released in the 1990’s? How do you reason when it comes to digital transformation?

– Hans Gillior: Senior Advisor and Expert in Digital Transformation