Excerpted from Looking Ahead.
The growth of all things digital has had an exponential impact on business and society. To better understand the economic and sociological impact of disruptive technologies on both companies and the world at large, we spoke with Dr. Michael Chui, a principal of the McKinsey Global Institute, where he leads research on the impact of information technologies and innovation on business, the economy and society. Michael has led McKinsey research in such areas as big data, Web 2.0 and collaboration technologies, and the Internet of Things.
■ Big data, open data
We believe that big data and data analytics are going to be incredibly important, certainly in the short to medium term. It is becoming a basis of competition in every industry. Companies that learn how to use data effectively are going to be more likely to win in the marketplace and those that don’t are going to fall behind.
It’s challenging because this isn’t a capability that you build and then you’re forever ahead of your competitors; it really is a run-faster business. Your competitors are always going to be trying to catch up with you or leapfrog in front of you, so you really have to become a learning organization in order to succeed at it.
We recently released a report on open data, which is data that becomes more liquid, shared amongst multiple organizations and consumers.1 Open data can become an instrument for breaking down information gaps across industries, allowing companies to share benchmarks and spread best practices that raise productivity. Sometimes you have to pay for it and sometimes there are restrictions on its use, but it can give rise to novel, data-driven innovations benefitting both businesses and consumers.
■ The growing impact of mobile
Mobile will continue to be a big deal going forward. We sometimes describe it as increasing diversity of form factors because it’s not limited to tablets or phones. Although many billions of mobile devices already exist, more than half the world has not yet been connected to the Internet. That’s a huge amount of head room, in addition to all the innovation that will come from people who are already connected. Mobile also has tremendous implications for the enterprise in terms of where and how people do their work.
Mobile has numerous implications for our current business models in terms of improving efficiency and effectiveness. Simple things like being able to optimize where people go and what routes they take can make a big difference if you’re managing a sales force or a team of maintenance or installation technicians. We have already seen new business opportunities unlocked by mobile devices; for example, services that allow you to summon a car to your location would not exist without smart phones, location sensors and so on. There is a whole industry developing around mobile advertising enabled by knowing where people are, how close they are to a store, and mobile payments are having an impact as well as creating new lines of business.
Another key concept is the Internet of Things: embedded sensor networks. This will lead to all kinds of new business models, new products and services as well as increasing the efficiency and effectiveness of the things that we already do.
■ How the board should address the digital question
Awareness is the first step. The board needs to learn about digital issues, including data, social, mobile and the Internet of Things. It is important for companies to invest in the capability to monitor potentially disruptive technology shifts that might affect the business in both a positive and negative way. Some amount of attention from senior leaders is essential. It’s rarely the case that an existing company with a successful business model will just throw everything away and do something completely different. However, it is important to understand the implications of these trends and be prepared to experiment and scale up as the situation demands.
Business leaders need to be extremely cognizant of the fact that these types of disruptive shifts are frequently underpinned by technology trends. It’s rarely the case that you can stop a technology trend. You might be able to slow it down a bit, but usually it is more helpful to either get ahead of it or be positioned to move quickly if and when the trend really accelerates.
In my observation, organizations that are most successful at adapting to technological change have the courage to reallocate resources in a significant way; also, they just have the best people across a number of different dimensions, including intrinsic ability, knowledge, leadership and motivation.
■ Embracing social
In our research, we found that there are some organizations that mostly gain impact from the use of social technologies within the organization and some that mostly gain impact from their connections outside the organization, whether it’s with customers, business partners or suppliers. However, we found that companies with a significant use of these technologies both internally and externally had a higher level of impact across both arenas. That suggested to us that what companies learn about using social technologies externally helps them with their internal uses and vice versa. There is real value in being able to do both.
■ The socio-economic impact of disruptive technologies
McKinsey Global Institute recently published a report on the impact of economically disruptive technologies.2 One of the big trends we looked at was the automation of knowledge work and a set of technologies which automate physical work, including self-driving cars, 3-D printing and advance robotics. What we’re discovering is that there are a tremendous number of tasks which previously we thought only people could do effectively, whether it be physical work or knowledge work. This has great potential for improving productivity and improving quality, creating new products and services, but it also will be tremendously challenging on the labor management side.
Historically, whenever we’ve automated we’ve always found new jobs for people to do. I think there’s a real question as to whether or not we’re automating away tasks faster than we’re creating new ones. This is arguably one of the most important public policy questions we will face in the future.
1 Open data: unlocking innovation and performance with liquid information, McKinsey & Company, October 2013. ^
2 Disruptive technologies: Advances that will transform life, business, and the global economy, McKinsey & Company, May 2013. ^
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