Besides underestimating the threat, another reason companies may not
be acting quickly enough in the face of digital disruption is that most
executives don’t understand exactly the key challenge facing organizations.
If they don’t understand the underlying nature of the problem,
they can’t know whether and how to respond to it effectively. In the
words of Pfeffer and Sutton, they can’t formulate the answer to the question
of “why” the organization needs to change. Fortunately, this is a
problem that our book can help address. Many treatments of digital disruption
regard the rapid pace of technological innovation as the key problem
facing organizations. Indeed, technological innovation is happening
at a faster rate than ever before. Computers continue to become smaller,
cheaper, more powerful, better connected, and embedded everywhere.
While the increasing rate of technological innovation is a significant part
of the challenge facing companies, it is not the problem in and of itself.
The true challenge of digital disruption facing organizations (and,
indeed, a major part of the solution, as we will see) is people—specifically
the different rates at which people, organizations, and policy respond
to technological advances (figure 2.1). Technology changes faster than
individuals can adopt it (the adoption gap); individuals adapt more
quickly to that change than organizations can (the adaptation gap); and
organizations adjust more quickly than legal and societal institutions
can (the assimilation gap). Each of these gaps poses a different challenge
for companies.1
Just how fast these curves are changing is under debate. For example,
while technology is certainly increasing in power (and decreasing in cost)
exponentially, the rate of those changes differs depending on whether
you are talking about processing power (18 months, Moore’s law), storage
(12 months), or networking speeds (9 months). Yet, cheaper processors,
more robust storage, and faster networking don’t threaten organizations.
The threat comes when someone realizes that this faster, cheaper, better
computing environment presents new ways of solving business problems.
These changes in technology use occur more unpredictably. The key point
is simply that changes occur at different rates, with organizations adapting
more slowly than either technology or individuals’ use of it; and the
gaps between these different levels of technology use are getting wider.
Adoption
Adoption describes the gap between the rate at which technology
changes and the rate at which individuals make those changes a part
of their daily lives. In the seminal work of Everett Rogers,2 he labeled
innovation adopters based on various rates and phases: innovators,
early adopters, early majority, late majority, and laggards. The result
is a cumulative adoption function by which innovation occurs rapidly
as the early and late majorities begin to adopt. This adoption curve
is certainly still relevant to technology companies and IT functions
that are trying to drive the adoption of certain types of technology by
employees in the marketplace or across the enterprise.3
Despite occurring to varying degrees, with a significant portion of
individuals lagging behind, adoption is not the most critical digital disruption
problem most managers face. Individuals generally still adopt
technology faster than organizations can adapt to it. As individuals
now have easy access to robust consumer-facing
technology products
(
versus depending on their employers for these formerly costly devices
and services), they are able to gain quicker fluency with new technologies.
For example, Facebook is an extremely robust collaboration platform
freely available to consumers, while enterprise versions of similar
tools can cost upward of fifteen dollars per user, per month. Furthermore,
consumer technology is increasingly user friendly and intuitive.
This situation is relatively new. As recently as ten to fifteen years ago,
businesses adapted more quickly to technology than individuals did. The
reason was simple economics. Prior to the first decade of this century,
most people could only afford technology through their employers, and
the so-called
enterprise-grade
technology was far more advanced than
consumer-facing
technology. As the costs of information technology
dropped, powerful consumer-facing
online platforms became widely
available, and powerful mobile devices have become ubiquitous.
The rapid rise of consumer-facing
platforms such as Google, Facebook,
and Amazon—all
currently among the top five most valuable
companies in the world—are
a testament to how quickly individuals
have adapted to change.4 As platforms and devices gather more data
from increasing levels of user interactions, they evolve in ways that
speed up the adoption curve. Facebook and other platforms engage in
A-B
testing to optimize every facet of platform design to make it more
usable.5 Mark Zuckerberg says that Facebook runs approximately ten
thousand different versions of the platform looking for small ways to
improve the experience and increase the time users spend on it.6 As
more people use the platforms, the companies gather more data about
how the platforms can be modified to deepen adoption. Adoption will
continue to be an issue for companies using expensive technologies that
only organizations can afford, but for most technologies, the problem
lies elsewhere. Most organizations don’t need to drive further adoption;
they need to adapt to the facility individuals have already built with
these tools. The “bring your own device” (BYOD) policies implemented
by many enterprise technology departments highlight and, perhaps,
exacerbate the lag between adoption and adaptation.
Understanding the adoption curve isn’t entirely without value, however,
because it can provide important foresight for when and how
certain strategic initiatives (i.e., when and how customers are adopting
technologies) and organizational initiatives (i.e., when and how
employees and partners are adapting them) will be necessary.
Assimilation
At the other end of the spectrum, assimilation refers to the gap between
how many organizations use technology and the laws and regulations
that societies agree on to govern that use. Laws and regulation usually
lag actual use, and this poses a different set of challenges for most
companies. The gap between organizational use and regulatory frameworks
is likely exacerbated for global companies that face differences
in legal governance. For example, global companies have to deal with
multiple legal and regulatory frameworks; policies that may work in
one country may not work in another. Regulatory frameworks also vary
across industries. One manager in a regulated industry actually points
to regulation as a benefit for the company, as it provides clear guidance
for what to do and not to do across all competitors in the industry.
Some companies in regulated industries have reached out to regulators
proactively to describe the innovations they hoped to enact, seeking
guidance for how these initiatives should be implemented.
For most companies, waiting for the legal policymakers to catch up to
practice is not an option. Organizations must adjust quickly enough
to accommodate customer demand, while abiding by legal and regulatory
guidelines. Indeed, among the major challenges facing rising stars
such as Uber and Airbnb are the regulatory frameworks that attempt to
structure their behavior.
Adaptation
Between these two gaps of adoption and assimilation lies the most critical
gap facing nearly every organization today—adaptation.
Adaptation is
the gap between how the majority of individuals want (and expect) to use
technology to engage with companies and how companies have adapted
to support those interactions. Technological advances that people don’t
widely adopt pose potential strategic vulnerabilities in the future if a
competitor figures out how to capitalize on them first. In the present,
however,
a disconnect between individual and organizational technology
use represents a real competitive threat. If companies don’t enable
effective digital interactions with their customers, for example, then
those customers can easily go to competitors or startups who will.
Fortunately, many companies recognize the need to engage with customers
digitally, and this motivation is the driving force behind many
initiatives. As companies embrace digital channels for reaching customers,
however, this effort can also exacerbate another facet of the adaptation
gap—the
space between employees and the companies for which
they work. Employees are also customers of other companies, and they
regularly experience streamlined digital interfaces for business interactions.
Our data suggest that employees have become increasingly
frustrated by the gap between what they are capable of accomplishing
with technology in their personal lives and what they can get done
at work when they are limited to email and nonmobile computing.
As companies learn to engage with customers using technology, they
often ignore their own employees. One executive at a company widely
recognized as a digital leader notes that his employees could engage
more easily with other companies as consumers using digital channels
than they could with one another and with their own company. For
example, it was often easier to apply for jobs outside the company than
inside it. He noted that this technological disparity posed a potential
talent problem.
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