Even before the pandemic upended the world, the very nature of how organizations were transforming was changing. Back in 2019, just as the world was learning about the Coronavirus outbreak in China, Bain & Company analyst Pete Hultman and former Bain analyst Leonora Lesesne wrote, “In the past, running an organizational transformation was a bit like taking an international flight — challenging but familiar. … Today, running a change program is more like flying a spaceship to the moon. That’s because change is changing. Today, change is a journey to the unknown. … It’s daunting; it’s also exhilarating and important. Business leaders today recognize the need for change. They know that their organizations must evolve and innovate more quickly.”[1] They go to note that to successfully lead companies through a digital transformation business leaders “require a shift in mindset,” they need to move “away from the idea of managing change and [move] toward [a mindset of] building change capacity and stamina.”
Hultman and Lesesne were not alone in their belief that business leaders required a change of mindset. A couple of years earlier, Tricia Wang, a self-described Tech Ethnographer & Sociologist, was telling business leaders, “A lot of companies treat digital as if they are ‘doing digital’ — this is ‘digitization’ at its worst — as if it’s some checklist of things to do. It’s very transactional, and people are so busy doing digital they don’t even know WHY they are doing it in the first place! Whereas [some companies] embrace ‘being digital’ — this is ‘digital transformation’ at its best — it’s a total paradigm shift in the culture and operations — it’s not just about buying the latest digital tool, but about creating a new system, new cadence, new mindset.”[2] Boston Consulting Group (BCG) analysts, Ryoji Kimura, Martin Reeves, and, former BCG analyst, Kevin Whitaker, insist one reason a new mindset is required is because the very nature of competition is changing. They explain, “The traditional playbook for strategy is no longer sufficient. In all businesses, competition is becoming more complex and dynamic. Industry boundaries are blurring. Product and company lifespans are shrinking. Technological progress and disruption are rapidly transforming business. High economic, political, and competitive uncertainty is conspicuous and likely to persist for the foreseeable future.”[3]
Changing into What
Hultman’s and Lesesne’s assertion that “today, change is a journey to the unknown” doesn’t inspire much confidence or provide much direction for business leaders. Nor does the BCG analysts insistence that “competitive uncertainty is conspicuous and likely to persist for the foreseeable future.” Those comments remind me of Alice’s conversation with the Cheshire Cat in Lewis Carroll’s Alice in Wonderland. Alice begins the conversation:
“Would you tell me, please, which way I ought to go from here?”
“That depends a good deal on where you want to get to,” said the Cat.
“I don’t much care where —” said Alice.
“Then it doesn’t matter which way you go,” said the Cat.
“— so long as I get SOMEWHERE,” Alice added as an explanation.
“Oh, you’re sure to do that,” said the Cat, “if you only walk long enough.”
Organizations won’t succeed in their digital transformation if they just want to go “somewhere.” Reeves and Whitaker, joined by BCG colleagues Allison Bailey and Rich Hutchinson, do offer some directions. They assert companies need to transform into learning enterprises (i.e., they must transform “to compete on the rate of learning”).[4] They explain, “Technology promises to play a critical role: artificial intelligence can detect patterns in complex data sets at extreme speed and scale, enabling dynamic learning. This will allow organizations to constantly adapt to changing realities and surface new opportunities, which will be increasingly important in an uncertain and fast-changing environment.” They go on to note, “The next-generation learning organization will need to be redesigned to fulfill several key functions.” Those functions are:
• Learning on All Timescales. The BCG analysts note, “The growing opportunity and need to learn on faster timescales, driven by technological innovation, is well known — algorithmic trading, dynamic pricing, and real-time customized product recommendations are already a reality in many businesses.” They also caution that the need for speed shouldn’t be an excuse for ignoring slower moving external forces. They explain, “Gone are the days when business leaders could focus only on business and treat these broader variables as constants or stable trends. Such shifts unfold over many years or even decades. In order to thrive sustainably, businesses must learn on all timescales simultaneously.” During the pandemic, Enterra Solutions® developed the Enterra Global Insights and Decision Superiority System™ (EGIDS™) — a system capable of modeling myriad scenarios at computer speed and which takes into account both fast-moving and historical trends. This capability is exactly what the BCG analysts indicated was the next key function.
• Combining Humans and Machines Optimally. According to the BCG analysts, “Machines have been crucial components of businesses for centuries — but in the AI age, they will likely expand rapidly into what has traditionally been considered white-collar work. Instead of merely executing human-directed and designed processes, machines will be able to learn and adapt, and will therefore have a greatly expanded role in future organizations. Humans will still be indispensable, but their duties will be quite different when complemented or substituted by intelligent machines.” For this reason, many experts prefer the term “augmented intelligence” to “artificial intelligence.”
• Integrating Economic Activity Beyond Corporate Boundaries. Everybody knows the world is more connected than ever. That means economic problems in one area of the world can affect companies across the globe. China’s recent economic woes are a good example. Journalist Dan Strumpf reports, “China’s deepening economic slump is damaging the fortunes of big American companies deeply rooted there, with some growing increasingly pessimistic that the country’s long-awaited post-pandemic boom will materialize.”[5] The BCG analysts explain, however, that being part of larger economic ecosystem also has its upside. They write, “Businesses are increasingly acting in multicompany ecosystems that incorporate a wide variety of players. … Ecosystems greatly expand learning potential: they provide access to exponentially more data, they enable rapid experimentation, and they connect with larger networks of suppliers of customers. Harnessing this potential requires redrawing the boundaries of the enterprise and effectively influencing economic activity beyond the orchestrating company.”
• Evolving the Organization Continuously. You’ve probably heard the old adage, “The one constant is change.” The first philosopher who recorded that observation was the Greek philosopher Heraclitus. According to freelance writer and part-time philosophy professor Joshua J. Mark, “[Heraclitus’] central claim is summed up in the phrase Panta Rhei (‘life is flux’) recognizing the essential, underlying essence of life as change. Nothing in life is permanent, nor can it be, because the very nature of existence is change.”[6] Plato credited Heraclitus as the father of the idea. He stated, “Heraclitus, I believe, says that all things pass and nothing stays, and comparing existing things to the flow of a river, he says you could not step twice into the same river.” Few, if any, leaders would argue that change isn’t constant. It logically follows, therefore, that dealing with change is the very essence of what it means to be a leader. It also underscores the fact that transformation is a journey, not a destination. The BCG analysts conclude, “The need for dynamic learning does not apply just to customer-facing functions — it also extends to the inner workings of the enterprise. To take advantage of new information and to compete in dynamic, uncertain environments, the organizational context itself needs to be evolvable in the face of changing external conditions.”
Concluding Thoughts
I like the idea that today’s organizations need to be learning enterprises. Just like people, when an organization stops learning it stops growing. The late futurist Alvin Toffler once said, “The illiterate of the 21st century will not be those who cannot read and write, but those who cannot learn, unlearn, and relearn.” I think he was correct.
Footnotes
[1] Pete Hultman and Leonora Lesesne, “Rocket Fuel for Complex Change,” Bain & Company, 2 December 2019.
[2] Trevor Miles, “Let’s be clear: Digitization is not the same as Digital Transformation,” Kinaxis Blog, 8 December 2017.
[3] Ryoji Kimura, Martin Reeves, and Kevin Whitaker, “The New Logic of Competition,” Boston Consulting Group, 22 March 2019.
[4] Allison Bailey, Martin Reeves, Kevin Whitaker, and Rich Hutchinson, “The Company of the Future,” Boston Consulting Group, 5 April 2019.
[5] Dan Strumpf, “China’s Worsening Economy Is Hurting Corporate America,” The Wall Street Journal, 14 August 2023.
[6] Joshua J. Mark, “Heraclitus of Ephesus,” World History Encyclopedia, 14 July 2010.
