Interview with Professor Mark Thompson

Digital Transformation: How Corporate Culture Responds to the Internet

Prof. Mark Thompson is Professor in Digital Economy at Exeter Business School, and Strategy Director at the Methods Group.  He is a leading contributor to Digital Leaders, the Digital transformation business intelligence network with over 110,000 subscribers in the UK. Mark was co-author of the 2014 book “Digitizing Government” and the “2018 Manifesto for Better Public Services”. He also serves on the board of TechUK. Previous roles include National Audit Office Digital Advisory Panel, Cabinet Office Data Steering Group and acting as senior adviser to the Cabinet Office on ICT Futures.

We hear a lot about digital transformation – what does it mean to you?

Everybody bangs on about digital transformation, but it’s often hugely misleading because these discussions are usually technology led. To me, Digital Leaders’ version of digital transformation comes down to one thing: the arrival of mature services that have been developed around the shared infrastructure of the internet.

This infrastructure element cannot be overstated. Imagine, for example, that we had electricity and understood how to make washing machines and TVs, but we had no National Grid. On every street, it would be completely rational to build our own washing machines and TVs, because there’s no market – people would be using different voltages, current and plugs. Indeed, the birth of electricity was very much like this.  It’s nobody’s fault – the absence of a common infrastructure means everyone’s on their own.

Add the National Grid, and suddenly it’s irrational to build your own appliances – someone else can profitably make devices because they’ll work for millions of people. So the game-changer is the shared infrastructure.

Four decades after the internet’s invention, we finally have online technologies that can meaningfully interact with each other and be joined up and used at scale. Digital transformation is nothing to do with websites or front ends (although they’re important of course); it’s about the shared plumbing.

To me, digital transformation conversations come down to one thing: the arrival of mature services that have been developed around the shared infrastructure of the internet. Digital transformation is nothing to do with websites or front ends, although they’re important of course; it’s about the shared plumbing.

But that is technology led, yet you said at the outset that a purely tech discussion is misleading…

Very true. What is transformational is what these new technologies mean for businesses and the way they operate – which is both exciting and hugely challenging.

To see why, instead of focusing on innovation, let’s look at what it means to be an incumbent, a legacy business.

A legacy business is any organisation – and the challenges are absolutely organisational –  which grew up in the last century with processes, infrastructure, services, an operating model and, most importantly, a value proposition, defined before the prevalence of the internet. They lived successfully through the online services revolution which created new opportunities to get closer to their customers, without challenging their fundamental value propositions.

Today, however, incumbents face Big Tech like Amazon on the one hand, and startups like regtech, fintech, proptech etc. on the other. Any legacy business in 2019 is surrounded on all sides by challengers to their traditional value proposition.

For example, I was speaking with a pharmaceuticals executive recently who advocated “sticking to the knitting”: he said “We make drugs, and the minute we take our eye of that, we’re dead in the water”. But we now live in a health data economy which focuses on keeping people well rather than curing them when they are ill. Businesses like Amazon are outspending pharma in the healthcare sector exponentially.

So digital transformation is actually the belated response of legacy organisations, in particular, to the arrival of the shared plumbing of the internet. It’s a dawning realisation in modern boardrooms that capitalising on new technology demands a wholesale review of business models and core value propositions based on what you can achieve with digital technology and services; and that the new wave of emerging technologies – AI, virtual reality etc. – will only accelerate the need to throw off the shackles of old practices.

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