How leaders harness three digital business forces to win

By Mark Raskino and Graham Waller Digital business is not optional. Yet CEOs, CIOs and other leaders struggle to stay on top of the rate of digital change and understand what is necessary to succeed. How do you contemplate strategy when products such as tennis rackets, e-cigarettes and medications embed digital sensors into the core of their physical construction? In our work with hundreds of digital business leaders, we uncovered three distinct forces that compel leaders to act differently to exploit them for success: resolution revolution, compound uncertainty and boundary blurring. Resolution Revolution Resolution revolution is the digital progress that enables businesses to economically see and control new and ever-finer-grained detail in the operation of products, services and markets. All industries can exploit this to innovate products, services and business models. [caption id=“attachment_2242816” align=“alignleft” width=“380”]  Thinkstock[/caption] Essentially, Moore’s Law has now miniaturized and made digital processors, memory and sensors so powerful that they can be embedded into everyday situations and things. The communication of these products illuminates our world and shows us what is happening in ways we have never seen before. For example, the Proteus company has invented a tiny disposable sensor so small, inexpensive and inert that it can be added to ordinary medicines, ingested and excreted with the patient barely noticing. Each pill is individually ID tagged and will report wirelessly when it is consumed. Or think of how low-cost, automatically stabilized, aerial drones might take a blood pack to a remote, lone accident victim faster than any other transport. Drones might be used in swarms to take small parcels over long routes in multiple hops — the way the Internet transports packets of information from one switching point to the next. The effect is that drones will provide us an ever-richer and more-detailed data view of our world and many more high-precision ways to impact situations and control them. Leadership Action: Research and discover how the resolution revolution effects of digital technologies will change your opportunity to design products, services and business models to better serve customer needs.  Compound Uncertainty Compound uncertainty is the effect of digital technology-enabled innovations breaking the boundaries of legal conventions and social norms. Digital business leaders must account for three crucial factors when trying to estimate the timing of digital changes in markets: technology progress, cultural evolution and regulatory developments. When all three come into alignment, new markets are created and often quickly grow. Drone package delivery is a good contemporary example of an idea awaiting the triple tipping point. The technology needs to become cost-effective enough, aviation regulations need to evolve and social culture needs to become accepting of having machines buzzing overhead.  Leadership Action: Creatively explore and assess the timing of major new market opportunities that digital technologies will enable. Determine when to judge or nudge the triple tipping point — judge when it is most likely to arise or nudge it to occur at a time that suits the company’s competitive need. Boundary Blurring Boundary blurring is the effect that the digitalization of products and services has on the traditional demarcation lines that separate one industry from another. This force can make it easier to move into adjacent markets, and may change the types of competitors typically considered by your company. As digital technology penetrates products, the sensor and software capabilities yield valuable data. Whether collected and stored over time or immediately analyzed in real time, data creates new value. A good example is Under Armour, a large manufacturer of sports clothing, which acquired fitness and diet mobile app companies that collect and store consumer activity and fitness data in the cloud. This makes Under Armour a partly cloud-based, information-processing business that blurs industry lines with healthcare companies, insurers, food companies and others. Leadership Action: Expand the range of cross-industry competitive opportunities considered. Retest your assumptions about the defensive lines that mark traditional industry territory. If necessary, some markets must be exited and others entered organically or by acquisition. The good news is that disposals can be used to fund and focus digital change. (Mark is vice president at Gartner, and Graham is research vice president at Gartner)