It is the season of mega mergers and buyouts. I was pondering the questions of life times of companies, their evolution and long-term survival in the wake of Dell-EMC, Microsoft-LinkedIn, Verizon-Yahoo and, back home in India, Flipkart/Myntra-Jabong.
Among the queries crowding in my mind: What makes companies buy or sell other companies? Why do we get the same old dope about synergies and leave the gory details about layoffs out in all those self-congratulating announcements? Does innovation gain or lose in the bargain? How would consumers of the merged entities fare?
While the above are regular sort of questions, another thought was pounding the gray matter inside my cranium: how does the infusion of new technology, especially digital, change the way companies behave in their environment?
I began to think of an organization as an organism: not a mish-mash of lines and dotted lines of hierarchies or collection of assets, liabilities and other attributes that usually go with a company—but as a living, breathing entity that evolves, grows and sustains itself as well as those associated with it.
At this point, out of the many tabs open in my web browser, one particular headline caught my attention and stopped my musings in their tracks—because it more or less mirrored my thoughts! “Live Business: The Digitization of Everything,” it read.
Among other things, in this amazing and wide-ranging paper, Dinesh Sharma, Vice President of Digital Economy at SAP, notes that the old, machine-like view of a company is giving way to a new, digital reality that thrives on hyperconnectivity, big data and adaptive systems.
One of the analogies Sharma uses in comparing the current industrial/knowledge economy to the upcoming digital/adaptive economy is closed systems versus open systems. Here is a largish excerpt from the paper:
“Auto manufacturers in the United States have traditionally focused on building factories to efficiently produce cars in large quantities. These factories are closed systems: as long as they get a constant volume of input, they produce a constant volume of cars. But the auto industry as a whole is an open system, subject to factors such as customer demand, which companies cannot control. The auto industry has outsourced the “open” part of their system to networks of dealers. The result is that auto makers continue to push cars out of their factories, even when demand drops. When this happens, the market becomes glutted with new cars and prices fall. Dealers can’t sell the cars, and manufacturers are forced to offer incentives and sell cars at a loss just so that they can keep the factories running.”
Adaptive systems, in contrast, writes Sharma, “are a special class of open systems, characterized by dynamic networks of agents interacting with each other and their environments.” He avers that adaptive systems are continuously evolving and shifting, much like the complex worlds of ant and bee colonies, stock markets, biological ecosystems and human organizations, including companies.
For many, many years, companies have been designed as “information-processing and production machines” but that machine view is set to be replaced by, if I may say so, an organism view in which learning is a creative process rather than a mechanical one, just as Sharma argues.
The mechanical view and rigid structures of companies have served us well in the industrial and, to some extent, the knowledge era but these must now be replaced with more flexible, agile arrangements that can be conjured up or dissolved quickly as the need arises or fades.
Hyperconnectivity, which rides on the digital cocktail of social, mobile, analytics, cloud (SMAC) and IoT (Internet of Things), will make sure that traditional and incumbent organizations across industries play by the new rules of market success.
“Hyperconnectivity is an assault on stable environments that have been the foundation of growth in the knowledge economy. The pace of change in the business world is accelerating to unprecedented speeds. For example, a retailer can engage with customers in the moment in a personalized one-to-one online relationship that is immediately known to a sales associate who helps the customer in a brick and mortar store. In another instance, employees build scenarios for the latest marketing campaigns that draw on real-time company data intermingled with live social network feeds. The new reality is that data can come from anywhere at any time in the new hyperconnected enterprise. The modern business needs to exchange data with its environment at unheard-of speeds,” notes Sharma in his research paper.
He identifies three key attributes of a successful digital business: seamless, connected and data-driven.
Things are jarring on all three of these counts when it comes to India: there are gaps in businesses being seamless, connectivity is broken and unreliable and data is just getting seeded into the entrails of business to make up the case for sufficient data-richness (the rewards of which could be reaped through big data analytics or other tools).
But Indian firms are getting there, in bits and pieces, in jerks and jumps, in the fierce competition of Olas and Ubers, in the dot-com launches/relaunches of ABOFs and BabyOyes, the payments frenzies of PayTMs and Mobikwiks—and the mergers and marriages of Myntras and Jabongs.
Needless to say, it is a time of transition for the industry. Companies that have more digital balm to apply to their internal and external joints will be able to alleviate or lessen the pain that comes naturally as part of this transition.
(Lead image courtesy: Pixabay.com)