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)
