Farrukh Iqbal, Director, Institute of
Business Administration, Karachi
Bank Alfalah, October 10, 2017
I would like to thank the management of
Bank Alfalah for inviting me to this session. I understand
that Bank Alfalah is a leader within the Pakistani financial
sector when it comes to matters digital. This should make
for good interaction during the presentation. I invite all
those present, in person here in this auditorium, or
connected by videoconferencing in Islamabad, to break into
my talk at any point with questions and comments.
Let me start by giving you a sense of the plan of this
presentation. I will begin with some remarks on the
definition of the term Digital Age followed by a discussion
of some characteristics of the Digital Age. I will then talk
about the implications of these characteristics for
corporate leadership in general and academic leadership in
particular. Since I am currently the director of a higher
education institution in Pakistan, I will use examples from
this domain to illustrate my points.
What's in a name?
We know the Digital Age by many names. You may have heard
the term Digital Revolution or Digital Transformation or
simply Digitalization. Why do these terms have the word
"digital" in them? The answer lies in the fact that the term
originates in the domain of information systems. It has
become technologically possible in recent decades to convert
sound, visual and textual information into binary
information (digits), for this binary information to be
transported vast distances by wired and wireless means (the
latter involving terrestrial and extra-terrestrial channels)
and then to be reconverted into sound, visual and textual
information at the destination. This has unleashed a vast
amount of information transfer all over the world in the
last three decades.
Defining the Digital Age in terms of information theory
concepts is a bit too dry, however. Most people understand
the concept best by the many new "things" that are now
associated with it, such as the internet, email, mobile
apps, mobile communication, texting, big data, machine
learning, hacking, e-commerce, e-governance and social
media. Others understand it best by the many new companies
that have emerged on the global corporate landscape such as
Amazon, Apple, Google, Facebook, YouTube, Skype, WhatsApp
and so on.
Sometimes it is easier not to define a concept very
precisely so as to avoid unending discussions of what is to
be included and what is to be excluded. One way to define it
is to simply say you know it when you see it. I am sure all
of you can and do recognize the concept of Digital Age in
this fashion.
Characteristics of the Digital Age
Now on to the next part of the talk. What are the key
characteristics of the Digital Age? What makes it different
from other ages? Most of the relevant characteristics are
associated with the scope, volume, and speed of information
transfer that is involved.
Greater connectedness
More people are now connected more frequently with each
other. This should be self-evident to anyone with any
experience of email, Facebook, Twitter, WhatsApp or any
other form of interpersonal communication. Some of the
numbers involved are mindboggling. Facebook now has more
than 2 billion members. That is close to one third of
humankind. WhatsApp has over 1.2 billion users. Twitter has
well over 300 million active users and many more that are
not active.
What this means is that people are getting a lot of
information from each other. Breaking into this thickening
information chain in a productive manner can be a source of
advantage for a business.
Faster flow of information
Linked to the first characteristic is the fact that
information now flows faster along more information channels
than ever before. This means that the time available to make
decisions is now shorter. Others are getting information
fast and may act before you do. As a corporate leader, you
have to act faster.
Greater amount of information
There is now simply a much greater amount of information
available than ever before, exponentially so. Why is this
so? In large measure, this has happened because information
is stored and transmitted through integrated circuits and
the amount of information that can be stored and transmitted
has grown rapidly over time. There is a concept known as
Moore's Law that states that the number of transistors that
can be placed on each square inch of a circuit board has
been doubling every 18 months.
For the corporate world his means that companies with tools
and expertise to analyze these large data stocks and flows
may obtain a competitive advantage. Some companies have
created departments of business analytics to ensure that
they remain abreast of the latest in analytic tools and
techniques.
Less need for hierarchy
It has become easier to operate with less hierarchy since
information and decisions can be communicated more easily
than before to a larger number of employees. Internal
communication within companies is now easier and can be used
more effectively as an HR tool, to inspire, to motivate, to
align, to reward and to discipline. The reduction of
hierarchy can itself be a motivating factor and can generate
innovation from more sources within a company. Reverse
mentoring becomes possible as managers can learn from staff
more quickly.
Physical location is no longer a constraint
It has become easier for companies to allow employees to
work from home, from a distance, from different time zones.
Video conferencing and email allow a manager to be in touch
with a team irrespective of where individual members may be
located at a given point in time (within limits of course).
The same is possible with suppliers and customers. Virtually
all sorts of information can now be communicated
electronically and so the need for physical interaction, at
one location in space, is disappearing. With 3D processing,
a vast new domain of information transfer will become
possible.
What does this imply for corporate leadership?
A corporate leader has three choices when confronted by the
Digital Age. He or she can resist, or go with the flow, or
become a digital leader.
My sense is that there is really no choice. The Digital
Revolution is so pervasive that resisting it at any level is
likely to be a mistake. Going with the flow may work in some
industries and sectors. But this risks losing market share
over time. Digital technology and analytics allow threats to
companies and industries from many sources. It is best to
seize the initiative and learn to stay ahead of the curve,
benefiting from the Digital Revolution and, at the same
time, preventing obsolescence.
Mastering the Digital Age is not going to be easy.
Established companies have legacy cost factors, whether they
consist of staff or buildings or a business model or
supplier relationships or all of the above. Newcomers do not
face such costs. Furthermore, digital tools and processes
can make it easier for competitors to attack at any or all
points along the value chain of an industry or company.
Amazon has completely disrupted certain retail markets,
seizing control of an important chunk of market share in
many. The same is true of the travel agency model.
One can get a sense of the nature of the threat and the
potential for established companies that is inherent in the
Digital Age by considering the fact that companies such as
Apple, Amazon, Google and Facebook that have come in on the
digital tsunami are now among the top ten companies in the
world by market capitalization!
Views of corporate leaders
One way to get a sense of the implications for corporate
leadership is to hear directly from corporate leaders
themselves. In the research that I conducted for this talk,
I came across a Master's Thesis where the author had
conducted interviews on the subject of digitalization with
corporate leaders in Sweden. (Shahyan Khan, Leadership in
the Digital Age, Stockholm Business School, 2016). Here is
what some of them had to say.
On disruptive potential: "Digital transformation is
extremely disruptive. I do not think we have the potential
to fundamentally change behaviors in such a short time at
any point in world history..."
On speed of decision-making: "There is now the danger
that we misjudge the market and be swept away. Daring to do
a product test faster, more trial and errors, forces us to
act instead of reflect. The time between idea and
realization has become much shorter."
On speed and scope of communication: "I Iead better
through digital and virtual channels, you can reach hundreds
within a heartbeat, and be more mobile and agile than any
physical leader trying to talk to everyone individually.
Governance through virtual means is today and will continue
to be a game changer for leaders and organizations."
On the perils of interconnectedness: "Everyone sees
everything. It is very difficult to move away from a problem
you have with a colleague or worker now that you are
connected to them 24/7. At my first job, if I had a problem
I could keep that to myself. Today, it is common knowledge
before I can tell anyone personally because of Facebook or
Instagram, even as a leader."
On the difficulty of maintaining control: "From a
leadership perspective, it is a natural disposition to be
very controlling, but this will be harder now with more
unstructured networking companies...as the boundaries of the
firm are removed, we have to find new ways to encourage and
influence our employees."
What does the Digital Age imply for academia?
Consider the standard education delivery model. It still
consists mainly of a teacher standing and delivering a
lecture to a room full of students, then assigning some
sections from a textbook as follow up reading, and urging
students to discuss questions with teaching assistants. This
model is a time and place bound activity. The Digital
Revolution threatens to change this model drastically.
The stand and deliver model is expensive. Faculty with the
training to conduct classes at the higher education level
are expensive. They can only teach 50 or so students
effectively in a physical classroom at a time. If more
students are to be taught, more faculty need to be hired or
the same faculty must give multiple classes. Teaching
assistants are needed for large classes and they add further
costs. Finally, textbooks have become increasingly expensive
over time.
When something becomes expensive, both suppliers and users
try to find ways to reduce costs. The Digital Revolution has
made it possible to do this in education as well.
For example, some universities are offering many of their
large-enrolment foundational classes online. Expensive
faculty time is reserved for discussion, follow-up, and
clarification. Other universities have redesigned such
classes as hybrids, mixing classroom delivery with online
delivery to economize where possible on expensive faculty
time.
An entire new system of education delivery is taking shape.
This system offers MOOCs or Massive Open Online Courses.
Entire classes are offered online and enrolment is unlimited
and unrestricted.
Companies that offer such courses include Coursera, EdX,
Udacity and others. Some of these companies consist of
partnerships among prominent universities such as Harvard,
MIT, Stanford and so on. Some offer courses free of charge,
others for a modest fee. Some are devising ways to test
online students for knowledge retention and provide credit
for the courses taken as well. The potential is great.
Coursera alone has 24 million registered users. EdX has 10
million users.
One is beginning to hear of other innovations as well.
Pearson, the big textbook company, is pioneering the use of
textbook subscriptions that are limited to one semester and
cost about one-third what a hardback textbook costs. Some
teachers are introducing robots based on artificial
intelligence systems as virtual teaching assistants.
Traditional universities have huge legacy costs embodied in
their academic buildings, dormitories, laboratories and
sports facilities as well as in tenured faculties and
unionized workforces. These costs make them vulnerable to
competitive attack from new universities who can deliver
online education of high quality.
The challenge for leaders of traditional universities is
clear. They have to find ways to lower the costs delivering
higher education while maintaining quality. The leaders of
those institutions that have high legacy costs must lower
these costs over time, by finding ways to amortize the same
over a larger number of students.
In order to reduce the cost per student while maintaining
quality, academic leaders must take advantage of digital
tools and technology. Introducing hybrid courses is one way
of doing this. A hybrid course is one in which part of the
teaching is done online and part is done in physical
classrooms. Another way is to integrate available online
materials and courses into the design and delivery of
traditional courses. Large-enrolment foundational courses
are often best suited for delivery in hybrid forms.
When done well, one of the advantages of the traditional
delivery method is that interaction between teacher and
student in a classroom can lead to higher knowledge
retention than online courses. Interactions among students
in a classroom also generate other benefits such as learning
how to communicate one's point of view in an empathetic and
respectful manner. A traditional university can use these
aspects of classroom teaching to its advantage by ensuring
that it has faculty with good teaching skills and by
selecting a body of well-informed students with good
communications skills so that potential applicants will
prefer the classroom experience to the online one. The
teaching reputation of a university and the quality of its
student body are likely to be its greatest assets as it
seeks to navigate in the Digital Age.
Traditional universities will also have to become more
entrepreneurial in the use of facilities. The university may
have to be transformed into a place where one comes for more
than just education. Facilities such as sports, dining and
shopping may have to be added in a suitable manner in order
to attract more students (and other stakeholders) and derive
higher revenues from each square foot of physical space that
is available. Modern airports, for example, derive
significant revenues from having added shopping and dining
facilities.
Some concluding remarks
Corporate and academic leaders will have to incorporate the
digital framework into the long-term vision of their
enterprises. They will have to motivate staff to work with
this framework and accept the changes and challenges that
are implied. Most importantly, they will have to become
adept at analyzing and using digital data. Every aspect of a
large company's future success is linked to the Digital
Revolution, whether it relates to marketing and sales
(getting information about customers' buying habits and
preferences or service quality experience and views) or
human resources (gathering and using information about
employee skills, work preferences, and work ethics) or
finance or innovation.
The Digital Revolution is a game-changer for the corporate
and academic world. No one can ignore it. Those who can use
digital data, tools and technology well will derive a
competitive advantage and improve their chances of survival.