It’s commonly assumed in today’s connected, Internet-driven world that all businesses have fully embraced the digital age. But the transition for some industries from their older analog model to digital has been difficult at times and fraught with peril. Many analog companies know they need to become disruptors themselves, but it is a new approach not so easily adopted despite the risk of getting steamrolled by newer, more agile startup businesses.
This new reality was confronted directly during an afternoon conference program yesterday at the San Francisco campus of the University of Pennsylvania Wharton Business School. Technology executives and business school faculty members participated in a set of panel discussions and question/answer sessions which captured the complex problems that a digital transformation can present when the stakes are high. As Niloy Sanyal, chief marketing officer for GE Power told the gathering, “If you are not an industry thinking about inventing the next iPhone, you will no longer exist in the next five years.”
One industry known for being notoriously slow to adopt their model to the digital age is banking. As a growing number of consumers continue to accept new tools such as smartphone payment apps to make transactions, banks have seemingly been dragged against their will into the digitally connected world. “I’m a recovering analog leader,” said Mike Selfridge, chief banking officer with First Republic Bank, who readily admitted that his industry is still struggling to move away from the reams of paper generated every time a home buyer needs a mortgage.
Another industry caught in the tidal wave of change involves the makers of electric power components, typically a business with products that could hardly be described as “smart.” All of that has changed. According to Prith Banerjee, chief technical officer for Schneider Electric, the power transformers and electrical switches his company makes are now completely connected.
“The transformer will call home and we’ll know it’s about to fail instead of waiting for it to go down and have to face an angry customer,” said Banerjee. The Schneider executive, who previously worked for HP Labs, views this transformation from an analog business to the digital world as a key ingredient in his company’s customer relationships.
Many of the Wharton conference speakers echoed this belief that the conversion to an increasingly more digital world is empowering the customer and forcing companies to keep their innovative edge. “The customer won’t switch if they know they can rely on you for their success,” said Ganesh Ayyar, the CEO of Mphasis.
Analog companies are quickly realizing that they not only have to embrace the digital model, they have to continually improve their product or service at a pace far faster than ever before. This requires building a set of protections in their technology to avoid being overtaken by a competitor or losing market share, a lesson that has been strongly reinforced by their digital counterparts.
A good example of this can be found in Google. One of the Wharton panel moderators, Quentin Hardy (a deputy tech editor for The New York Times), described how he interviewed Eric Schmidt, the company’s executive chairman, and asked him what kept the mammoth search giant from losing ground. Schmidt’s succinct answer was “spellcheck,” a reference to Google’s high-level ability to understand poorly phrased or badly misspelled search queries and still give us exactly what we need. To date, no one has been able to do this as well as Schmidt’s mega-billion dollar company.
Perhaps the most obvious area in American society in need of a successful transition from analog to digital is government. A recent study by Deloitte University Press reported that the needs of a technologically astute millennial generation are rapidly eclipsing the largely analog government bureaucracy to meet them. As yesterday’s enlightened dialogue at the Wharton San Francisco campus showed, the government need look no farther than the country’s older industries for a powerful lesson in how to manage this difficult yet necessary transition.