Digital transformation is now on the CEO’s shoulders

“So when I see CEOs who may be experimenting here and there with AI or the cloud, I tell them that’s not enough. It’s not about shiny objects. Tinkering is insufficient. My advice is that they should be talking about this all the time, with their boards, in the C-suite—and mobilizing the entire company. The threat is existential. For boards, if this isn’t on your agenda, then you’ve got the wrong agenda. If your CEO isn’t talking about how to ensure the survival of the enterprise amid digital disruption, well, maybe you’ve got the wrong person in the job. This may sound extreme, but it’s not,” Thomas Siebel, chairman and CEO of C3 IoT, wrote at the end of 2017 in an article titled, “Why digital transformation is now on the CEO’s shoulders.”

There is even more urgency around Siebel’s insight and observation of digital transformation. Transformation is driven by a “highly disruptive extinction event” or series of events that breaks a period of stasis. Often this event or catalyst is science and technology advancement, which fuels a period of growth until settling into a new equilibrium. Throughout history, landmark innovations such as these have included the Gutenberg printing press, the Jacquard loom, urban electrocution, the automobile, the microprocessor, and the Internet.

Enterprises that fail to transform will disappear. Digital transformation is the massive disruption (i.e., causal factor) that has already upended every single industry and ushered in sweeping change. Since the beginning of the new millennium, over 50% of Fortune 500 companies have been acquired, merged, or declared bankruptcy — and the innovative corporate entities are taking their place.

Minicomputers, relational databases, computers, the Internet, and smartphones have created a $2 trillion industry, and fulfilled Daniel Bell’s prophecy of the Information Age in The Coming of Post-Industrial Society, says Siebel. He cites the electric power grid – a fully connected electrical distribution center – as a transformative innovation that can “aggregate, evaluate, and correlate the interactions and relationships of vast quantities of data from all manner of devices—plus weather, load, and generation-capacity information—in near real-time.” AI machine-learning algorithms optimize grid operations, reduce operational costs, enhance resilience, increase reliability, harden cybersecurity, enable a bidirectional power flow, and reduce greenhouse gas emissions.

Interwoven relationships between devices and data sets introduce disruptive events that are faster, more expansive, more detailed, and more capable.

Industry examples include:

  • Healthcare records and genome sequences are becoming digitized. Medical devices are censored, which enables tracking of vital statistics and accurately predicting and preventing disease.
  • Oil and gas companies use predictive maintenance to motor assets and proactively prevent device failures on rigs, resulting in lower-cost production and less environmental impact.
  • Manufacturing uses IoT-enabled inventory optimization to improve the supply chain from lowering inventory carrying costs, performing maintenance, lowering the cost of production, increasing product reliability, and mitigating supply-network risk.

The drivers of transformation are now the CEOs. The adoption cycle has inverted — the CEO, once briefed on the cost and results of technology initiatives, is now at the forefront of propelling global corporate transformation. Thought leaders in the space, such as Michael Porter of the Harvard Business School, anticipate that a world of smarter, more connected devices hearken a shift in the fundamental dynamics of competition. Companies, such as Apple and Tesla, shifted executives’ perspectives — leading by example, as their executives have become iconic leaders of envisioning the path forward with bold technology ideas.

“As in evolutionary speciation, many new and unanticipated enterprises will emerge, and existing ones will be transformed with new business models. The existential threat is exceeded only by the opportunity,” says Siebel. The highly disruptive extinction event is well underway in 2020. A fourth industrial revolution, “grounded in AI and IoT,” is accelerating the need to ensure the survival of the enterprise, and CEOs are at the helm of digital leadership.