Digital competence in management

13 Apr 2016

A person who contributes to a national digitization work group in his country told me “most people in the management groups of corporations have no idea, what digitization means.” He also mentioned one positive exception, the CEO of a local telco. And he continued “but he used to be a coder, when he was young, so he understands the value of software and IPR.” Is it so that the management layer of many corporates doesn’t yet really understand digitization and does it require some degree of technology competence?

Some time ago I spoke to a group of executives of an industry. A couple of days later I met younger people of the same industry in an accelerator. I would claim those young people knew what’s going on globally in their industry better than the executives. Of course, younger people often know better new things, but this was not only about certain technologies and new models, but I felt they had a better ‘big picture’ grasp of their industry, when they followed technology, latest articles and new innovations globally.

It is often said that development must not be too technology driven; it must be based on customer needs, business targets, and company strategy. But it looks like that to understand technology opportunities, and how to use them in business and what they enable to customers, it is anyway fundamental to understand business and new technology. And sometimes the technology competence is really needed to fit a technology into a business context.

Let’s take blockchain that now makes big waves in the finance industry and fintech. I wrote about it in the last year (read here). It has made a really fast breakthrough in the finance business talk. But how many really know what it means, and how to use it? The executives say their companies have workgroups for blockchain and participate in industry workgroups. Big consulting firms talk (with dollar signs in their eyes) about huge opportunities to replace old databases. And when you talk with people who have really worked with blockchain, you can get very different comments like “blockchain philosophy is more important than the technical details, it is to decentralize control and authority” and “blockchain is to disrupt the industry in order to take power from the banks.”

There have been also comments and data, how digitization hasn’t increased efficiency and productivity (see, for example, about productivity and national digitization). This is an area that probably needs much more research. But it is good to remember some important points: 1) digitization is not only to start to use a certain technology, it is as much or even more to find totally new business models, like sharing and API economy, 2) digitization destroys some companies, industries and a lot of jobs, and the value is gained by creating new opportunities based on more effective ‘platforms’, and 3) digitization will also re-distribute wealth between individuals, companies and nations.

I'm not saying the winners and the competent in digitization are all tech nerds and the losers old business executives. But I am saying technology has such impact on business that to understand real opportunities of new technology, not over-estimate or under-estimate, is an important competence need for executives. With many technologies it takes some work to really understand their meaning, philosophy and how they can also change the business models and the whole industry. It is easy to focus on incremental efficiency improvements from new solutions, but it is much harder for executives to seriously evaluate disruptive solutions that can kill their own businesses. And it is exactly the difference between executives who just make industry average numbers and leaders who create new things and change the world.

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