Introduction

The digital world presents new challenges for every organizational leader. Do you fold digital capacities onto your organization, or do you remake the business entirely? This collection of articles from MIT Sloan Management Review examines how executives are responding today — and the ways they can be smarter in the future.

From “The Right Response to Digital Disruption”:

• A McKinsey & Co. survey of 2,000 C-suite executives in more than 60 countries looked at how digitization is unfolding across industries and how incumbents are responding. With some notable exceptions, the answer is: “Not well.”
• The survey found that digitization has a significant negative impact on the profits of incumbents through two loop effects: digital entrants competing with incumbents through disruptive models, and incumbents responding to disruption and creating more intense competition with other incumbents.
• These two loop effects suggest that organizations should go on the offensive: A successful digital strategy built on a scale larger than that of the rest of the industry yields the largest returns.
• Companies should focus on at least two dimensions when devising the type of bold reactions needed to compete: (1) new customer segments, rather than current customers exclusively, and (2) new ways to resegment the market, instead of relying solely on using automation to cut costs and save time and effort.

From “The Big Squeeze: How Compression Threatens Old Industries”:

• Accelerating compression of both revenues and profits may rapidly prove fatal to traditional businesses.
• Consider the accelerating decline of voice calls as a means of communicating via mobile telephone: From 2013 to 2015, average mobile voice revenue per user declined globally by 19%, and a further decline of 26% is expected through 2020.
• To stave off disaster, incumbents in every industry must transform and renew their core operations — while also expanding into new businesses and industries.
• This article is based on a 2004 to 2015 study of the life cycle of compression in asset-heavy industries, with observation of six industries that experienced four phases of compression. Each phase was examined by studying revenue and EBITA growth year-on-year, as well as the resulting EBITA margin.

From “Leading in the Age of Super-Transparency”:

• Thanks to social media and an increasing flood of data, the capacity to generate causes and controversies almost instantly has become the new norm in today’s “super-transparent society.”
• For instance, when a local government council tried to stop 9-year-old Martha Payne of Argyll, Scotland, from photographing her school lunches and posting the pictures on her blog, the council faced a firestorm of online criticism.
• Individuals and organizations produce a voluminous, mostly involuntary, “digital exhaust” from activities such as such as searching the Web and posting on social media, and that digital exhaust reveals much more about them than they realize.
• Most business leaders have not yet come to grips with the new reality — and what it means for their organizations.

From “The Heavy Toll of ‘Always On’ Technology”:

• Our electronic devices and expectations for immediate responses to communications are degrading our attention, with implications not just for productivity but also for mental health and stress levels in the workplace.
• In a Q&A, one of the authors of The Distracted Mind: Ancient Brains in a High-Tech World says that research now shows that “the impact from so many interruptions on our mental and emotional functioning is vast, and it needs to be addressed.”
• Some businesses implement policies on online communications such as a 7-to-7 rule, where communications sent before 7 a.m. or after 7 p.m. don’t need to be answered until the workday begins.
• To quell the “almost Pavlovian response to incoming communications,” people should go on “tech breaks” of, say, 15 minutes at a time, closing down any websites on devices that are not relevant to work. When the 15 minutes are up, they can check anything for one minute, then start again.

From “Thriving in an Increasingly Digital Ecosystem”:

• Research from MIT Sloan School of Management’s Center for Information Systems Research says that to prepare for a future of digital disruption, companies need to consider which of four business models for the digital era to adopt.
• Companies can choose to operate as suppliers, omnichannel businesses, ecosystem drivers, or modular producers.
• Companies need to develop new capabilities in two areas: learning more about their customers and becoming “more of an ecosystem.”
• Companies that had 50% or more of their revenues from digital ecosystems and understood their end customers better than their average competitor had 32% higher revenue growth and 27% higher profit margins than their industry averages.

From “A Data-Driven Approach to Identifying Future Leaders”:

• Many executives believe they are good at identifying leadership talent. However, when asked how they make their decisions, they often cite intuition or “gut” instincts.
• Social science research suggests that individuals are often prone to cognitive biases in such decisions. The author’s own study of 245 organizations with operations in North America found that while 71% of organizations aspire toward having a diverse culture, only 11% report having one.
• Companies that are serious about making tangible and measurable progress toward attracting and retaining the best talent need to make a fundamental shift.
• Rather than just relying on the subjective opinions of executives, some companies are using assessment tools to identify high-potential talent.