There’s that old saw about how the biggest risk of all can sometimes be not taking one. I’d say there’s one that’s even bigger—it’s the deadly risk that’s staring you right in the face but, because it’s so well known and happening so slowly, it ends up blending into the background.
Let’s call it the Blah Swan Scenario—because unlike their black and gray cousins, everyone knows the Blah Swans are coming. No surprises here. Management is already working on it—just too slowly to make a difference.
If you think I’m talking about climate change or ESG, I’m not. The biggest Blah Swan facing business—the one I’d rate most existential to nearly every corporation outside of Silicon Valley—is far less sexy and far more important to keeping your lights on. It’s digital transformation, or digitalization, or whatever we call it these days.
It boils down to this: The fast are growing faster. In 2017, researchers at MIT’s Center for Information Systems Research found that companies that are “future ready” (i.e., digitally advanced) had net margins 16 percentage points higher than peers who did not operate that way. Just two years later, they found that gap had widened to 19.3 percent.
This may explain why the market cap of the world’s 50 largest companies—those with the most wherewithal to scale digital—is now the equivalent of 26.7 percent of global GDP versus 12.7 percent in 2010. It’s little surprise that 21 of the world’s top 50 companies are now from the technology sector.
The Swan in Seventh Place
And yet, in polling conducted this year for our annual What Directors Think survey, digital transformation ranked seventh on the list of agenda-setting items for 2022 and “challenges to oversee” among board members we polled. Blah, indeed.
Not to say any of this is easy. It isn’t, especially with all the in-your-face stressors facing boardrooms and the C-Suite right now. A global pandemic entering another year, inflation at levels not seen in decades, the fierce war for talent (which plays into the tech struggle), new taxes and regulations and so on. Ask directors what worries them most about technology in 2022 and they’ll likely say cybercrime, not falling behind rivals in utilizing predictive machine learning techniques. But if you step back and look at all of the issues you’re facing, there’s likely only one that could actually drive your firm out of business before 2030.
The good news here? If you’re behind the Amazons and Walmarts of the world on your technology journey, you’re far from alone. The vast majority of companies we talk to—aside from the largest global firms—are closer to the starting line than the state of the art. That means there’s still plenty of time to leapfrog rivals and grab the future.
The trick is making sure that digital remains at the top of you strategy agenda, no matter what operational challenges try to crowd it out. This swan may not be black or gray, but it’s trouble just the same.