The Puzzling Technology Adoption Discrepancy Between Individuals and Institutions

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[Irving Wladawsky-Berger]
[Irving Wladawsky-Berger]

Since the publication of its first report in 2009, I’ve closely followed the Shift Index initiative of Deloitte’s Center for the Edge. The initiative, co-led by John Hagel and John Seely Brown, is an attempt to quantify what Deloitte calls The Big Shift, the long-term transformations in the global business environment over the past several decades, brought about by the rapid advances in digital technologies as well as major changes in public policy.

One of their major findings is that the return on assets of U.S. companies have been steadily dropping, and are now 75% lower than their 1965 levels. ROA is a general indicator of the profitability of a company, so this means that something profound has happened in business to cause the ROA of U.S. companies to drop to a quarter of their 1965 levels. This ROA decline is expected to continue into the foreseeable future.

The Shift Index is composed of 25 metrics grouped into three major indices that render explicit some of the major drivers behind these historical transformations. The Foundation index measures the fast-moving advances in technology performance and adoption, as well as the shifts of global public policy that are reducing the barriers to entry and movement. The Flow index measures the flows of capital, talent and knowledge across institutional and geographic boundaries that, enabled by an increasingly powerful digital infrastructure, are transforming the business landscape. And, the Impact index aims to quantify the impact of these changes on companies and individuals, as well as on competition, volatility and business performance.

These three indices are highly interrelated. The Foundation index can be viewed as a measure of the potential for change and improved performance made possible by the increasing power and capability of the digital infrastructure, while the Impact index measures the actual realization of that potential in companies and the overall economy.

The Flow index can then be viewed as a kind of gear box between the potential for change at the technology level, and actual change in the marketplace. In the past, our stocks of knowledge–what we know– was a great source of economic value. That is no longer the case, because the increasing rate of change all around us is rapidly obsolescing knowledge. Therefore, the real economic value has now moved from the stocks of knowledge to the flows of new knowledge that we are now able to quickly acquire, and thus refresh and expand our rapidly depleting stocks of knowledge. The Flow index is an elegant concept that nicely captures the essence of the knowledge economy.

The Shift Index has been updated twice before since it was first published. For the 2013 edition, Deloitte chose to break up its findings into five separate reports, each focused on a different topic. I was particularly intrigued by The burdens of the past, a report which focuses on the growing gap between individuals and institutions in their adoption of knowledge-sharing technologies.

Long-term trends help to tell a story. In the case of the 2013 Shift Index, the story centers on the puzzling discrepancy in technology adoption between individuals and organizations. In their personal lives, individuals are enthusiastically harnessing the power of rapid technological advances and the information flows they unleash to create more value. Why then do so many corporations and institutions seem unable to effectively embrace technological advances that speed up the flow of knowledge?

This discrepancy in technology adoption has been observed for the past few years. For example, during a panel discussion at the 2012 MIT Sloan CIO Symposium, I learned about Sunday-night/Monday-morning syndrome, the name given to the tension between employees and their IT organizations. People are increasingly frustrated that, at home on Sunday night, they have access to the latest devices and applications, purchased on their own, that have become such an indispensable part of their daily lives. But, when they show up at work the following morning, they have to use the more primitive and limiting devices and applications supported by their IT departments.

“The business environment is changing in a more fundamental way than short-term, boom-and-gloom market and employment numbers show,” observes the 2013 Deloitte report. New products and services are hitting the market faster than ever, brand loyalty keeps decreasing, and the increased competition is continuing to shift power from institutions to individuals.

A few leading edge companies are able to keep up, but the vast majority of more traditional firms are lagging behind. These companies are working harder than ever, trying to achieve greater efficiencies and predictability. They keep trying to fit new technologies and practices into old business models. This is a holdover strategy that worked well in the relatively stable business environments of the industrial economy, but falls short in our fast changing digital economy, where new products, business models and competitors keep emerging from all corners of the worlds.

“[T]he world of the Big Shift demands resilience and learning over routine and the status quo. Scalable learning trumps scalable efficiency, and participating effectively in knowledge flows within and across organizational boundaries becomes a critical skill.” Firms must now embrace knowledge-age organizational structures designed to help them reach out, absorb and integrate all the expertise and talent out there, including employees, partners and clients.

For the past decade, individuals have been embracing all kinds of new tools and social media platforms that make our communications easier and faster. But, despite the widespread success of public social networks, many companies have been slow to embrace social media as an integral part of their workplace. This is a problem, particularly for younger employees who are extensively using these technologies in their personal lives, but cannot properly do so at work.

The Social CIO, a 2012 study by Forrester Researchconcluded that the number of businesses that are truly executing social initiatives remains surprisingly small. Companies are making investments in social platforms and technologies, but, in general, their efforts remain haphazard and disjointed. The report observed that:

While the speed at which ideas traverse public social networks is phenomenal, surprisingly few organizations have managed to fully exploit the power of open knowledge sharing inside and outside their company walls. Many businesses have set up social technologies in their organizations, yet few have truly made the technical, cultural, and process changes necessary to reap the full opportunities and benefits of these tools or the vast amounts of data they capture.  This puts business and government leaders at risk of being overcome by the tidal wave of rapid change and innovation spearheaded by knowledge-empowered customers, partners, and competitors.

According to the 2013 Deloitte report, the use of social media in companies is actually declining.

[T]he ways we connect and share in our personal lives have not carried over to how we connect, innovate, and learn from each other professionally. This is in spite of the fact that the Internet and Web 2.0 tools are driving a convergence of the personal and the professional.  More and more people are using technology to work anytime, anywhere; the traditional boundary between work and life is rapidly dissolving. One might expect social media and other knowledge-sharing tools to be as widely used within as well as outside the workplace. But rather than increasing, the integration of such tools into the work environment is actually declining.  In 2012, participation in work-related online forums, professional and community organizations, and social media networks decreased from their 2011 levels. Corporate social media usage, in fact, is lower in 2012 than it was in 2009, with participation rates in social media below 20 percent across most levels of the organization – including middle management (18 percent), lower-level management (13 percent), and non-management (9 percent).

Why is this happening? The Deloitte team believes that a fundamental force may well be at work: “the historical value accorded to efficiency and controllability by businesses accustomed to a less changeable, less transparent world”

Simply put, there is a growing mismatch between the old frameworks and practices that many companies use and the structures and capabilities required to be successful in a rapidly changing environment. Legacy corporate practices are holding businesses back from fully participating in new opportunities.  . . .As long as our institutions continue to resist the Big Shift, the journey ahead will remain stressful and pressure-packed. As workers and as leaders, our lives will not get easier unless we decide to shape, rather than simply adapt to, the future.

We are indeed in the middle of a historical transformation as we transition to the 21st century knowledge economy. The traditional, industrial-age way of doing business is under siege and must evolve. But, as the 2013 Shift Index study uncovered, this transition will be quite difficult for many institutions.

Irving Wladawsky-Berger is a former vice-president of technical strategy and innovation at IBM. He is a strategic advisor to Citigroup and is a regular contributor to CIO Journal.

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