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The Triangle Becomes a Pentagon - The Digitally Transformed Workforce

You may have heard that digital transformation will change the nature business.  Well, you can at least count on it changing the nature of the workforce.  Digital transformation is being referred to as the fourth industrial revolution.  Each time our society went through an industrial revolution, it created a massive change in the makeup of the workforce and the skills and abilities needed.

Industrial Revolutions

The first industrial revolution occurred in the late 1700’s and early 1800’s.  It was driven by the introduction of steam power.  Prior to this time, the vast majority of the workforce was slave labor or serf labor performing low-skill manual tasks.  Thanks to the first industrial revolution, the steam engine  provided the brute force power needed by the early industrial companies.  Massive numbers of jobs disappeared and societal upheaval, such as the Luddite riots, occurred.  

The second industrial revolution started in the late 1800’s and went through the early 1900’s.  It was driven by the introduction of the mass production assembly line.  In this revolution, the workforce became adept at one task or activity.  This led to dramatically lower product cost while improving quality.  The economy boomed and the workforce transformed from mostly agrarian workers to mostly factory workers and a vibrant middle class. 

The third industrial revolution was the advent of electronics and computers in both products and processes.  Business success now leveraged complexity that was enabled by the computer systems.  Individuals in the workforce had to develop digital skills applicable to their functional role.  People required specialized training and technical certificates.   To get a job, you needed a degree.  Often the workers became isolated as they operated the computer system or equipment in use at their workstation – whether it was on a factory floor or more commonly in an office cubicle.  This led to the rise of the subject matter expert.  At the same time, many decisions about products and processes were forced higher into the organization where managers had the experience, oversight and understanding of the complex systems.  The workforce became a host of isolated specialists and a person’s career growth was based upon their functional knowledge, not their tenure with their employer.

Industry 4.0

Now we have the fourth industrial revolution.  This is driven by the introduction of smart devices and artificial intelligence.  This requires the connectivity and processing capacity to create ready access to real-time data throughout the business processes.  Real-time knowledge and information changes how people interact and the scope of their work.   The availability of data and the application of smart devices often frees both customers and the workforce to interact virtually on a 24/7 basis with respect to each unique order or account.  We used to say in the organization that knowledge and data were power.   In Industry 3.0, subject matter experts and managers held power by closely controlling the flow of information.  Decisions were forced to the highest levels in the organization.  Thanks to the Industry 4.0 revolution, the knowledge and data are available to almost anyone, and both customers and employees expect instant decisions. 

As in the other revolutions, we are starting to see a massive shift occurring in the workforce.  Many of the routine administrative processing jobs, the paper pushers and gatekeepers, have vanished.  Even some of the highly skilled positions that relied on specialized knowledge and abilities are being automated and replaced with smart devices.  If we look at the organizational chart of an Industry 4.0 company, it no longer looks like the pyramid of old with entry-level workers and process operators at the bottom of the pyramid who over time can become subject matter experts, front-line managers, and finally senior managers of the organization.  Now the organization chart looks more like a pentagon.  Many of the entry-level and process positions are replaced with digital assets, and even some of the subject matter experts are now automated systems and algorithms running the business processes. 

Workforce Transformation

This transformation of the workforce has significant impact for education, training, hiring, and careers.  The career path in Industry 4.0 is very different from the path to success that has been promoted by our education system and many HR departments.  Let’s briefly consider the role and responsibilities of each of these workforce levels in Industry 4.0 and then the educational and career implications.   

The number of process operators and entry level positions within an Industry 4.0 company are sharply reduced as compared to an Industry 3.0 company.  Much of this work is done by digital assets.  The paper pushers and gate keeper roles have disappeared.  Based upon the ROI for creating or acquiring a digital asset, entry level positions are also disappearing.  Just consider the retail environment, for example. Many stores now have self-checkout and often customers order online without interacting with a salesperson.  The base of the pyramid has already shrunk, and it will continue to shrink as the capability of digital assets grows.

The role of the Subject Matter Experts (SME) is still needed, but it is changing.  In Industry 4.0 they are often on the front line of the business processes and have been empowered to make day-to-day decisions.  Their authority has increased, and they are normally expected to be problem solvers and real-time solution providers.  They can do this since they have immediate access to all relevant data and can connect with other SMEs, both inside and outside the organization, to determine the best decision.  In an Industry 4.0 company, digital assets handle the routine process management work that SME’s have done in the past.  The Industry 4.0 SME takes on the special cases and provides the unique value-added solution for these.  This means the skill set and responsibility have expanded.  The SMEs still need the appropriate subject matter expertise.  But in addition, they need access to cross-functional process data and understand how to interpret this real-time data.  They also need the inter-personal expertise and decision-making skills that are vital to successful process management and problem-solving decisions.

The frontline manager role also changes in an Industry 4.0 company.  They are not as involved in day-to-day decision-making. That is done by SMEs.  But the speed of change, both technical and organizational, is rapid in Industry 4.0 companies.  So, the frontline managers are coaches, trainers, and change agent leaders that help their people gain and maintain the evolving skill set needed to do their job.  These positions are not based upon seniority, but rather on the leadership and facilitation skills of the individual.  These individuals must be leaders of change who are constantly hiring and training the workforce to equip them to perform the evolving business processes.

The role and scope of senior managers in Industry 4.0 is similar to that of managers in Industry 3.0 companies.  They are responsible for strategic direction, resource allocation, and monitoring the execution of all aspects of the business.  However, although the role and scope are similar, the means by which they do this and the pace of their decision-making is radically different.  They do not sit at the top of the pyramid and wait for filtered and sanitized data to work its way up.  Instead, they have instant access to real-time data of product and process performance throughout the business.  While this provides improved insight and understanding, it is also can be an enabler for micro-management.  To be effective, these individuals must delegate the authority for real-time decision-making and then focus their decisions on strategy, asset allocation, and personnel development.  They shouldn’t try to make all the decisions, instead they should point the direction, enable the teams of SMEs, and help frontline managers cope with mid-course corrections.  And there will be the need for many mid-course corrections because the business environment is constantly changing.  Five years plans, annual strategy meetings, and quarterly reporting is much too slow for Industry 4.0.  But chaotic and continuous redirection and micro-management will exhaust and frustrate the organization.  These individuals must be outstanding leaders to guide and direct their organizations.

Industry 4.0 Personnel Development

Finally, let’s consider a few implications for education, training, hiring, and careers within an Industry 4.0 organization.  First with respect to education, everyone needs basic skills for using technology.  And, of course, they need the ability to communicate well and understand basic concepts about the world and the people they interact with.  These are the traditional academic disciplines of reading, writing, math, science, history, and sociology.  The individual will also need foundational knowledge in their selected discipline.  But a key here is that they have foundation knowledge that they can rely on as they adapt to the ever-changing environment in which they establish their area of functional expertise.  The education should encourage the student to explore new ideas and concepts using these as appropriate to make decisions and solve problems. 

While education is important for foundational understanding, the rapidly changing business environment and technologies will require continuous training for subject matter experts.  The subject matter expertise rapidly becomes stale.  An Industry 4.0 company must create a strong training program that helps the subject matter experts remain experts.  In addition, the training and development system should lead the new hires into positions of subject matter expertise.  This will often require developing their interpersonal and problem-solving skills.  This means the learning management system for an organization will become a strategic asset and a critical portion of the organizational infrastructure.  This is the most significant value-added activity of the HR department.

In the Industry 4.0 environment, products and processes are constantly adapting.  Some of the individuals in the organization may choose to adapt to the change by following the technology or process to a different company rather than changing their skill set and remaining with their current company.  Added to this, the need for companies to quickly scale up and scale back as their fortunes ebb and flow in the digital economy leads to high degree of employee turnover and the use of temporary employees.  In fact, many people in the workforce want and expect to change jobs frequently – they are part of the “gig economy.”  The front-line managers will be in a constant mode of recruiting hiring and assimilating new employees – some temporary and some permanent.  The organization will be constantly filling the pipeline with candidates and rebuilding their workforce.

One of the most significant changes from a workforce perspective is the impact that Industry 4.0 has on promotions and careers.  Promotions are not based upon seniority.  They are based upon subject matter expertise.  To move from the entry level position to a Subject Matter Expert within a company will be based upon technical knowledge and problem-solving skills.  Leadership and team management skills are required to move from the SME role to front-line manager.   The opportunity for promotion within a company is associated with the changes in the company and the growth of the individual, not the retirement of someone’s supervisor.

 Organizational charts are fluid.  Positions will be created and disappear again, perhaps within a matter of months.   The old maxim that each individual is responsible for their own career is more true than ever before.  The individual’s ability and desire to adapt to change, and their personal leadership skills determine their career path.  HR organizations must also be nimble to create urgently needed positions and eliminate suddenly obsolete ones.  The HR organization should be prepared to explain and guide individuals through this sea change in workforce management.

What I have described is the likely result of a company embracing Industry 4.0.  But we must also recognize that change is difficult.  The previous industrial revolutions took decades before the majority of companies had adopted the new practices.  We are about 10 years into this revolution.  So, if your company is not on-board yet, there is still time to catch up.  But don’t delay too long.  As more companies embrace the Industry 4.0 business model, your old workforce and people management practices will soon be viewed as an oddity and anachronism.

Lesson from the Moon Landing: Expect Unexpected Transformations

Fifty years ago on July 20, 1969, Apollo 11 astronauts Neil Armstrong and Buzz Aldrin were the first men to land on the moon.  This undertaking was an enormous challenge, requiring technical innovation, countless hours of devoted work, and a big dose of courage.  It was heralded at the time as the dawn of space travel.  We were told that soon everyday people would be traveling to other planets and then the stars.  Well, that hasn’t happened yet, but let’s look at what happened instead.  The transformation based upon space travel did not go exactly as planned. Instead it has gone far beyond what was envisioned.  Let’s consider some of the reasons for the technical and cultural revolution that has ensued.

When President Kennedy made his famous speech in 1961 stating that the USA would put a man on the moon before the end of the decade, there was no clear plan for how to do that.  There were some general ideas, but there were many things yet to be discovered and developed.  However, the focus on putting a man on the moon did bring together three vital enabling elements of the space program’s success.  First, there was a clear goal or mission that galvanized everyone involved into action.  Second, National Aeronautics and Space Administration (NASA) went on a hiring spree to bring in bright, young, technically savvy engineers and scientists (the average age of Apollo 11’s mission control team was 28) who could both envision and design the needed systems.  Third, the integrated circuit technology (computer chip – invented in 1961) received a massive investment which set it on a path of ever-increasing processing capability at an ever-decreasing size and use of power.  This combination of a clear goal, innovative resources, and technological capability came together to give us the moon landing on July 20, 1969.

The USA space program’s innovative journey of discovery has impacted far more than the transportation sector in society.  The program fundamentally transformed society around the world.  This was not part of the original plan.  But the results of the space program opened doors that were beyond most people’s wildest dreams.  Let me just point out two of the innovations that occurred and their impact.

As already mentioned, the development of the integrated circuit, or computer chip, was greatly accelerated by the NASA program.  The result was the creation of an industry and technology that was not even foreseen in science fiction at the time.  Today, virtually every electrical device that is manufactured has a chip in it doing data processing or communication.  When the space program started, computers were based upon vacuum tube technology.  Today, vacuum tubes are only found in museums.  This technical innovation, the computer chip, did not stay confined to its original sphere of development in the space program. Computer use spread and transformed every other aspect of society.

That is the hardware perspective, so now let’s think about software innovation.  When NASA started the space program, the program plan did not include the word “software.”  There was no budget, no resources, and no time allowed in the plan to develop software because software as we now know it did not exist.  Keep in mind this was ten years before Microsoft was started.  The only people who interacted with computers were engineers and scientists.  The idea of a user interface did not exist.  NASA pioneered the development of the principles of software design that were needed to make the integrated circuit computer chip work within the system.  Part of that was the creation of the user interface keypad and screen.  A new technical discipline, software, was born.  It has grown to dominate innovation and 50 years after the start of the space program Marc Andressen wrote an article for the Wall Street Journal, “Why Software is Eating the World.”  Software controls how we interact with technology, and that often includes how our customers interact with us.

As we look at society today, nearly every aspect of our life has been impacted by innovations that can trace their roots back to the NASA space program.  Consider the field of medicine.  Medical imaging technology, mapping the genome, and patient monitoring would be impossible without the innovations from the space program.  Or consider communication.  Smart phones, wireless systems, even the internet, have roots in the space program.  Transportation systems today are orders of magnitude better than the 1950’s in speed and reliability.  We have seen the impact of these transformative systems in industries like retail, agriculture, banking, energy, and entertainment.  And the nature of the changes and improvement are far beyond anything envisioned by the NASA engineers who were trying to put a man on the moon.

So, what does this have to do with digital transformation?  Your business, once it has started on the transformation journey, will likely change in ways that you can’t even envision at this time. Today we can’t imagine doing business without our smart phones, yet the iPhone was first introduced in 2007.  There are millions of apps that have integrated the smartphone into every aspect of our life.  The capabilities of Siri and Alexa are constantly expanding as household systems are integrated with those devices.  Other new technologies, like blockchain, have the potential to change the way business is transacted and to transform culture and society.  Your digital transformation plans may not include these items now, but if they become dominant you will need to adapt.  The point is, you cannot know precisely where your digital transformation will take you.  You may have a goal, but it is just a door to many more possibilities.

Now that may sound scary.  Why invest in something if you can’t predict the result of the investment?  There are two reasons.  The first is that your competitors are investing in digital transformation and when they discover the new business models and opportunities, your business will soon be like the vacuum tube manufacturers of the 1950s.  The second reason is that digital transformation opens up a world of possibilities and opportunities.  The fact that you don’t know all of them at the beginning is not a reason to hold back.  Instead, go forward and select the path that you believe will be best for you, your company, and society.  Digital transformation is an enabler of the future. Go down the path and see what the future reveals.

Let’s go back a moment and look at the elements of the NASA space program that combined to put a man on the moon.  You should strive to ensure your digital transformation has these same elements.  First was the clear goal.  While there are many opportunities that are created by digital transformation, a near-term goal is needed to focus the effort.  This goal should come from senior leadership and be clearly articulated and supported.  The second is to apply the appropriate resources to achieve the goal.  Assign the people in your organization who are expert at what you do and what you want your business to become.  If you don’t have them, hire them and give this team the time and money to do the job right.  Finally, embrace the technologies that are at the heart of digital transformation.  The specific applications will be based upon your industry and your products.  Regardless of the application, you need the core of digital communication, data acquisition from every product and process in your value chain, data processing to turn that data into business intelligence, and the computer processing power do each of those.

So, let’s commemorate the moon landing and the insight, innovation, and courage of all those involved.  Then let’s use the example of the NASA space program to inspire our own digital transformation.  The future may not be exactly what we predict – it’s likely to be far better!

First published at https://www.institutefordigitaltransformation.org/lesson-from-the-moon-landing-expect-unexpected-transformations

Four Lean Six Sigma Principles That Strengthen Your Digital Transformation

Digital Transformation is a major element of strategy for many businesses. But according to studies done by Forbes and McKinsey, most digital transformations are failing. There are many reasons for the failures - some are cultural, some are related to technology, and some are resource based.  Regardless of the underlying reasons, a company with a strong Lean and/or Six Sigma program can leverage this program to improve the success of their digital transformation.

Digital Transformation Challenges

According to the Forbes and McKinsey research, the primary reasons for digital transformation failure are cultural. And just to be clear, the reason was “corporate” culture. Issues included top-down decision-making, inappropriate organizational structure alignment, lack of senior management support, and a poor understanding of digital trends and approaches. But the issues were not only cultural. There were also problems with poor process definition and control, and a lack of data and use of data management techniques. Of course, there were also challenges such as finding the right talent, acquiring the technical infrastructure – or finding the right partner to augment the infrastructure, and funding the projects to include the training of the workforce. What is clear is that digital transformation challenges are not limited by the technology. They are limited by the organizational capabilities and resources.

Lean Six Sigma Characteristics

Fortunately, Lean Six Sigma can assist to overcome these challenges. Let’s review the characteristics of Lean and Six Sigma. These methodologies, which are often combined, are problem solving approaches to drive continuous improvement. Lean emphasizes the process flow and knowledge of why the process slows down or is less than 100% effective in delivering exactly what the customer wants. The ultimate goal of Lean is to eliminate waste. Six Sigma relies on a structured problem-solving process that is grounded on data associated with the problem, process and products being studied. The problem is defined from the customer perspective with data. The problem is analyzed statistically using data. A solution is implemented, and data is again used to demonstrate it works and the situation is improved. The ultimate goal of Six Sigma is to eliminate variation and problems. In both cases, you are likely to have a trained cadre of individuals who are accustomed to using a structured process for driving customer-focused continuous improvement that relies on data. If incorporated into the digital transformation approach, these will be a tremendous advantage.

Let’s look at four principles of Lean Six Sigma that can accelerate and support your digital transformation:

Principle One: Understand Your Processes

A common approach for achieving digital transformation is to automate manual processes or even better, to replace them with technology-based systems that can perform the same functions in a fraction of the time and with a fraction of the resources. The Lean Value Stream Map and data boxes for each business process are an excellent method for documenting the existing processes to then either automate them or replace them with a system that has equivalent functionality. A problem that has often occurred when doing digital transformation is that everyone has a different idea of what the digitally transformed system should do. The Lean analysis removes that uncertainty. In addition, a Six Sigma project to find and fix problems in the existing process before it is digitally transformed will help to ensure that the new process does not start off with a fatal flaw. The process knowledge gained with Lean and Six Sigma will accelerate your ability to transform.

Principle 2: Rely on Data

Digital business systems use digital data – lots of data. When implementing a digital transformation, an organization often finds that through the use of the Internet of Things and digital portals for their customers, they are creating massive amounts of real-time data. In addition, the data mining of unstructured databases creates even more data and information. The organization can quickly reach data overload and not know how to prioritize and use the data that is generated. This creates confusion for the organization trying to implement the digital transformation.  Lean and Six Sigma establish disciplines for using data to make day-to-day business and process management decisions. The data box found at each step in a Lean Value Stream Map is a great vehicle for aggregating the data and setting warning flags if the data shows the process or product is unsatisfactory. The final phase of Six Sigma, the Control phase, encourages the establishment of statistical process control charts to track process or product performance with real-time data. The use of these disciplines prepares the organization to establish and manage the business operations with data and analytics. When this has become standard practice, it is easy to use more advanced digital tools of a digital transformation to maintain that discipline.

Principle 3: Use Problem Solving Methodology

The third way in which Lean and Six Sigma can improve a digital transformation initiative is to institutionalize a problem solving methodology and continuous improvement mindset. When undergoing a transformation, there will inevitably be some unexpected situations that have a detrimental effect on business performance and customer satisfaction. If these situations are not quickly and effectively resolved, they can derail the entire transformation as both customers and employees reject the new digital processes and products. Lean and Six Sigma provide a structured method to confidently identify the root causes of problems using numeric and statistical tools. They also provide a baseline of performance against which solutions can be evaluated to ensure they have the desired effects. While everyone knows that problems happen, when there is confidence and trust in the methods used to resolve the problem, the organization maintains the momentum that will sustain them through the transformation. Without a trusted methodology, the organization often flips and flops around, trying to decide if the issue is a problem and what should be done about it. This only creates delays and confusion along with extra costs and loss of customers. Over the years, Lean and Six Sigma have established a proven track record of problem solving and continuous improvement.

Principle 4: Establish Culture of Customer Preeminence

The fourth way in which Lean and Six Sigma will assist in a digital transformation is by keeping the organization’s focus on the customer experience and customer impact. It is very easy when implementing process and technology changes to become internally focused. After all, that is what you are changing. Yet in digital industries, the customer has increased power and the customer experience is often the most important factor in determining market share. An internal focus can lead to disastrous business performance. Both Lean and Six Sigma (when implemented correctly) will start and finish their analysis with the customer experience. Lean tracks the critical customer KPIs through the process with its data boxes. The As-Is Value Stream Map quantifies the customer experience. The To-Be Value Stream Map demonstrates the customer impact of the process change. Six Sigma starts with a problem definition that is based upon what is a customer-defined Critical to Quality (CTQ) characteristic.  And a Six Sigma project does not end until the project team can demonstrate that the CTQ is meeting customer expectations and is under control. By using every customer complaint as the starting point for the next Six Sigma project, the customer experience is maintained as the most significant aspect of the business operations throughout the digital transformation.

Summary

Your organization may have been using Lean and Six Sigma for years. In fact, you may have felt that you got all the benefit you could from these approaches and you then moved onto other business initiatives. But don’t abandon these when undergoing digital transformation. The principles of these methods are excellent enablers of your digital transformation and are essential elements for resolving the speed bumps you are sure to encounter. A cadre of trained and experienced Lean Six Sigma Black Belts and Green Belts are a critical element of your organization’s successful digital transformation.

Data - The Newest Natural Resource

When someone starts to speak of natural resources we think of minerals, forests, fields, flocks and herds or water.  A natural resource is anything occurring in nature that can be used for economic gain.  It can be argued that the history of mankind is the history of the acquisition and use of natural resources.  We even refer to different periods in history by the natural resources that dominated innovation in that period, such as “The Bronze Age” or the “The Iron Age.” 

Industries have been created to develop and use natural resources.  The different mining industries, timber industries, and many of the farming industries illustrate that point.  And the control of natural resources is often directly related to the power and significance of a nation-state.  Wars have been fought over the control of oil, minerals, water, and arable land.  Societies and cultures have developed around the management and processing of natural resources.

To say that understanding and managing natural resources is important is an understatement. 

The Data Resource

Let’s look at the definition of a natural resource again.  It is anything occurring in nature that can be used for economic gain.  Most types of data are a description of what is occurring in nature. Let’s compare a typical natural resource to data. Imagine an apple seed that is sown in the ground.  It grows into an apple tree.  That tree then yields bushels of apples, which are regarded as a natural resource when they are harvested.  Similarly, an event occurs in the world around us.  That event creates analog data – sound, movement, scenes, emotions, and reactions among people and things.  That analog data can be digitized and harvested.  It becomes a resource that can be used for economic gain.  And since this resource is representing something that is occurring in nature, it is a natural resource.

Much of our data today is in digital form.  This means the data is a digital representation of the world around us.  It is the digital natural resource.

Consider some of the different types of traditional natural resources.  There are minerals that are mined.  Some are scarce and precious like gold and silver.  Some are much more common, but are processed and used in multiple applications, such as iron or tin.  But generally speaking, there is a finite amount of minerals in one area.  Some of the data natural resources are like that.  The data is buried and must be dug out.  In some cases, there is a limited amount of data when it relates to a unique occurrence.  In other cases, there is a tremendous amount of data that can be used for many different purposes.

Then there are the natural resources associated with agriculture that are labeled as renewables.  These have a growing cycle from seed planting through harvest.  And these natural resources can be fertilized to increase yield.  There are many types of crops and different strains are grown to emphasize different characteristics.  The land can yield multiple harvests as long as it is tended.  With respect to the data resource, the “planting” of IoT sensors or the collection of actions and reactions in digital devices can create an ongoing harvest of data.  And different sensors or data recorders will give different insights into the natural phenomena that is happening.

The Use and Management of Natural Resources

Natural resources are only valuable when they are used.  Oil in the ground that is never pumped creates no value for mankind.  Wild grapes that are never harvested and turned into wine provide no value for mankind.  For the value of a natural resource to be realized, there must be a process to acquire the resource, purify the resource, and apply the resource.  The execution and management of this process creates value.

Let’s use the example of iron ore resource and compare it to the data resource. First, iron is found in many locations, but it is buried.  Likewise, data is being created all the time, but it is often buried.  A geologist discovers a deposit of iron ore based upon his or her knowledge of the surrounding geology and the results of testing.  A data scientist can apply their knowledge to the business or societal circumstances and identify areas where important data can be collected.   The mining company must acquire the mineral rights before they can legally start to mine the iron ore.  And in today’s society, many types of data, especially personally identifiable information requires the consent of those involved before it can be collected and processes.

When the mining company has determined they can legally and economically mine the iron ore, they will open the mine.  There are numerous mining techniques – some very manual and some relying on technology and automation.  The type of mining done will depend upon the location and the expertise and resources available to the mining company.  The parallel with digital data acquisition is obvious.  Once the decision is made to acquire the data, there are many different tools that can be used.  The data acquisition can be done using manual methods, or a digital platform can be used to automatically and systematically collect the data.

The mining company must then ship the iron ore to the processing locations.  This could be by truck, by rail, or by ship.  In the same way, the acquired data must be transmitted to the servers and applications where the data will be processed.  Granted, data transmission is much faster than shipping iron ore.  But it is also much easier to intercept the data and garble the data during transmission.

Once the iron ore reaches the processing operations, it goes through many steps before it is useful for applications and has created economic value.  The iron ore is crushed and heated until it becomes malleable.  The iron must be refined and impurities must be removed.  The iron can then be cast into useful shapes and sizes or combined with other minerals to make new products, such as steel.  Again, there are the similarities with data processing.  The individual data elements are often aggregated into databases.  The data is cleansed to remove noise and false data points.  The resulting databases can then be used for many different applications, and multiple databases can be combined to create new applications.

Opportunities and Risks

By placing digital data into the paradigm of a natural resource, we can use lessons learned from history about the management of natural resources.  This tells us that data management is full of both opportunities and risks.   These opportunities and risks exist for individuals, business entities, and society at large.

First, they exist for the individual.  A person who is a skilled worker or craftsman in an industry that is developing a natural resource is employable, and often has a very good-paying job.  In fact, a culture or society will often develop around that natural resource and additional societal relationships and cultural norms will develop.  This gives the individual a sense of community and purpose.  History has shown us this in agrarian cultures and mining communities we find around the world.  In fact, this effect has been created with respect to digital data in the Silicon Valley culture.  Continuing to consider the individual, if a culture develops based upon a natural resource and an individual does not participate or rejects the use of the natural resource, they will likely be ostracized by their culture.  One other point - when a new natural resource, or at least a new deposit of a natural resource, is discovered, a frenzied “get rich quick” atmosphere can develop that is full of charlatans and predators.  Consider the California gold rush of 1849.  While some did get rich, many others were fleeced and destroyed during that time.   That is a word of caution for those individuals who are jumping on the digital transformation bandwagon.  Make sure you are relying on trusted sources.

Next let’s consider business entities.  There are numerous opportunities up and down the value chain of a natural resource.  A company may choose to specialize in one aspect of the value chain and offer its services broadly across the industry.  Or it may attempt to vertically integrate around one application or category or use for that natural resource.  Of course, all the normal aspects of a competitive business environment are present and the need for access to capital, customer engagement, quality products and services and competitive pricing all contribute to the success or failure of a business.  With respect to digital data resource management, the speed and scale of the industry precludes a “wait and see” strategy.  The barriers to entry are low and natural geographical boundaries are meaningless.  There are already many digital giants and entrepreneurial start-ups.  The development of the industry is racing ahead and those who are not embracing digital transformation are shut out from participating in the development of this natural resource. 

Two companies that illustrate viable strategies are Google and Airbnb. Google has chosen to dominate one aspect of the digital data industry—that of searching—and has spread that capability broadly across many applications.  They are dominant within a horizontal slice of the industry.  Airbnb is vertically integrating data management with respect to overnight stays – they are dominating a vertical slice within the industry.  A question you should be asking yourself right now is, “What strategy is my business using to take advantage of this natural resource?”

Finally, there are opportunities and risks for society.  Access to information and data has become a great democratizing influence around the world.  Digital data and information have opened the doors for goods, services, and exposure to ideas and knowledge in virtually every corner of the world.  But with this explosion of data has come the spread of propaganda and censorship and the loss of personal privacy. When one company becomes all-powerful within an industry, it often results in exploitation of customers and aggressive hostility towards new ideas.  Monopolies stifle the development of an industry and culture.  It has been argued that companies like Google and Amazon have too much power and that they should be broken up in the same way that Bell Systems was dismantled during the 1980s.  In addition, when personal private information is in the wrong hands, it can be used to manipulate and intimidate individuals.  The European Union recently took action to address this concern with the imposition of GDPR regulations.  The correct balance point for both of these concerns is still being debated.

Using the paradigm of a natural resource, the development and management of the digital data industry and its impact on society becomes clearer.  It is not just an incremental step in technology advancement.  Rather, it is an organizing element for industries, society, and individuals.  And as with any other natural resource, control of the resource and the ability to process that resource and use it for many applications is a strategy for success.  Whether you are an individual dabbling with digital devices, a corporation that is attempting to participate in the digital data value stream, or a policy maker who wants to leverage the advantages of this natural resources and avoid the risk, you need a strategy for engagement.  You are not in the “Bronze Age” you are in the “Digital Data” age.  Are you making the most of your opportunities?