Digital technology is not software, it is a state of mind (Part 1)


28 January 2015

Marc Anderssen, co-founder of Netscape, once said: “software is eating the world.” Or, to put it another way, digitization is pervading all aspects of our society.

The Internet is permeating the entirety of our lives, and of course, also the way that companies operate in the markets. And the change is evident in the way that the most successful businesses of our time (the digital ones) achieve monopoly positions in very different ways (Article in Spanish) than industrial firms used to. Now, companies seek out ways to improve sectors by delivering products and services more efficiently, both as a result of technology, and collaborations between people. In other words, the purpose that digital media serves goes beyond the economical, as it is clear that it enhances profitability, which is necessary for the long-term sustainability of businesses.

The companies that dominated the markets during the 20th century did so by growing so large that if they disappeared, they could drag an entire country down with them – the fact is, digital companies are too important to people to disappear. It is not unreasonable to think that if necessary, patrons of these companies would be capable of rescuing them, as these types of companies tend to deliver much more value to society than they take from it.

If you thought this was a fad, I’m sorry, but digitization has come to stay.

Let’s take a look at the two main dimensions which affect digitization: 1 – the way in which companies are organized, and 2 – the way in which they produce value for the market. In this post, we will analyze the first aspect, detailing some of the factors that affect the internal machinery of digital organizations.

How digital companies are organized

As if it were thing most normal in the world, we have gotten used to seeing how most companies devote majority of their efforts to managing their competitive advantages. The fact is: digital companies dedicate practically all of their resources to building their own competitive advantages through constant innovation. And if all these organizations have anything in common, it is that these companies now violate everything that was once valid in terms of management, and in terms of the management of their own resources.

The purpose for which they exist

The purpose of any digital company defines its reason for being and for which people want such an organization to exist. This purpose goes beyond mere profit making, and involved companies’ dedication and ability to bring to the market more monetary value than they need for survival. It is only in this way that great professionals can be inspired to work for an organization that offers them a lower salary than they could potentially get elsewhere. Hence, it is essential to have good recruitment strategies in place within a company, in order to hire people that are a good fit with the company’s overriding purpose, as, if the hired party does not share the vision or is not passionate about it, they are not likely to give it their all. A clear example of such purpose is evident in Google’s ambitious goal to organize all of the world’s information, to make it universally accessible, in useful form.

Agile processes versus linear processes

Processes should aim for results that will bring about the reduction of risk, and should be based upon the philosophy: “fail often, fail fast, fail cheap,” which is prevalent in all digital companies; always accompanied by decisions based on data analysis. With this method of value production, the opportunity cost for organizations is optimized, to enable them to cope with the constant innovation processes that are required in the dynamic digital environment. In order to make the way that digital companies deal with constant innovation more tangible, it is interesting to have a look at the way in which Spotify creates new products.

Doers versus managers

A manager is the coordinator, and that often means that people do not know what to do, or what has to be done in order to control the outcome. In both cases, this is due to a clear problem of autonomy of the members of the organization. Your team should not control the information – it is a waste of time, but they must be dedicated to achieving the objectives. The people of Valve and Netflix clearly have this covered – the best hires require less management and are more productive, and at the same time, the workers feel more responsible for carrying out the company’s mission.

The team that’s constantly learning

A company is only as good as its team. The sole competitive advantage of many companies lies in their ability to retain and enhance the professional development of their teams. Therefore, most of the time, team leaders are focused on understanding the potential for development of their team; exactly as we at Territorio creativo understand, and attempt to imbue, and it is a challenge that makes us very happy.

We are at a turning point

Organizations are constantly knocking down the imaginary walls between departments and becoming more interconnected internally, encouraging new ideas and solutions. In turn, information stops being a power tool, but rather, becomes an essential element for all organization members to have a greater degree of self-management; all aimed at increasing self-management and personal development, towards a shared vision. As a result, this allows the organization to function flexibly and rapidly, becoming especially apparent in sectors more reluctant to change.

At Territorio creativo, we understand the challenge of dealing with an ever-changing environment, transforming increasingly each day; an environment full of uncertainty. Personally, we prefer to apply our own formula to easing our ‘doubts,’ as each day, we become a more digital organization – thus, a result of our own experience, as well as the various cases that we have analyzed, we created our first whitepaper on Digital Transformation (Article in Spanish), in which we share our vision of a framework that applies the ‘digital’ as a state of mind.

Image Rights: Yuri Samoilov, Giuseppe Milo.