A complex path to the digital future

Photo Howard Gross / Founder and Principal, HG Communications, LLC; former Senior Director of Global Communications, The Nielsen Company / March 15th, 2016

In a world in which information, capital, and labor are no longer confined by time nor distance, nearly everything has an impact on practically everything else. As traditional barriers to entry crumble, organizations that once operated in separate universes now bump up against each other, competing, collaborating, or both in newly defined markets. The tag team of digital and complex systems is slamming business models and upending corporate cultures, nowhere more so than in the realm of communications. Individuals and organizations need more than merely manage technology. They have to master complexity. That means being able to step back and consider all of the critical components of system.

Scores of businesses have spent much of the past year obsessing about digital transformation. For good reason. According to one survey of 941 leaders across 12 industries, by the Global Center for Digital Transformation, respondents believe roughly four of the top 10 companies in each industry will be displaced by digital disruption within five years. That is a sobering prospect; and yet their apprehension is somewhat misdirected. Granted the world is being digitized as billions of individuals, organizations, and devices link online. However, these are the same reasons life is becoming ever more complex; which presents an equally formidable challenge.

There are times when trying to explain something confusing or hard to understand we casually label it “complex” and move on. But it is a mistake to reduce such an important concept to a throwaway line. Complex systems comprise multiple interacting parts. When even the simplest components converge they produce new phenomena that are qualitatively different than their original ingredients. (As when gases hydrogen and oxygen combine to form water). Moreover, the process is nonlinear, so input and output are not proportional to each other. What may first appear small and inconsequential can quickly become big and burdensome. For every event that occurs, there are any number of possible causes, with no clear connections between them. And said systems can learn and change in response to their environments. All of which means they are extremely difficult to control, and their outcomes are often too uncertain to predict.

By these measures, our social, political, and economic institutions have always been complex; as has society as a whole. So what is different now? To start, there are a great many more of us with whom to interact. The planet’s population has grown three times larger over the past century than during the previous nineteen hundred years combined. An increasing majority also live in cities, which by their very nature engender complexity. Further, today’s most pressing issues, whether immigration, climate change, dysfunctional governments, or a fragile worldwide economy are not only intricate in and of themselves, but are deeply entangled with each other. “Global risks are interconnected, and that can create unexpected consequences,” warns the World Economic Forum’s latest report on the subject. Plus the situation will surely intensify, thanks to our ability to translate just about anything into strings of ones and zeroes.

In a world in which information, capital, and labor are no longer confined by time nor distance, nearly everything has some sort of impact on practically everything else. As traditional barriers to entry crumble, organizations that once operated in separate universes now bump up against each other, competing, collaborating, or both in newly defined markets. For evidence, look no farther than the recent machinations between Ford and Google as to the future of the automobile. The digitization of products and services also enables disrupters to deliver the same or better value while dodging many of the obstacles incumbents had to confront. Thus, it is the tag team of digital and complex systems that is slamming business models and upending corporate cultures. Nowhere more so than in the realm of communications.

Communication is at the core of complexity
“Every time there is an improvement in the technology with which people and ideas come together, major change ensues.” British science historian James Burke uttered those words some thirty years ago, and time has only amplified the process. As the connectivity within systems expand, it is the interactions rather than the parts themselves that ultimately define those systems. Since all complex systems involve the exchange of varied types of information, these interconnections are actually modes of communication, and digital networks are the high speed conduits through which disparate elements travel in the form of news, entertainment, social conversations, and data. Lots of data. The Internet and the slew of apparatus attached to it have begot massive databases, whether residing on single servers or distributed within “clouds” of computing resources. Currently, cross-border data flows are 45 times higher than in 2005, and are expected to balloon another nine fold by the end of the decade.

No doubt the rate of “datafication” — converting objects into data form — is accelerating. Much of the transition is being driven by people across social media, soon to be substantially augmented by myriad gadgets arriving via the Internet of Things. Like the telescope, which opened the universe to intellectual exploration, and the microscope that revealed organisms once too minute to imagine, this deluge makes it possible for data scientists to discover new insights by collecting, dissecting, tabulating, and analyzing trillions upon trillions of bits of information.

But more and more detailed data bring with them added complexity, especially as companies seek to extract value from numerous sources. In a study of 1,500 global executives by digital consulting agency Bluewolf, close to half admitted having a hard time reconciling data with different origins. Not surprising considering analysis by the Aberdeen Group and Ventana Research, which found that over 70 percent of firms rely on at least six sources, with some exceeding twenty. What is more, though the number of data sources may grow in linear fashion, how they interact increases exponentially. Online ad markets, for example, are estimated to generate 100 billion impressions daily, with each one measured against as many as 100 separate variables, culminating in countless possible outcomes. And because variables frequently change, so do outcomes, forcing marketers to regularly rework their models.

Indeed, the fact that content traverses networks in various formats — and audiences can receive it when, where, and however they want — is reshaping the entire media industry. Where the New York Times, CNN, and National Public Radio previously operated in ostensibly separate domains, these days they directly compete for attention online, relying on comparable combinations of text, sounds, and images. The same goes for communication professionals, as those in public relations assume roles that were formerly the exclusive province of journalists, while defending their own turf against an onslaught of content marketers.

For their part, consumers are both adapting and contributing to the intricacies of a digital world. Once generally passive and apart from each other, they now readily interact, influencing the manner in which they access, understand, and use information. Cheap yet capable systems have also made it possible for virtually anyone to produce content and distribute it, either on their own or in collaboration with others. The resulting complexity, according to research by corporate and marketing communications recruiter, VMA Group, “is the single most important challenge for the communication function.”

Still, the problem is hardly unique to individuals or organizations. For developed nations, whose economic and political hegemonies are already in question, this liberation of information and communication technologies is further eroding the status quo. At the first BRICs Media Summit held in Beijing at the end of 2015, leaders of media establishments from the five emerging economies declared they were no longer willing to allow the world’s mass media to be monopolized by the West. They vowed instead to pool their resources and strengthen ties among their countries so they “may come together and tell stories that truthfully reflect BRICs’ cooperation.”

Not all transformations are equal
Digital transformation and the complexity it provokes are subverting conventional business practices, while opening opportunities for aggressive start ups, upstarts, and veterans. But the conversions aren’t occurring in equilibrium. A study out of the Fletcher School of international affairs at America’s Tufts University found significant differences in how countries digitally adapt. In lieu of a single grand pattern, researchers identified several key drivers — the interplay between supply and demand, institutional environments, and the capacity for innovation — that determine both the direction and momentum of advancement. The extent to which the drivers do or do not correlate dictates whether their trajectories are consistent or nonlinear.

Taking a slightly different tack, an investigationby the McKinsey Global Institute focused on just one location — the United States — gauging the degree to which both corporate America and the general population are moving into the digital age. Dividing the nation into digital “haves” and “have-mores,” it defined the latter as the minority of companies using contemporary means and tools to successfully update their core processes, and as elite workers whose highly marketable skills garner wages well above the national average. After examining more than two dozen key indicators across 30 industries, McKinsey concluded that in the U.S., as elsewhere, progress is uneven, causing a critical imbalance between the most digitized members and the rest of the economy.

Inequality like this “brings a number of potential consequences including the rise of populist politicians, the blocking of innovation and the onset of protectionism and nativism,” cautions Richard Edelman, president and CEO of the communications marketing firm bearing his name. The company’s annual trust and credibility survey uncovered an unprecedented gap between the global elite and the rest of the world’s inhabitants with respect to their confidence in government, non-governmental organizations, business, and the media. Adds Edelman: “the trust of the mass population can no longer be taken for granted.”

Under these circumstances, every institution finds itself firmly wedged between the proverbial rock and hard place. Complexity, after all, doesn’t conform to most peoples’ desire for control, nor to their need for direct lines between cause and effect. Likewise, managers want assurance that once a strategy is put in place it can be used repeatedly, hence the appeal of  playbooks and best practices. When they don’t get that, says Yves Morieux, senior partner and managing director at the Boston Consulting Group, they respond with a “proliferation of cumbersome structures, interfaces, coordination bodies and committees, procedures, rules, metrics, key performance indicators, and scorecards.” This hodgepodge of initiatives, however, can unwittingly aggravate the problem. In response to survey of 331 executives from companies with revenues over $500 million, by the Economist Intelligence Unit, more than half confirmed that organizational complexity actually lowered profits.

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Thinking differently
Some enterprises, on the other hand, are pursuing a considerably different line of attack. While not necessarily embracing complexity, they are learning to adapt to their environments and cope with the uncertainty of constantly changing conditions. The scientific community, for instance, has applied complexity thinking to a range of climate, food, and security matters. Epidemiologists have developed tools to identify super-spreaders of diseases and prevent or limit contagion. Most recently, a group of experts from fields as diverse as physics, sociology, ecology, computer science, public health, economics, and banking co-authored an article urging financial regulators and central bankers to incorporate complexity theory into new models that could enable them to foresee and possibly mitigate future crises.

What these endeavors exemplify is the capacity to tackle the vicissitudes of 21st century life through what are known as emergent strategies: patterns of action that evolve from the juncture where an organization’s best laid plans collide with the realities of the marketplace. Essentially ongoing works in progress, they often develop in the absence of specific policies, or despite them, and instead require a willingness to put aside assumptions and learn what works in practice. Just as important, emergent strategies arise through the convergence of ideas from discrete sources.

This is especially important to communication professionals, for whom the rules of engagement are changing. With the upsurge of social media platforms, communication is becoming more like conversation. Yet conversations are sometimes uncontrollable, often unpredictable, and almost always self-adjusting. In short, they are complex. And because people perceive their lives through multiple lenses, it is critical to recognize how different groups access, process, interpret, and use information. To that end, advances in cognitive and behavioral sciences bring together distinct disciplines like psychology, sociology, anthropology, philosophy, linguistics, economics and political science to explore how humans reason and respond in the context of their sundry state of affairs. Incorporating these variables within powerful databases reveals previously undisclosed patterns, peculiarities, and even sentiments around which to design and deliver more meaningful messages. Yet communicators must understand that the task is no longer theirs alone, but one they will increasingly share with machines.

All technologies are complex
There are algorithms, for example, that already gather, organize, and analyze data that they turn into rudimentary documents such as press releases and quarterly reports. More advanced designs are underway that can automatically edit hours of video footage for images with the ideal artistic qualities. And a team of Chinese and American engineers is developing the means to anticipate users’ needs and deliver only the most relevant content. Little wonder then, in a survey of more than 3,000 technology officers in 30 countries, 97 percent of participating CIOs in broadcasting and media acknowledge digital disruption as a significant threat; as do 90 percent of their counterparts in public relations and advertising. These and innovations like them will add still newer layers of complexity.

In fact, complexity is inherent in all technologies because they are basically combinations of elements. “Novel technologies call forth further novel technologies,” notes W. Brian Arthur, an American economist and a pioneer in complexity theory. They, in turn, make possible still newer applications, and so on. Adds Arthur: “It follows that a novel technology is not just a one-time disruption to equilibrium, it is a permanent ongoing generator and demander of further technologies that themselves generate and demand still further technologies.” Accordingly, what it takes to be effectively digitized today won’t be the same, one, two, or five years down the road, rendering digital transformation a moving target.

In time, most businesses will likely learn to cope with the current crop of systems and technologies. Nonetheless, their successes will be short-lived. A lot of the world has yet to come online. The Internet is expected to connect four billion users, and as many as 25 billion devices, before the close of the decade. By then, ultrafast 5G mobile broadband may deliver data and content at speeds possibly up to 100 times faster than current 4G platforms.  Add enhancements to machine learning, virtual reality and, on the horizon, biotechnology to the mix, and these vast swarms of elements will interact in trillions of different ways, increasing uncertainty but unleashing a bounty of unpredictable opportunities as well.

Capitalizing on these will require that individuals and organizations do more than merely manage technology. It will demand that they also master complexity. That means being able to step back and consider all of the critical components of system. They will vary depending on the circumstances. Not everything will be apparent; certainly not right away. And some are bound to change throughout the process. But the goal will be to recognize how all of the different pieces interact and influence each other; and with that knowledge, continually build appropriate strategies.

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