Q&A  | 

The corporate digital divide, by Robert Siegel

"If a company doesn’t digitally evolve, it will perish".

Tags: '4th industrial revolution' 'corporate digital divide' 'digital transformation' 'Robert Siegel' 'Stanford University'

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Robert Siegel is a Lecturer in Management at Stanford University and has led primary research and written cases on Google, Charles Schwab, Daimler or AB InBev among many others. He sees himself as an explorer: "I explore how companies combine digital and physical solutions for their customers".

His expertise comes not only from his academic background, but also from his trajectory as an executive in some of US top technological companies - he is a General Partner at XSeed Capital and a Venture Partner at Piva. He sits on the Board of Directors of Foxeye Robotics and Avochato and was previously General Manager of the Video and Software Solutions division for GE Security. No wonder he has served as lead researcher for Andy Grove’s best-selling book, 'Only the Paranoid Survive'.

Why do we talk about the digital transformation as the fourth industrial revolution?

The ways in which products will be designed, manufactured, delivered and maintained will impact all parts of the product development process. The capabilities and skillsets of designers, factory operators, sales/marketing and service will require a knowledge of both the physical and digital domains.

What do we understand by corporate digital divide?

Historically, this has meant that companies that came from an industrial or physical background have been at a disadvantage when incorporating digital capabilities – from product design to hiring to using data for customer contact.

Ironically, we are seeing that digital-native companies have often been just as disadvantaged in understanding supply chains, manufacturing, quality assurance and working with government in the physical realm.

In which industries is the digital transformation necessary in order to survive and thrive?

All of them.  No industry will go untouched: healthcare, finance, mobility, retail, education, etc. Every industry is impacted.

Is there a one-fits-all digital strategy to follow within this transformation or at least some pillars?

Clearly, there is no one-size-fits all, but companies need to be competent in the use of analytics, creativity, risk taking, partnering, building a digital culture, as well as knowing how to manage supply chains, the art of manufacturing, operating at scale, managing ecosystems and building a brand over time.  Being successful in only part of these areas will be insufficient for the future.

Following a paper published by the European Investment Bank, this transformation results in a growing corporate digital divide

– small manufacturing firms and old small firms in services, for example, are significantly more likely to be and remain non-active in terms of digitalisation. 

Do you think the digital transformation is leading to a polarisation in the economic structure?

No, I think companies that remain non-active in digitalization are simply proving that Darwin was correct. If a company doesn’t evolve, it will perish.

I would encourage us not to confuse lack of evolution and maintaining competitive in markets with polarization.

Are digital technologies leading to winner-takes-all markets?

Not necessarily, but those that get to a large size and scale will have cost advantages (in both the physical and data spheres).  Winner-takes-all?  No.  Consolidation? It appears so.

In Capitalism without Capital (2017) Haskel and Westlake argue that the trends of rising market concentration and mark-ups tend to be more pronounced in the sectors in which digital technologies are widely adopted, and that the latter give advantage to large firms and foster market concentration. Do you agree on this?

I do agree on this (so far). That said, there is no proof that continued innovation stops. Incumbents end up facing their own challenges (finding ways to innovate while simultaneously running their own large businesses, the development of entrenched internal bureaucracies that inhibit innovation, etc.). Just because an organization becomes big doesn’t mean the Schumpeterian creative destruction ceases.

What's the role of the big five - Apple, Amazon, Google, Facebook and Microsoft- in the digital transformation and in this 4th industrial revolution?

That is to be determined. Largely they have only wanted to sell their own software and not really integrate into the industrial revolution.

The one exception on this list is Amazon – they are involved deeply in manufacturing and logistics. They are the one firm on the list that might have a strong footprint in both the physical and digital to have a profound impact outside of their core retail business (the development of AWS shows their ability to see connections into adjacent areas and build successful new businesses at scale).