The results are in, and they’re not particularly pretty.

According to Tufts University’s Digital Planet Report, Australia’s digital evolution is falling behind the rest of the world, sitting firmly in the ‘stall out’ quadrant of the findings, reserved for – ahem – digital dunces like Finland, Japan, the Czech Republic, and, yes, Australia.

When you consider the fact that Australia’s digital economy – estimated at $79bn – is larger than agriculture, retail and transport, it’s a big deal to consider that we’re not keeping pace.

Add to that these findings, which show that the most digitally innovative businesses in any industry are also the most economically successful, and it’s clearly a problem worth thinking about.

Of course, when you dig a bit deeper, it’s not all doom and gloom.

This HBR visualisation shows that while Australia is indeed no longer moving forward at the same pace we have in the past, our progress isn’t receding too rapidly, either:

Combine that with some notable bright spots, and there’s a lot to learn.

UNSW’s Business Dean, Mark Uncles, agrees:

“It’s not as if … Australians have their head in the sand and they’re unaware of what’s happening in the rest of the world…we have pockets of expertise, with examples of where things are cutting edge.”

Pockets of expertise? Examples of cutting edge?

If that’s not an invitation to dig deeper, I don’t know what is.

And so I set out down the Internet rabbit hole, combing press releases, consultant and academic reports, YouTube videos, and news stories to answer the two burning questions I’ve been asking myself: what is the biggest challenge that Australian senior leaders are facing when it comes to leading their companies into the digital age, and how can they navigate the transformation effectively?

If you’re looking for surgical precision, this isn’t the post for you. Like the digital transformation, the themes I uncovered are interconnected and inseparable.

In my opinion, they’re also completely fascinating.

 

Embrace The Outside-In.

Remember this now infamous Rumsfeldism from 2002, when the US was in a fuss about Iraq’s possible weapons of mass destruction?

“..there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don’t know we don’t know.”

As it happens, unknown unknowns are a huge challenge for leaders driving digital evolution, and from the looks of it, Australian business leaders are guiltier than their global counterparts in bothering to uncover them.

According to PwC’s 2015 Global Digital IQ Survey, “only 14% of leaders in Australia say they network with other companies, as opposed to 23% globally.” Further, Australian companies “could extract even greater value from digital through better connections externally.”

What does that mean in practice?

Telstra’s new Gurrowa Innovation Lab in Melbourne is a prime example of building external connections. Opened in August, 2015, the lab partners Telstra’s top talent with that of its enterprise customers and vendors, research organisations, and incubators, combining the best minds, technology and resources to solve digital innovation challenges.

Writes Vish Nandlall, Telstra’s CTO:

“We want to think big, solving customer challenges such as the Internet of Things (IoT) and designing intelligence into solutions through data analytics and deep learning…To achieve this, we need to bring the best practices from across the world.”

 

Step-Up to Multi-Speed.

In my recent interview with Carlo Gagliardi, leader of PwC’s Strategy for the Digital Age Practice, Gagliardi was quick to point out that “strategy and execution are no longer sequential…they are peers.”

It’s a theme that comes up again and again.

While no one’s suggesting established businesses adopt Facebook’s early mantra to move fast and break things, locked away annual and five-year strategies no longer work if they’re the sole approach to business planning.

According to Andrew Walduck, Executive General Manager of Trusted Services at Australia Post,“we now live in an era where how we work is as important as what we work on.”

For Australia Post, that means a three-speed approach, combining traditional, long-lead strategy; break-neck startup agility; and an in-between speed, whereby well-planned approaches are executed to tight timelines.

By mixing all three approaches within one company, Australia Post can gain the benefits of both blue chip planning and startup agility.

 

    

Focus On The New Cs.

Tasked with leading the digitisation of Australia Post, Walduck has a deep wealth of knowledge on the subject, pointing out that management thinking needs to shift from a machine-age focus on employee productivity, to a digital-age focus on employees’ creative capabilities and customer centricity.

In 2015, neither employees nor customers want to be told what to think, do or want.

Employees want ownership, impact and recognition. And in some ways, so do customers; think of companies like Airbnb, which allows hosts to “develop” products, and Twitter, which was famously shaped as much by its users as its Founders.

According to this piece on the Wharton School of Business’ Knowledge@Wharton blog: the most profitable companies are those whose most valuable assets are relationships and ideas, and executives are willing to relinquish some control so customers and employees can shape the future growth trajectory.

Consultant Philip Otley agrees: 

“The impetus to put the connected customer at the centre of everything you do creates amazing opportunities for businesses to rethink their products and services.”

Introduce a Hacker Culture.

The term hacker gets a bad wrap, conjuring up images of teenage savants stealing classified data from the comfort of their parents’ wood-panelled basements.

But according to Mark Zuckerberg, that’s not fair: “Hackers believe that the best idea and implementation should always win — not the person who is best at lobbying for an idea or the person who manages the most people.”

What does it mean to implement hacker culture within an established blue chip?

In June 2015, QANTAS decided to find out, holding its first-ever – and wildly successful – hackathon. A collaboration between the company’s Digital Innovation Team and the digital advisors behind the Disruptor’s Handbook, the event gave non-QANTAS coders and developers 30 hours to create ground-up solutions and prototypes to solve a real-world problem facing the business.

Remember that no one person or job title has a monopoly on good ideas. Demanding a meritocracy and encouraging creativity from every level of the business – and even outside the business – can help executives drive digital evolution.

As one of the judges at QANTAS’ event noted:

“Hackathons are a direct route to new entrepreneurial thinking … that corporates would be remiss to ignore…”

 

Contribute To An Ecosystem.

Five years ago, Singapore’s IT and Internet Tech start-up scene was non-existent.

Today, 42,000 startups later, one in 10 working-age Singaporeans are in the process of founding or running a startup, and Singapore is well on its way to establishing itself as the Silicon Valley of SE Asia.

How did they do it?

Singapore’s long-standing emphasis on science and technology education certainly didn’t hurt. Ultimately, it’s been a collaborative effort, combining business- and startup-friendly government policies, a strategic location vis-à-vis China, and an army of willing innovators.

In Australia, recent events suggest the tide is starting to turn, beginning with recent minting of “friend of the Internet“, aka Prime Minister Malcolm Turnbull.

This year also marked Australia’s first-ever policy hack, a collaboration between the Minister for Innovation and industry to remove government barriers to innovation, digitisation and business, more generally.

The winning idea of this inaugural event was an initiative to start entrepreneurial thinking and skills in primary school.

Like the outside-in thinking mentioned above, the most digitally successful business recognise digitisation doesn’t occur in a bubble, proactively engaging at each opportunity with government, stakeholders, customers and industry colleagues to create a pro-digital ecosystem.

 

Technology Is Not A Panacea.

Finally, I’d be remiss to write an entire post about digital evolution without mentioning what many Australian executives would argue is at the heart of digital innovation: technology.

Indeed, when compared to countries with the highest digital IQs, more Australian business and IT executives believe digital is synonymous with techology. And it seems as though that’s to our detriment.

According to PwC: among Australian respondents (of a global survey), there was a “greater propensity to blame outdated technology for failed digital initiatives, to funnel the greatest proportion of digital budgets into IT, or to defined ‘digital’ solely in the context of technology-related innovation.”

On that note, digital transformation designed solely around IT seems destined to fail, especially when you consider it within the context of my above points: employee creativity, customer participation, stakeholder and partner engagement, and meritocracy.

“A truly ‘digital’ business is one that focuses on wider issues of disruption, engagement, digitisation and trust. Technology should be viewed as a means of enabling this. Real transformation is about holistic business change and leadership buy-in.”

What do you think? What are your most significant digital transformation challenges?

 

    
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