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The philosophy of digitization

tl;dr:

  • Digitalization means: change without resistance
  • Therefore, the natural direction of development is exponential growth
  • Digitization gives each individual superpowers
  • With great power comes great responsibility
  • The philosophy of digitalization means: You have to be willing to test your powers; what used to be fantasy suddenly becomes reality; superheroes need big dreams; for every (digital) superhero there will be a kryptonite sooner or later

Looking back: the psychology of digitization

As early as 2016, our fundamental study “The Psychology of Digitization”showed how decision-makers approach the topic of digitization. We have shown how a mixture of a sense of duty, compulsive adventure and a high expectation in leadership quality automatically leads to fear and thus rejection or at least hesitation. What appeared irrational before became understandable through this study.

Better understanding will lead to better actions: Dozens of marketing initiatives, trainings, product developments, applications and ultimately customer relationships have emerged from this study. Measures that make it easier for providers of digital services to bring digitization to medium-sized companies. On the other hand, they reduce the fear of contact on the part of decision-makers and enable the digital evolution of existing business models.

Looking ahead: the philosophy of digitization

Today, we would like to give further fundamental thoughts on the consequences of digitization and thus on the digital future of companies.

Technology describes WHAT can be done with digitization. This is a never-ending topic, as new digital technologies and applications are emerging almost daily.

Psychology explains HOW people (decision-makers, employees, customers) currently deal with digitization and the associated technology – or not.

Neither is sufficient for a truly comprehensive understanding of digitization. We also need to clarify WHY a company should be involved in digitization. By WHY, we do not mean that digitization is naturally pursued for its economic advantages. The WHY written in capitals stands for the philosophical question of the motives for actions. Where are we going? Or: Where is digitization taking us? And what does this mean for the companies and the people behind them.

Digitization is unleashed information

When we talk about digitization, we always mean the digital transmission and processing of information. Besides the content, the quantity and speed of transmission are of particular importance in the transmission of information. For example, when we transmit information by speech, a few thousand bytes per second can be moved from A to B, the sound waves travelling at a moderate 300 m/s. Digital transmission is many orders of magnitude faster: the current record is 44.2 terabits per second. This is equivalent to approximately 1.8 million songs per second (or 2.5 billion times the transmission rate of speech). Not only the bandwidth but also the transmission speed is much higher: Electrons in computers and computer networks move at the speed of light. 300.000.000 m/s.

Digitization makes everything more efficient

If you can transfer and process nearly infinite amounts of information with nearly infinite speed, this means: What you could only dream of before is now something you can take for granted. Digitization makes many things almost infinitely more efficient.

Everyone of us knows this from everyday life: searching for information via Brockhaus – slowly. Information search with Google, Wikipedia & Co – at least 10 times faster. Shopping from A to Z vs. One-Click-Shopping at Amazon: 100 times faster. Writing a letter to 100 people vs. sending the corresponding e-mail: At least 1,000 times faster.
The same applies in the business sector – only with even greater numbers: 1,000 customers sorted by the number of their purchases in a customer file vs. one database query – efficiency factor 1,000,000. Or how about operating and continuously updating a global loose-leaf collection where millions of customers can choose from millions of different real estate offers. Not possible with analogue methods. At Airbnb it happens daily. Efficiency factor:∞

Movement without resistance

The digital economy can operate unimpeded, i.e. almost without resistance. Without resistance, change or growth happens exponentially.
The consequences: Limits are no longer valid. Everyone has unlimited access to everything and everyone. Reaction times implode. National borders? Scaling problems? No longer exist. What is small and insignificant today, the startup in the living room, can be three steps ahead of us tomorrow. And is unrecognizable in 5 years. Size and tradition are assets? Just ask Kodak. Business models? Can and must change parallel to the unleashed possibilities: First a bookstore. Then a department store. Now a global consumer corporation that produces films and hardware, rents storage space, dominates logistics and covers the entire value chain. Amazon is not the exception, but the logical consequence of unleashed action and thinking.

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Human problems with exponential processes

The difficult assessment of Corona or the repeatedly wrong answers to the classic water lily puzzle prove that we have the greatest difficulty in dealing with exponential developments. Humans function differently. That is understandable. One lives in the here and now. The only thing you can be reasonably sure about is looking back and looking in the mirror: Where was I x years ago? Where am I today? Extrapolation into the future is difficult. There are four fundamental possibilities:

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A) Is the future the continuation of the status quo?
B) Is the future the linear projection of the past?
C) Is the future the tangential continuation of the past?
D) Is the future the exponential continuation of the past?

One does not know. So you tend to go for what you can handle best. Option A is therefore not applicable. The future should be at least a little better than the past.

Option B is very tempting. The thought “If things continue as they have done so far, …” sounds very rational and is based on a known period of time in the past. What could possibly go wrong?

Option C is really difficult to judge. Here the basic idea is: “If things continue to develop as they are currently doing, …”. To do this, you would first have to know how they are developing at that very moment. Mathematically speaking, it is all about derivatives. A topic that has been rather unpleasant for many people since their school days.

Option D blows the boundaries of the imagination: ever greater changes are made in ever shorter periods of time. What seems endlessly far away today will be normal tomorrow – and the day after tomorrow a marginal note.

But digital processes develop exponentially. In other words, with digitization, the future option that we have the most difficulty imagining becomes the most likely.

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Digitization gives superpowers.

Unleashing changes people. One can – see above – accomplish achievements that until recently seemed impossible, even almost superhuman. Digitization brings superpowers to everyone. For the economy this means: There are no more small companies. A start-up can become dangerous for an established company in a very short time. A “crazy” immigrant in California can rock one of the oldest high-tech industries with moderate start-up capital, a used Lotus and 1000 cell phone batteries. A former employee of an investment consulting firm founds a bookstore and, within 26 years, turns it into the world’s most successful trade-media-film-cloud-payment-etc corporation. Superpowers make it possible.

” With great power comes great responsibility.”

Peter Parker was given this motto by his uncle – right at the beginning of his career as Spiderman. It also has significance for the digital entrepreneur. By responsibility we do not mean the social responsibility of a multi-billionaire start-up founder or the political responsibility of social networks. There is no doubt about that.

Responsibility begins much earlier, however. Specifically with the question: “If superpowers are available to everyone – including me – how would I like to use them? Here, too, the “relevant literature” from Marvel provides the answer. At first, there are two solutions: Whoever has super powers becomes either a superhero or a super villain. In the real economy there is a third option: Those who have superpowers available but do not use them become super losers. For he (or she) remains at best on their linear trajectory of development, while the competition uses its superpowers and escapes with increasing speed That’s about the same as if Clark Kent had decided to remain a normal reporter and at best fly to the ceiling to change a light bulb.

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Thinking like superheroes 1: Testing the powers

Let’s assume that most of us would rather become superheroes than super villains, and certainly not super losers. This means, however, that we must learn to think and act like a superhero

For example, we have to learn to handle our superpowers appropriately. This means that in the beginning some things will go wrong. You know this from the corresponding films: no superhero who, while testing his powers, hasn’t accidentally smashed a car or punched a hole in the wall.

This is an appeal to the error culture in companies. A major problem with the introduction of digitization is often the desire to do everything right. It is better to simply try out what you can do with your powers and learn how to do it better and what can come of it. Maybe a fun customer loyalty project will turn into an app that can be sold thousands of times.

Thinking like superheroes 2: Are you ready for big?

The most important responsibility a digital superhero has, is this: Are you ready to accept big challenges? Because this much is certain – nothing will remain at the small beginnings. What can be digitized, will be digitized.
The philosophy of exponential change has consequences:

First: If you aim too low, you run the risk of being overtaken by the competition right at the start, or not finding any combatants at all. What used to be called “fantasy” is within easy reach in digital times. Those who ignore it are therefore not simply considered unimaginative, but increasingly unrealistic.

Second: The status quo cannot be accepted. Never. In an exponential-dynamic environment, contemplation is a killer. One must always be ready for the next step. And one must always be aware that this next step will be bigger than the one before. This results inevitably from the parabolic curve. Increasingly large changes are made per time unit. This is impressively demonstrated by Amazon’s acquisitions: in 2008 Amazon acquired Audible – for $500 million; in 2012 the robotics expert Kiva Systems for $775 million; the video platform Twitch cost $970 million in 2014; in 2017 the acquisition of the Whole Foods retail chain was completed – for $13.7 billion.

Third, the ultimate consequence of superpowers and exponential change: Those who have superpowers must also dream bigger dreams. In 1968 Philip K. Dick asked “Do Androids Dream of Electric Sheep? Today one must ask oneself: Which dreams are worthy of a superhero? Can one still afford the late chancellor Schmidt’s statement “If you have visions, you should see a doctor”. Or do you have to be a weirdo, a dreamer, a fantasist who wants to change industries or fly to the stars? The answer is quite clear: Whoever thinks too small does not become a hero, but a super loser. What he thought was his dream then becomes a toy for the other superheroes.

Thinking like superheroes 3: Where is the Kryptonite?

In 2018, Jeff Bezos frightened his employees at a meeting: „I predict, one day Amazon will fail.” Even superheroes are not immortal. No company is too big to fail. After growth comes stagnation. Then irrelevance. And finally the decline. Because somewhere in the world someone has had an idea whose explosive power multiplied by the digital superpowers makes it irresistible. One’ s superpower is the other’ s kryptonite. Anyone can win.

Or as Spiderman says: “You are much stronger than you think. Trust me.”