To remain competitive, businesses need strategic digital transformation

With no international alignment on how to regulate the digital environment, companies are managing an increasingly complicated set of conflicting rules in key markets.

At the same time, fears are growing about a new “digital cold war” and the “splinternet,” where the Internet becomes more balkanized. This is forcing companies around the world to shift strategies on everything from procurement to customer engagement.

According to a new report by A.T. Kearney’s Global Business Policy Council, Competing in an Age of Digital Disorder, we are descending into a period of digital disorder.

Companies can no longer be passive observers of the digital revolution, the authors argue. Instead, they must actively adapt to the present disorder while also preparing for the future digital order by embarking on strategic end-to-end digital transformations.

Much attention is focused on the “techlash” nature of new policies on key issues such as consumer privacy, data protection, and anti-competitive practices. But many governments are now seeking to strike a balance in policies that both maximize digital’s upsides and mitigate its downsides as they prepare to regulate the digital environment for the first time.

Whether those governments are able to deftly strike such a balance will influence companies’ ability to use digital technologies effectively in the coming years.

“This cycle of innovation, adoption, and then regulation is consistent with previous waves of technological change,” says Paul A. Laudicina, founder and chairman of A.T. Kearney’s Global Business Policy Council and co-author of the report.

“Today, the intense regulatory debate regarding digital technologies is creating a high degree of uncertainty about how the policy environment will evolve.”

After providing a richly researched background on the opportunities and pressure points facing societies, governments, and businesses in this period of digital disorder, the study then offers four scenarios for the digital order that will emerge. The scenarios are based on two political uncertainties that are unfolding:

• Regulatory activity. The extent to which governments in key markets around the world impose new regulations on technology companies and the use of digital technologies more broadly
• Digital environment. The extent to which the digital economy is a globalized whole, characterized by extensive cross-border digital flows, or an islandized environment, fragmented into different country-level or regional blocs

“These scenarios are designed to be compelling and plausible visions of the future that challenge and test executives’ capacity to anticipate and plan for their companies’ digital strategies in the coming years,” says Erik Peterson, managing director of the Global Business Policy Council and co-author of the study.

“In fact, some aspects of these scenarios, such as the emergence of a digital ‘cold war’ between major global powers and early indications of a ‘splinternet,’ are already playing out in various markets around the world.”

Finally, the study argues that companies cannot be simply spectators of the ongoing digital revolution. Instead, executives will need to guide their organizations through strategic digital transformations across a variety of business functions.

“Companies must adapt to the emerging digital order across strategy, customer experience, operations, risk management and compliance, and employees and culture—our SCORE framework,” says Courtney Rickert McCaffrey, manager of thought leadership for the Global Business Policy Council and co-author of the study.

“To compete in the 21st-century digital economy, companies must embark on end-to-end digital transformation in all SCORE areas.”