Whilst technology shifting tremendously in the last decade, which has impacted and redefined industries’ environment, ecosystem, jobs, and even daily life, some questions remain whether such shifting would lead to a new uncertainty and whether the effect of such uncertainties brings us opportunities or threats?.
There is no day without technology-related news around us, including the use of automation, robotic advancement, start-ups initiative, blockchain technologies, cryptocurrencies, smart contracts, quantum computing, artificial intelligence, virtual reality, and societal dynamics – through social media. How are these seemingly disparate technologies interrelated? And most importantly, how can business and corporate leaders make these far-reaching concepts work for their business model.?
MIT (Massachusetts Institute of Technology) IDE Director Erik Brynjolfsson and Co-director Andrew McAfee offer answers in their latest book, Harnessing Our Digital Future, Machines, Platform, Crowd (June, W.W. Norton). According to them, business leaders and executives need to understand key concepts about technology and economics to master and scale the next digital-driven transformation. They can “rethink the integration of minds and machines, of products and platforms, and the core and the crowd,” as they write in the book A Triple Revolution. Further, they said that such a Triple Revolution affects every part of the economy. It doesn’t make sense for executives to exclusively delegate this to their CIOs (Chief Information Officers) or CTOs (Chief Technology Officers). Likewise, the same suggestion is also applied to the board members to understand the principles of such A Triple Revolution and how to assure executives embed them into the fabric of organizations, harnessing their digital future.
The triple revolution: Machine, platform, and crowd, actually link back to some underlying fundamental technologies that have been much discussed in the Second Machine Age that involves the automation of a lot of cognitive tasks that make humans and software-driven machines substitutes, rather than complements. The revolution took the discussion to the next level and said that the implications of digital, exponential, and combinatorial are new ways of allocating decision making between mind and machine, which are mainly driven by artificial intelligence (AI), new ways of organizing products and platform which are primarily driven by the Internet of Things (IoT), and new ways of connecting the core and the crowd which is mainly driven by blockchain technologies.
What does this mean for business? How is this going to change the way we make decisions? How does distributed expertise change how we interact with our customers, suppliers, and partners. The answers can be seen from three perspectives of economics as follow:
- Behavioral economics, to understand how the mind and machines work and change the way we make a decision more optimal.
- The economics of information, to understand how the digital platform serves the new ways of organizing products and services among the players.
- The theory of the firm and transaction-cost economics, to understand how the new ways of connecting the core and the crowd are established.
Understanding the underlying economics above helps us set some boundaries on what’s realistic versus unrealistic. If business leaders and executives can understand not only what’s possible but what’s not possible, or at least not likely, they’ll have a better chance to make effective use of these new technologies. Hence, it offers ideas for entrepreneurs interested in building businesses or plugging into established, incumbent companies.
For example, there is an exciting ecosystem of small, young start-up businesses that build the bridge of their platform economy and help them make the most of their data that bring together minds and machines through the core and the crowd. Whereas many big companies try to embed the new technologies to intensively build, expand, and/or sustain their ecosystem that supports their product and services more effectively in the new economic environments.
Nevertheless, the traditional dichotomy between executives in big companies and entrepreneurs working in startups is becoming less and less relevant. Both groups need to work with each other, think like each other, and coordinate much more. These revolutions require everyone to think more like an entrepreneur, and entrepreneurs need to think more about how they can leverage big platforms on a larger scale and wider landscape. However, successful adoption depends on both the awareness and the mindset of the people leading the organization. The biggest pitfall is that leaders are going to continue to think in the old ways, preserve the status quo, and not face the changes.
Many people have really deep knowledge of the components of a triple revolution, but few have pulled together the big picture to understand how the components fit together. The result is that many people see the turbulence and chaos in the economy as being unpredictable and the benefits as unattainable.
As we go deep in economics, we could have the right lens to view many of these changes and the most productive way to think through what’s going on and how a business needs to change to profit from these changes– as opposed to being overwhelmed by them. What we don’t want to see are some bottlenecks of success that are still happening right now: Whilst technologists are rushing ahead with breathtaking accomplishments, business leaders, executives, entrepreneurs, however, aren’t taking advantage of these technologies to meet the business challenges and to do a better job for their customers, suppliers, and employees.
Therefore, it is important and critical that board members, executives, and entrepreneurs see such principles of underlying economics that are very important to machine, platform, and crowd. By understanding those economic principles, we will have a more comprehensive view of the tech-driven changes that are coming to the business world, upon which we build our preparedness to embrace the prevailing uncertainties and turn them up as opportunities rather than threats.
I hope this article is useful for GRC professionals.
Dr. Antonius Alijoyo
Founder of Center for Risk Management and Sustainability Indonesia