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The Matrix is here – leveraging digital ecosystem strategies

You don't have to take a red pill to discover the modern-day matrix, but executives need to understand the digital economic ecosystem

Like roads, telephones and electricity in the 20th century, an ever-more capable digital ecosystem is becoming the underlying business infrastructure of our time. 

Whereas in the past each major industry sector relied on its own vertical stack of systems and processes, firms must now leverage powerful “horizontal” capabilities – computing, messaging, GPS, maps, payment systems, social reputations and more – that are used across all industries. These new capabilities are radically transforming many aspects of business and society, and will only get stronger over time.

At the Leading Edge Forum, we refer to this emerging set of digital services as “the matrix”. While we could have easily used existing terms such as the internet, the web or the cloud, we believe that the metaphor of a matrix best captures both the friction and synergies between these traditional vertical and emerging horizontal worlds.

Clearly, The Matrix is also a direct reference to the dystopian 1999 movie. As in the film, this matrix is a world where computers talk directly to one another, often with little human involvement. While the cloud suggests something “out there”, like it or not, we are all part of the matrix – a place where 3D goggles can immerse us in digital worlds, and where our virtual identities increasingly have a life of their own.

Of course, the creators of the movie imagined a deeply dystopian future, where humans are used merely to provide energy to the machines that are really in charge. But despite the recent warnings regarding the rise of machine intelligence and the risk of human obsolescence from no less than Stephen Hawking, Bill Gates, Steve Wozniak and Elon Musk – as well as more recent movies such as Her and Ex Machina – as of now, digital innovations have been overwhelmingly positive in nature.

From vertical stacks to horizontal services   

In the past, most company business models were based on their own functional and process stacks. For example, major banks would have their own branches, datacentres, credit cards, cash machines, callcentre systems, loan approval processes, investment advisors, and so on.

The Matrix - by LEF

The Matrix is the economic infrastructure of our time

But increasingly the most interesting new businesses come from leveraging “horizontal” digital capabilities. Consider the way taxi app Uber takes advantage of public infrastructure – smartphones, cloud computing, GPS, mapping software and internet payment mechanisms – to increasingly dominate the taxi industry. 

These and other public infrastructure capabilities will continue to emerge, even though you didn’t ask for them. They are not there waiting to be sourced as alternatives to in-house provision. They are primarily there as components that enable your firm to develop new products, services and business models, and they cost you nothing until they are used. 

Even more powerful components are on the way. These include smart sensors, the internet of things (IoT), and machine-to-machine (M2M) communications, often combined with algorithms, artificial intelligence and vast knowledge bases such as Google and IBM’s Watson. It is this emerging layer of awareness, intelligence and virtual operations that will make the matrix metaphor even more apt, while also triggering many future market disruptions.

The role of digital leaders

With new capabilities appearing virtually every day, ignoring the matrix is not an option. Today’s leaders need to embrace the fact that the Matrix is a powerful, unruly force they cannot control and whose movements cannot be predicted. The required management posture is more akin to journalism, war gaming and storytelling than traditional business planning and strategy development, which presumes more control than the matrix allows. 

Executives should ask the big, simple questions: What is the future situation likely to be in they do nothing? Who are the new disruptors, and where will they seek to enter our markets? What are the major scenarios that might become reality? What are the emerging capabilities in the matrix that should most interest or concern us? What sort of experimental experiences, learning and talent development do we need?

Executives should ask, what are the emerging capabilities within the matrix that should most interest or concern us?
David MoschellaLeading Edge Forum

Most of all, management needs to develop an intuitive feel for the matrix, and this can only be done by getting out of the office and engaging with key matrix players. Executives should be spending more time networking in digital circles and seeking to understand their industry as Silicon Valley would see it. They should also be trying to hire digital leaders who have lived in and absorbed the matrix culture.

The 1920s and 1930s were also a time of great technological change – electrification, telephony, radio, automobiles, air travel, refrigeration and, of course, movies. Information technology has not yet matched the transformative societal impact of that great wave of scientific progress – but we are still early in the game. The ability of the matrix to support advances such as robotics, 3D printing, human/machine integration, autonomous vehicles, biotechnology, machine intelligence and all manner of virtual worlds suggests that change on an even greater economic and social scale is likely. For better or worse, the matrix is here.

David MoschellaDavid Moschella is research director at the Leading Edge Forum.

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