The Changing Nature of Capital Allocation and Capital Expansion

With the Digital Age well and truly upon us, the changes brought about due to the advent of this era have been many and multifaceted.

Right from newer work methodologies such as Agile and the rise of the Gig Economy, the Digital Age has left no aspect of the modern corporates untouched.

One such change that is afoot as far as businesses are concerned is that the role of the CEOs or the Chief Executive Officers is also changing by the day.

Whereas earlier they used to deal with physical assets and capital allocation and capital expansion plans for factories, office buildings, machinery, and other such immovable and fixed assets, increasingly they are being asked to allocate monies for the Intangible Assets such as Intellectual Property based Patents, Innovations, and other such virtual assets.

For instance, a typical CEO of a manufacturing firm has to decide whether the capital allocation for the upcoming year would be towards buying more machinery and opening more plants or factories.

In contrast, the CEO of a typical technology firm has to decide whether he or she would have to spend more on certain innovations or intangible assets such as software and in the cloud applications. Indeed, when leading Tech firms invest, they do so in virtual assets most of the time. Therefore, there is a distinct change in the way the CEOs operate in the Digital Age.

How the Concept of Labour has Changed in the Digital Age

Next, more often than not, CEOs in the Digital Age have to contend with Gig workers and Part Timers as well as Freelancers.

While earlier, CEOs could proudly say that they are leading a workforce of say a Hundred Thousand FTEs or Full Time Employees, the CEOs in the Digital Age can only point to the ever changing number of part timers and freelancers who work for their firms.

For instance, aggregator and app based firms such as Uber hardly have more than a few thousand FTEs.

Instead, their workforce is made up of Millions of Part Time drivers and other such workers who can never be called as true workers and who, in all probability would not even know the name of the CEOs of their firms.

Thus, along with Capital, the nature of Labour is also changing in the Digital Age and this has implications for the way in which CEOs operate.

Data is the New Oil and How CEOs in the Digital Age Harness it along the Value Chain

Third, CEOs in the Digital Age also have to contend with the new resource which is Data. As Asia’s richest businessman, Mukesh Ambani is fond of saying, Data is the New Oil, and hence, CEOs in the Digital Age have to contend and reckon with on ways and means to reap the benefits of this resource.

This can take the form of owning the data generators in platforms such as Facebook and other apps or can take the form of owning the means of transmission of such data such as the Fibre Optic networks.

In other words, while earlier CEOs of manufacturing firms tended to either invest in oil wells and mines and other sources of raw materials, CEOs in the Digital Age have to reckon with owning the sources of data.

In addition, they also need to control the transmission lines by investing in hardware much like manufacturing firms owned distribution channels and further down the value chain, retail outlets, CEOs in the Digital Age have to invest in User Interfacing systems and software as well as apps.

Notice that the changing nature of the raw material changes the entire value chain and hence, the other aspect of land or the resource factor of production is also changing.

Time Management and Dealing with Exponential Acceleration and Globalisation in the Digital Age

Apart from that, CEOs in the Digital Age find that the demands on their time are many and this time crunch means that most CEOs in the present times often delegate as much work as possible and instead, devote their time to intellectual pursuits.

Indeed, whereas earlier, CEOs used to make it a point to monitor production and other aspects of the value chain minutely, CEOs in the Digital Age spend most of their time in devising newer strategies to move up the value chain.

Moreover, with globalisation of the world economy, CEOs in the Digital Age have to contend with their firms being located worldwide and this has given rise to the Lore of the Jet Setting CEO who breakfasts in London and has Dinner in New York.

Apart from that, the exponentially accelerating pace of change means that CEOs in the Digital Age have little time for day to day running of their firms that is also supported by the increasingly flat and agile organisational structures.

Therefore, apart from the factors of production, the management function too is changing in the Digital Age apart from the Planning which is now more focused and cerebral than before.

Conclusion

Last, as we have explained, the changing nature of the Four Factors of Production, Land, Labour, Capital, and Entrepreneurship means that the Digital Age has impacted them in many different ways than before, though the theoretical constructs around which the economy is organised remains the same.

Therefore, what has changed now is that CEOs have to approach their performance in intangible and virtual means and not think in linear and fixed notions.

To conclude, it is not easy being a CEO in the present times, though if one were to perform well, then the rewards are commensurate, if not more than what they bargained for.