We’ve just released a major new report, “The Revenge Of The Atoms.” The report starts with an anecdote from MIT Media Lab founder Nicholas Negroponte.

Once, when traveling through US customs, Negroponte declared the value of his laptop at $2 million, counting the value of the bits of information stored on the hard drive. But the customs agent declared the laptop worth $2,000; she counted only the value of the device’s atoms. He later wrote a book — Being Digital — predicated on the shift of value from atoms to bits, which was a revolutionary idea back in 1995. And of course, he was correct: The past 24 years have been dominated by advancements leveraging digital bits.

Today, CIOs, CTOs, and digital business leaders understand the value of bits better than ever before. In the world of bits, AI and automation can identify patterns and insights from data or, as with robotic process automation (RPA), mimic how humans use a PC. Increasingly, it’s both the bits of data and the algorithms we apply to drive insights and actions from that data that create value, so bits and algorithms are crucial to today’s digitally enabled businesses.

But Atoms Are On The Verge Of Getting Their Revenge

Until now, the worlds of bits and atoms have long been treated differently by organizations, generating internal silos. A variety of divisions persist, including:

  • Too few businesses can connect insights to real-world actions. Becoming an insights-driven business requires that you not just collect data and derive insights but that you apply them to real-world problems — which often live in the land of atoms. Think of the meager level of insights physical retailers have about their in-person customers compared with the vast data and insights that pure-play eCommerce players can collect.
  • Too few leaders have the competencies to combine bits and atoms. Former GE CEO Jeff Immelt identifies two types of leaders: physical thinkers with a background in vertical production and digital thinkers with a background in horizontal, software-based business. He believes that as AI and automation become crucial to business success, grooming leaders with both competencies — “systems thinkers” — is critical to creating competitive advantage.

To plug these and other gaps, leading-edge companies are applying algorithms to the world of atoms to solve previously intractable problems. And so atoms get their revenge, becoming the new — and hard-to-achieve — focus of digital efforts. Market leaders are showing how applying algorithms to atoms can drive new kinds of business results:

  • Take the example of construction. On average, large construction projects require 20% longer to finish than scheduled and run 80% over budget because managers lack visibility into the daily physical construction process. The vendor Doxel AI employs an innovation chain comprising computer vision, drones, robots, and algorithms to drive better construction results on a daily basis. Doxel’s cameras capture the entire site every day — down to the level of individual pipes or electrical wires — and algorithms evaluate progress against the plan. Thus, leaders can vastly improve the performance of these projects.
  • Another benefit comes from reshaping customer relationships. Companies that invest in solutions crossing the physical/digital divide have the potential to reclaim some of the power they have lost to customers over the past decade of the age of the customer. Why? Because the continuous delivery of value — automating on behalf of customers — creates a new level of stickiness between companies and their customers.
  • Investing here also acts as a forcing function. In order to succeed in the world of the revenge of the atoms, those silos between digital and physical, and the skills gaps between bits-oriented and atoms-oriented leaders, must be overcome. For these leading-edge, automation-oriented companies, we see a move toward much more unified organizational structures that bring together the needed competencies.

To find out more, please read the entire report, “The Revenge Of The Atoms.” Brian Hopkins, Craig Le Clair, and I are interested in your feedback, your company’s own examples, and clients’ questions about this new thesis.

J. P. Gownder is a vice president and principal analyst serving CIOs. He leads Forrester’s research on the impact that automation, artificial intelligence, and robotics have on the future of work, the future of jobs, the economy, and CIO strategies. He also covers innovation in the context of disruptive devices and interfaces — from PCs to mobile devices and augmented and virtual reality (AR/VR) to software and intelligent agents — and how these technologies drive improvements in employee experience and business outcomes. Follow him on Twitter at @jgownder.