As the world slowly moves back to a new normal after the pandemic, businesses have over a year’s worth of knowledge to go over and digest in their strategy rooms. While most industries plunged by 30+ percentage points at the end of the first quarter of 2020 – and some by 50%, many remained underwater for the rest of the year as well.
However, a capital markets survey indicated that the top 25 companies that carved a category of their own captured 40% of the overall gains made in the public market. Yet another survey indicates that the top 10% of companies take home almost 80% of the profits in today’s new business dynamics.
Staying afloat has, more or less, become a recipe for preparing to fail. How should the senior management wade through this new reality, and what are the secrets of success that will make or break a business in the new normal?
Today’s business ecosystem
In 2020, over 1.5 million new businesses were registered in the US alone. In the rest of the world as well, while established businesses were struggling to reopen after the first wave of hurried lockdowns, new entrants were disrupting the competitive landscape by leveraging technology to drive innovation and capitalize upon new, evolving customer behaviors. For instance, availability of products became one of the biggest reasons that prompted 65% of customers to stray from their brands of choice.
Across industries, enterprises also found themselves facing supply chain shock. In fact, as per our Digital Acceleration survey, over 69% of businesses indicated that they were negatively affected by supply chain disruptions. While technology helped reboot businesses in the early stages, orchestrating digital business with excellence didn’t come easily to most – as many were discovering the jurisdictions that regulated digital business for the first time.
Clearly, we live in a completely different world. A Boston Consulting Group study points to a grim reality where 33% of public companies will cease to exist in the next 5 years. Moreover, holding the position of leadership is becoming increasingly difficult.
A McKinsey & Company survey indicates that the middle 80% of firms make near-zero profits on an aggregate, while the lowest 10% of firms destroy as much value as the top 10% create. Doing business in the digital era is not an easy job – and the opportunity cost of mediocrity is higher than ever before.
Understanding profitability in a constrained environment
What does it take to excel in today’s constrained ecosystem? When most companies are looking to reduce their operational spend to make it to the top after implementing their digital agendas, top performers are not only profitable but also innovating rapidly to deliver new value propositions in their industries through deeper investments into digital – thereby further increasing competition for the laggards.
A good example is a 100-year-old industrial equipment manufacturer, who leveraged IoT sensors and cloud technologies to mobilize and monetize its assets to provide an innovative subscription model to its customer base.
2020 also witnessed a mass exodus of customers switching to companies that exceled at digital delivery – in other words, 24×7 services, lightning-fast responses to their issues and simple, yet effective and seamless omnichannel experiences. At the same time, the top performers are also rapid learners, who can gauge the life expectancy of existing business models – which has gone down from 15 years to 5 years – and proactively build and implement new ones.
Clearly, it takes more than time and cost-competitiveness to become and stay profitable in today’s economic reality. What are the secrets of outperforming in this environment, and how can businesses get there?
The secrets of the outperformers
The three key pillars of outperforming in the next decade include:
1. From planning to adaptability
Learning at the pace of change and adapting rapidly to these changes will be critical – as compared to a focus on long-winded planning and forecasting.
2. A fluid perception of the world
New technologies are blurring the boundaries between the physical and the digital – bringing this fluidity to business products and services is the key to both scalability and better customer centricity, while bringing down the costs and reducing wastage in the form of time and money.
3. Resilience empowered by innovation
Maintaining availability and uptime will be the primary means of keeping the doors open. Yet, innovation will be crucial for retaining traffic – both literally and figuratively, in the long run. This calls for a highly efficient operating model that will free up funds for experimentation and innovation.
Technology: at the heart of the next-generation business model
As noted previously, the lifespan of existing business models is progressively going down. Yet, successful businesses will ultimately be driven by profitable business models. What remains constant across industries and geographies, is that successful business models will be shouldered by nimble, yet powerful technologies – which will empower the human workforce rather than replace it, and allow them to innovate on the go.
In fact, delivering digitally at scale necessitates a solid technological core, which can be constantly reinvented by high return on investment technologies like robotic process automation (RPA) and artificial intelligence (AI). Moreover, the CIO’s conception of transformation must shift from a linear, one-time approach to an iterative, constant one – which is driven by modularity and scalability and focused on experience.
However, making this leap will require businesses to bring technology focus outside of the CIO’s office and into the boardroom.
An integrated technology and business strategy
Digital excellence is no doubt, one of the deciding factors of succeeding today – there is no longer room for creating buy-in for digital in the board room. That case was closed yesterday. What is needed, however, is a seamless merging of technology into the overall business strategy. Whether it is a change in the business model, a process improvement, or a question of talent – a strategic approach to a business decision will be inevitably tied to digital technologies.
Here are three easy in which companies can integrate technology into their business strategy and set themselves up for digital success for the coming decade:
1. Accelerate digital change
As the lifespan of business models goes down, achieving digital change fast is the key to maintaining the value proposition of the transitioned state. The pandemic response has demonstrated that achieving digital paradigms such as remote work and collaboration was possible within a timeframe 40 times shorter than thought before the pandemic.
Technology partnerships form an essential step in achieving targeted, accelerated, and profitable transformations. At the same time, keeping the affected stakeholders involved and at the forefront of digital initiatives will be crucial to injecting acceptance and adaptability to change as it happens.
2. Conceive a bionic company
The success of transformative technologies – like AI-assisted upselling or cross-selling, automated ticket generation, and decisioning support – lies in a concurrent and parallel transformation of the workforce. As a result, a digitally-reinvented process will succeed only when those at the steering wheel have reinvented themselves. Therefore, business reinvention will be tied to an informed and calculated approach to technologically aligned workforce reinvention.
3. Focus on the core enablers
Digital excellence will be impossible without a solid technological core that can shoulder advanced technologies. As a result, time and cost-conscious adoption of cloud and SaaS solutions will be critical to ensure success at the laṭer stages – following which, strategic directives like cost-optimization or process-reinvention will inevitably include a technology view of the business too.
While digital excellence can look like a daunting and unachievable target for businesses living in the legacy world, a leap into the future will be impossible without the integration of technology into the overall business strategy. As the performance gap between the leaders and the laggards widens, making this leap is going to get harder.
The urgency is real – because the first-mover advantage is largely absent for core transformation initiatives. However, those who are committing to integrated technology and business strategy will ultimately belong to the future of business, no matter what their industry – and digital excellence, and consequently, leadership will thereafter become a matter of time and commitment to tireless innovation.
About the author: Amitava SenGupta is Executive Vice President, Digital Consulting at HCL Technologies.