The quantity and quality of data available means it is increasingly easy to base business and marketing strategies on hard facts. However, businesses still revert to their comfort zones of doing what worked for them in the past. This results in business landscapes that are changing faster than the businesses that serve them. For example:
Forward-thinking ‘digital’ companies – like Google and Facebook, as well as telcos and retailers – are using demographic insights to jeopardise traditional industries such as banking and insurance (note 1). Every company must now embrace the digital age in order to keep up (note 2).
As the global economy moves towards an increasingly complex ecosystem, many organisations still operate as though they are at the centre of their market – they are protective of existing customers, but slow to reach out to new economies and they keep suppliers at arm’s length. Meanwhile, emerging economies are overtaking their Western counterparts in innovation and productivity:
Smart businesses are now looking beyond their organisations and industries, recognising that partnering and engagement with global suppliers and customers are key to future success.
Many organisations are planning inadequately for the coming absence of resources - not just fossil fuels and minerals, but also rare metals and certain foodstuffs. Although businesses might have other challenges on their minds as they come out of the downturn, they still operate in a state of denial about future resource availability, which could cause them problems if it leads to inadequate planning. Businesses may see:
Although it may be an exaggeration to suggest that businesses could fail as a result of such challenges, organisations that have already revisited their business models, financial plans, product roadmaps and procurement strategies will be better placed than their competition when the inevitable resource crisis occurs.
Most organisations have key performance indicators (KPIs), indeed some businesses have too many.
Organisations with a wealth of KPIs may also lack insight into what the data means. Few CFOs we speak to have an integrated end-to-end view of their business and few boards have the tools needed to make decisions quickly. This is not what technology promised. Here are some of the issues that need to be addressed:
As the world becomes increasingly data-oriented, such challenges are only set to grow. A shift in mindset is needed to make information availability and accessibility central to business success.
Focusing on efficiency is understandable for organisations that find themselves in this streamlining phase, which continues in the post-financial crisis era. However, the market landscape now looks very different to five years ago:
Paying too much attention to efficiency is subject to the law of diminishing returns and risks missing opportunities to respond to changes in the market. In consequence, businesses can stay locked in an old-fashioned mindset that responds to historical needs. Business effectiveness will come from a relentless focus on customer needs, on building engaging experiences, and on creating both broad and deep relationships with a widening pool of suppliers.
We often hear organisations say that employees are their most important asset, but do they really mean it? Investment in staff is recognised as having long-term benefit, but the reality is short-term priorities often take precedence. This results in short-term cost savings, but can result in poor performance in the long term. The ways in which organisations treat their staff have implications:
Organisations’ success or failure is based on whether employees are enabled to deliver on strategic objectives. Google’s ‘20% time’ model is an example of best practice, where employees take a day out of each week’s schedule to work on their own projects (note 10). However it can be difficult to pinpoint from where in the business such imperatives should be driven.
Many organisations recognise that strategic change is inevitable in their future, but are less comfortable with the idea of it being in their present. Boards believe that existing value chains are just fine and don’t need to adapt to the uncertainty of current business trends. The results of this approach are:
The historic graveyard of well-known companies is testament to how easily this process can occur: Kodak, Blockbuster and Woolworths all provide stark warnings. The future holds a great deal of opportunity for organisations that are able to respond to changing demand from BRIC (note 11) and MINT (note 12) countries. Companies need to adopt a start-up mentality each day, looking for opportunities to innovate and collaborate with suppliers and customers, or else they risk joining the scrapheap.
Business regulation will continue to evolve - both at national and international levels of government. This will be largely based on how markets are globalising, how demographics are changing and political efforts to address areas of weakness identified in recent years. New regulations can be seen as a set of constraints to be ignored, circumvented or avoided, as companies look to exploit loopholes in existing laws, even as new ones are drafted.
Regulation is set to gain sharper teeth as transparency around data increases. The response of organisations should be to recognise the role of regulators in guiding industry sectors and to work with them in terms of the spirit of regulation: adapting to paradoxical customer behaviours and attitudes (e.g. around privacy) while keeping within existing laws.
While the world still needs and wants products, business success is becoming increasingly dependent on front-line services. Sectors from manufacturers and FMCG, to utilities and mobile service providers are looking to optimise customer relationships and offer value-added services. For example:
Using digital data to support the day-to-day working of a business is central to this. Organisations that ignore this digital transformation face increasing commoditisation on product complexity and associated premiums; they also have scant protection against growing competition from manufacturers in emerging countries. Organisations without a service strategy for their customers face an inevitable race to the bottom, where there can be few winners.
About 10 billion devices currently connect to the internet, a figure expected to grow to 50 billion by 2020. For the majority of businesses, we expect the main consequence of this growth to be in terms of the volume of data generated, which will soar to fifty times its current level over the next 5–10 years. What can we expect to be the outcomes?
Inadequate processes for dealing with increased data flow not only takes up valuable time, it draws attention away from the main goal of a business: to harness the value that new data sources can bring. Businesses cannot afford to be distracted by the so-called ‘technology debt’ caused by the integration, management and maintenance of legacy systems and databases.
Organisations must develop new business models that reap the benefits of market knowledge from external sources. These business models must be implemented by organisations before future waves of data-driven innovation pass them by.
