The pace of change today means that businesses have no choice but to transform or risk being left behind. How can companies achieve this, even during turbulent times?
Transformation transcends uncertainty
As we enter 2020, the current economic and geopolitical environment is anything but predictable.
Even without the threat of a slowing of the extended economic expansion we have been experiencing, many executives feel the pressure of a complexity crisis, where too much is happening too fast. Geopolitics, sociocultural change and digitization have all changed fundamentally since the last recession and are creating a complex set of pressures on businesses today. Lessons from the past tell us that business leaders must both play it safe and double down to protect, optimize and grow their businesses.
The natural tendency of companies facing uncertain times is to focus only on defensive measures. However, this is not an effective strategy — companies need to pair defensive tactics with offensive moves into new markets.
Underestimating the headwinds leaves an organization at risk of being passed by competitors that invest in continuous transformation — both traditional rivals and new entrants to the market or sector — and are able to move quickly without the baggage that weighs down established operators. Responding to the volatility has never been more complicated.
By sitting still and waiting for things to return to “normal,” companies will emerge from the volatile period without the right capabilities in new technologies, such as artificial intelligence (AI). Additionally, they will emerge without the ability required to leverage data to implement new business processes and create new experiences for their customers.
Businesses now understand they must invest in new experiences and capabilities, wrapped around their existing core products. Companies must keep innovating and evolving the way they offer products, services and processes — there’s no longer the option to stop, then restart and catch up later. Technologies, expectations and capabilities are changing too fast. The new normal is constant change, and the need to transform must outweigh the uncertainty!
Taking the plunge with dual transformation
To successfully achieve this, a business needs to understand the concept of dual transformation. There’s no denying that running the current state business while simultaneously transforming into something different can be a very hard concept to grasp — especially if you’re a market leader and doing very well.
Organizations are being asked to transform themselves into something completely different, which requires a new business model — one that involves not just creating the product that was produced in the past but also wrapping new and innovative services around it. By doing this, a business can generate large amounts of valuable data across the ecosystem from the services it offers. That data can be leveraged for the future, not only for improving the business but also for transforming the organization’s activity plan, anticipating stakeholder needs and creating new offerings to take to market. This will lead to new outcomes, as opposed to just making slow and steady incremental improvements to the current ways of working, as well as create value for customers.
One of the biggest issues we find when helping organizations with transformation is that they struggle to learn how to fail fast. A business needs to ask, How do I change the culture of my company so it’s acceptable to try something completely different than what we’ve always done before?
The answer is to see transformation and innovation as a process — not an invention, but a way of working. This includes the culture and processes that an organization needs to build to successfully develop new capabilities and services. A business should focus on building the processes and workflows that allow it to generate new ideas and integrate them into the market.
Instead of seeing innovation as an epiphany, transformation should be viewed as the constant process of leveraging new capabilities and data to create new business models and processes — multiple steps vs. the one mythical “lightbulb moment.”
Going back to the future
To help our clients achieve transformation, we spend a lot of time with them thinking about the future and what it looks like for their businesses. And we always say: don’t just think about what’s next but instead consider what lies beyond — think about what the beyond looks like for your sector, your customers and your processes.
Our advice is to think of a way of doing things completely differently from how they are done today (e.g., more efficiently or cost effectively) to achieve a new set of outcomes. After establishing the desired outcomes, organizations will then need to work backward and look for, or develop, a technology or process that will allow those outcomes to be achieved. This will likely involve leveraging data or a new technology or tools and eliminating an old process through automation. This approach is significantly different than looking at emerging technologies as “shiny new objects” and wondering how to incorporate them in the existing business.
This is what we like to call a “future-back” approach to transformation. Once a business successfully gets to this state, then it becomes a case of looking at what the effects will be on processes and workflows and adapting accordingly.
Linked to this, many organizations are constantly asking themselves, How could we do something better vs. how do we do something differently, for our stakeholders, customers, employees or partners? Once they are able to answer this question, then it becomes a baseline expectation. Because of this, a company needs to be able to adapt its workflows and processes very quickly to reflect this new set of expectations.
Breaking down traditional boundaries
To facilitate this new approach, a business must be able to transcend traditional boundaries; transformation inevitably leads to the breakdown of silos. Additionally, a culture should be developed whereby the entire organization is committed to work together to solve problems and create potential new outcomes. It can’t be just the chief innovation officer or the chief digital officer — the whole team must drive transformation across all components of the business to enable this journey. In this instance, the process should be less about how the business is structured and more about what it can do.
We’ve talked for years about end-to-end processes, and somebody recently asked, “Don’t we talk about end-to-end processes anymore?” In fact, we do still talk about them all the time! That’s how an organization runs, but we need to understand that all components of that end-to-end vision must be transforming to one single outcome rather than each piece or node being optimized within its own set of parameters.
Regardless of how a business is currently functionally organized, the question should be, What are the right automations and new processes to put in place? Previously, we needed to organize employees into bundled layers, functions and groups of people with certain skills, such as marketing, finance, supply chain or procurement. Now we must ask, What is right moving forward?
Cross-functional skills a requisite
Today, a business needs people who have skills that transcend the traditional functional groups, as the new tools and technologies that will be central to transformation don’t rely on these skills to operate effectively (e.g., taking customer data and using it to do something that would have previously been regarded as a supply chain process). Transformational processes, tools and data don’t utilize what we consider functional silos.
The other thing that is very different today, and some organizations inherently do this better than others, is recognizing that transformation needs to be a part of the ecosystem. For example, companies will need to use cloud providers for a big chunk of infrastructure, technology and capabilities, which aren’t in their core offerings but are required for this transformation. There will also be a need for skills that aren’t necessarily in the existing talent pool, so leveraging the ecosystem of partners to create new capabilities is necessary to provide new outcomes.
Increased customer expectations driving transformation
A major reason that all this change is essential is because customer expectations have soared due to the way business-to-consumer organizations have transformed themselves — the knock-on effect is now driving expectations and transformation in business-to-business markets. Now, we all expect things to be frictionless and for data to be immediately available. There’s been a collapse of time and space, for example, to need something and to be able to get it almost right away, be it next-day (even same-day) shipping, or obtaining a vehicle for immediate mobility. People now expect this in a business-to-business market as well.
In the future, we may well be leveraging emerging technologies so that we can print the part we need at the point we need it rather than having to wait for shipment. This customer-initiated transformation isn’t just changing how a business interacts with its customers, it also affects how the company serves and supplies those customers. Inevitably, changes will have to be made to supply chains and business processes.
This convergence of expectations is affecting every industry. We can see it across different sectors as they learn from each other and come to grips with the challenges of evolving from purely product-orientated models to a true overlap with providing new customer-focused services. Examples include the automotive industry with vehicle sharing and ride services, the value-added services that power and utility sectors can offer once plugged in to a customer’s network or pharmaceutical companies with personalized medicines and products.
So far, truly consumer-facing industries and companies have taken the most advantage of the new data available to transform their business models and offer new services, but other sectors and business-to-business companies need to learn from them fast or, again, risk being left behind.
Leveraging data to increase value
So, how does a business ensure that it meets these raised expectations? Better leveraging of data is the most obvious and potentially successful way. A company should be saying, I’m providing this capability, product or service through a set of processes; what are the other outcomes that I can provide given I’m already interfacing digitally with my clients or customers? This customer-centric view of the world will be needed going forward.
Once a company possesses this data, consumers now expect that business to use it to provide them with better services — a critical component of creating new products and experiences. Many organizations have a significant amount of customer data but aren’t currently leveraging it to create efficiencies in processes and to develop tailored experiences for their customers. With the amount of demographic data available today, consumers expect that data to be used for personalization and improved experiences.
Energy or utility companies are a good example of organizations that can leverage existing data to improve the services they offers their customers. They’re already plugged in to customer homes, so they have all the data on how customers are using the energy, which can be used to drive smart homes and provide connectivity to other services. Similarly, professional sporting venues need to provide a complete experience to event-goers and need to focus on how their products are being used and the complete needs of the users at the time of use — food, bandwidth, social media, player data, etc.
It’s important to remember that data doesn’t have to be super structured these days. There are lots of ways to look at unstructured data, such as text discovery and document discovery. This data can also be used to drive efficiencies, automate processes and create algorithms to help with decision-making. For instance, businesses can achieve this by looking outside their own ecosystems and using partners to make the data seamless, eliminating different systems with different data pools. A question to ask is, How do my employees partner with those from another provider and work jointly to provide that seamless customer journey experience?
Thrive in the Transformative Age
Crucially though, it can’t just be customer initiatives that change the way a business interacts with those customers and prompt investment in the new technologies and processes used to improve digital experiences. Businesses must seize the moment and put the right workflows and processes in place to allow innovation to flourish across the whole organization. This is what produces more innovative and transformational thinking.
So now is the time to ask yourself, Where will I choose to play it safe, and where will I double down?