10 principles for winning strategies in a digital world

18 April 2016 Consultancy.uk

Digital upstarts are rewriting the rules of strategy, adopting winning principles almost instinctively. Traditional incumbents and hybrids should take note, says Chris Outram, founder of OC&C Strategy Consultants.

The massive transformation of the business landscape in recent years has been driven by ‘Digitalisation’, mostly inspired by “pure plays”, companies that only have online activities and are not encumbered by either the assets or the organisational inertia of most incumbent, traditional companies. 

In many sectors, traditional organisations can’t hope to compete effectively unless they embrace the digital economy… and its rules. At the same time, many of today’s pure digital plays have a lot to learn from traditional strategy. In my recent book, ‘Digital Stractics: How Strategy Met Tactics and Killed the Strategic Plan’, I put together a list of key principles that could help the survival chances of pure plays, incumbents and hybrids alike.

1.  Start with vision and purpose
In a business landscape where so much is in flux and new ways of operating are being developed all the time, never before has the need for an inspiring vision and an audacious goal been greater. Such visions have a dramatic effect on the ability of companies to attract people and finance in equal order. For example, Moneysupermarket oriented itself around saving the U.K. £1 billion in 2012, which translates into 500,000 households saving £200 each. This created an organisation motivated by helping people to save money.

2. Be obsessed by customers / consumers and their behaviour
John Roberts, CEO of AO in the UK, summed it up well when he said: “The web hasn’t changed what customers want, it has empowered them. We want to consistently be the best in how we treat our customers.” The competitive battleground in digital businesses is, rightly, around capturing the hearts and minds of consumers. Unless you can inspire and retain large numbers of them – and simultaneously very high market shares – you’ll gain only modest recognition in the digital world.

Start with vision and purpose

3. Embed the right planning horizons
On speaking to any pure-play entrepreneur, you will learn that they invariably have a very ambitious vision of what they are trying to achieve, but seldom do they have detailed plans on how they are going to get there.

Given that the digital world and its underpinning technologies are developing so quickly, it is entirely defensible to have a business model that is experimental and empirical. In fact, many argue that this greater flexibility is key to pure-plays’ success. Rapid feedback loops allow you to refine and develop your customer proposition, your understanding of how customers behave, the challenges for the supply chain and how ultimately you might make money. So while you may dispatch of detailed plans, it is crucial to build your organisation’s thinking processes robustly. Assessing top to bottom objectives and key results every quarter gives you the ability to stay focused and to pivot when and where you see greatest opportunity.

4. Understand and invest in competitive differentiation and advantage
In the digital world, competitive differentiation and advantage can be a combination of a number of factors such as a low cost business model, the brand itself, unique technology, supply chain, rate of innovation – the list goes on. It is essential that entrepreneurs are honest and self-critical in order to ensure that the advantage is real and applicable to the marketplace in which they compete.

A good test of this is the best-in-breed benchmark, as defined by Andy Street, Managing Director of the John Lewis Partnership, when he said: “focus on beating the best, even if they are not your most direct competitors, because it makes you stronger.” This will require experimentation which will inevitably mean a few failures along the way. But tolerance and a learning culture have long been shown capable of turning failure into sustainable success.

5. Harness technology effectively
Don’t make the mistake of believing that ‘IT’ is what we mean by ‘technology’ in the digital age. The sort of technology which makes digital businesses work is not the same as the technology (IT) that is at the core of many traditional businesses. It is very much more consumer oriented and is as much about consumer interface as it is about transaction or supply chain management or flows of massive amounts of information. The cost of poor or slow consumer facing technology is very high – that’s a lesson hybrids are better off learning early.

Harness technology effectively

6. Build a robust business model which encompasses an ecosystem of staff, suppliers, and customers
In the early years of the digital era, hybrids often placed their e-commerce or online teams in separate organisational entities, to avoid polluting the mainstream with radical and often disruptive ideas and/or to prevent these new ideas being smothered by the  mainstream. As a result, at the same time that pure-plays were outstanding at front-end consumer interface issues, they were naïvely incompetent in management of the supply chain. 

Nowadays, both pure-plays and hybrids understand the need to have a fully integrated business model. By engaging with consumers in co-creation, getting suppliers to provide inventory (and even delivery) systems and ensuring your own organisation is capable across a multichannel model, the added value of integrating digital assets of a business with its physical assets becomes very clear.

7. Do not tolerate mediocrity
In the digital world, the quality of your people and the culture in which they operate can translate into a massive competitive advantage. Creating a culture of openness so that even the most junior people can influence the direction of the business makes all the difference. Insight and creativity is no longer bound up with experience. Pure-plays translate this into true competitive advantage by organising to get the most out of a talented workforce who are used to building apace. Small teams focused on tough problems can make rapid inroads – an all-important characteristic for success in the fast-moving digital world.

8. Reinvent yourself frequently
One of the truisms of the digital world is, of course, that nothing stands still for very long. Knowing this, it is incumbent upon the leadership of any business to make sure that management is constantly questioning itself on whether its business continues to be fit for purpose and is responding to customer and competitive requirements. If not, it needs to reinvent itself rapidly.

Chris Outram - OC&C Strategy Consultants

9. Design a fit-for-purpose governance model
Although organisational shape has been transformed in the digital era, governance remains key and can make or break a business’ success. The push for corporate transparency and integrity is only likely to hasten the need to reflect this in your business model. It is vital, therefore, that both hybrids and pure-plays design a corporate governance model which will help unlock value in a competitive environment. This should include: shareholders with long term conviction; an informed board; and an inspired leadership; a motivated management.

10. Build a fit-for-purpose organisation
It has been found time and again that simply dropping a group of digitally competent individuals into the middle of the traditional organisation will not work. Tissue rejection - which happens quickly and brutally - usually smothers and discourages even the most motivated group of digitally oriented individuals. In order to get the best out of this talent, companies need to build an agile culture of experimentation and learning through failure – they should take decisions at speed and be encouraged to experiment.

The speed of transit has increased exponentially; but instead of “move fast and break things”, the mantra championed by Facebook’s Mark Zuckerberg, organisations should embrace a slightly new motto: “Move fast and turn your satnav on”.

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Four ways digitalisation is transforming car brands and dealers

16 April 2019 Consultancy.uk

From changing expectations from the customer to new stakeholders entering the industry, the digital transformation of global automotive industry means it is facing the wholesale transformation of its business model. In a new white paper, global consulting partnership Cordence Worldwide has highlighted four major digital trends that are transforming the relationships between car brands and dealers with consumers.

With digital transformation drives booming across the industrial spectrum, automotive groups are no different in having commenced large digital transformation programmes to improve productivity, efficiency, and ultimately profitability. Falling sales figures mean the automotive sector is facing an increasingly difficult road ahead, something which means companies in the market are even more hard pressed to find new ways to improve their bottom lines.

While it offers major opportunities, the industry’s move to digitalise is not without complications. It has triggered a series of major internal changes, which have presented automotive entities with the challenge of becoming a “customer-oriented” industry. A new report from Cordence Worldwide – a global management consulting partnership present in more than 20 countries – has explored how automotive companies are navigating the rapidly changing nature of digital business.

New business models

The level of change likely to be wrought on the automotive industry by digitalisation is hard to overstate. Automation could well lead to significant reductions in the number of accidents, higher vehicle utilisation and lower pollution levels, while leading to a $2.1 trillion change in traditional revenues, with up to $4.3 trillion in new revenue openings arising by 2030.

As a result of this colossal opportunity, it is easy to see why almost all automotive groups now have digital departments, with generally strong communication within the digital transformation and the customer approach. The changes to society which this may have are potentially distracting automotive firms from the change it is leading to in its own companies though, according to Cordence’s paper.

The automotive market is dead, long live the mobility market

Because of this, the sector’s business model is set to transform over the coming decades. With digitalisation speeding up the appearance of concepts such as car-sharing, a subscription package model will likely become more palatable. At the same time, car and ride-sharing models will cater to the sustainability criteria of millennials, who will rapidly become one of the automotive market’s leading consumer demographics in the coming years.

Antoine Glutron – a Managing Consultant with Cordence member Oresys, and the report’s author – said of the situation, “These ‘old school industries’ are now working on creating new opportunities, but in so-doing are facing challenges and threats: new jobs, new technologies, new ecosystem of partners, necessary reorganisation, different relationship with customers, and even new businesses. The customer approach topic is in fact a real challenge for car companies as it implies changing their business model and adjusting their mind-set to address the customer 4.0: from product-centric to customer-centric, from car manufacturer to service provider.”

Digital customer experience

In the hyper-competitive age of the internet, even top companies face an uphill challenge when it comes to holding onto customers through brand loyalty. Digital disruption has resulted in changes to consumer behaviour, which is forcing a range of marketing strategists to reconsider their old, possibly out-dated strategies. As modern customers wield an increasingly impressive array of digital tools and online databases, they and are now able to quickly and conveniently compare prices, check availability and read product reviews.

The automotive sector is no exception to this trend, according to the study. In order to adapt to the needs of the so-called ‘customer 4.0’, car companies will increasingly need to change their business model and move away from product-centric companies to customer-centric ones, from car manufacturers to service providers.

Glutron explained, “As an automotive company, you can no longer expect customer loyalty simply with good products; you must conquer and re-conquer a customer that “consumes” your service. The offer now has to be global, digital and personalised. Your offer has to be adapted to this customer’s needs at any given moment. A key issue related to data control is to build customer loyalty by creating a customer experience 'tailored' throughout the cycle of use of the 'car product': purchase, driving, maintenance and trade-in of the vehicle.”

One way in which the sector may be able to benefit from this desire for a tailored experience is via connectivity. Consumers are generally positive about new connective features for automobiles, and many are even willing to pay upfront for infotainment, emergency and maintenance services. Chinese consumers, where the connected car market is set to hit $216 billion, are already particularly interested in paying a little more for navigation and diagnostic features in their future new car. This can also enable automotive companies to exploit a rich vein of customer data, enabling them to rapidly tailor their offerings to consumer behaviour.

New automotive segments

Digital transformation has also brought with it the rise of completely new application areas. As mentioned earlier, the most well-known example is the autonomous or self-driving car, where the last steps forward were not taken by major automotive groups but by technology companies such as Tesla. While this may have given such firms the edge in the market briefly, a number of keystone automotive names will soon be set to take the plunge into the market themselves, leveraging their car manufacturing prowess and huge production capacities to their advantage.

Before companies rush to invest in this market, however, it is worth their while to remember that the readiness and uptake for such vehicles differs greatly geographically. For example, following a study published in 2018, 92% of Chinese would be ready to buy an autonomous car, compared with only around 35% of drivers in France, Germany and US. Meanwhile, the infrastructure of different nations will also be significantly less accommodating of the new technology.

Use digital for steering thr activity

Elsewhere, Cordence’s analysis has suggested that hooking the cars of tomorrow into the Internet of Things is also likely to see a rapid change in the business model for car maintenance, providing real-time diagnostics for problems. This presents chances for partnerships to improve the connectivity of cars, especially with tech companies; for example, PSA partnered with IBM for a global agreement on services in their vehicle. Meanwhile, data could also be sold to other parties with an interest in this data, such as the government, which could use it to manage traffic levels, or ensure that only adequately maintained vehicles take to the road.

Glutron added, “With the increase in the amount of client data and connected opportunities, the recommendation is to set up data-centric approaches. The value is now in the customer data. The general prerequisites are to rework the data model and the Enterprise Architecture and generally build up a data lake including data from all sources (internal and external, structured and unstructured).”

From automotive to mobility

Relating further to the idea of connectivity, the report claimed that automotive firms must now adjust their models in line with the provision of end-to-end mobility, rather than treating the sale of a car as an end point in their relationship with the customer. In order to realise this transformation, transformations are likely to become more and more important.

A network of partner companies means automotive firms can provide a global mobility experience. As the vehicle is increasingly connected to its environment, new partners can also be cities, governments, and other service providers within the global mobility services industry in which the car brands want to take part.

According to the study, the target is clear. Companies must look to a holistic transport service, offering to move customers from A to B in a unique and pleasant way – otherwise they might as well take public transport. At the same time, they should extend the services reachable “on-board” (especially the enhancement of the connectivity between the car and smartphones or other connected devices), and reach high standards in terms of user experience (online sales, online payment, customised experience during and after the use of the car).

Concluding the report, Glutron stated, “These mobility market transformations could be considered a threat for the car manufacturers. Quite the opposite: if they take up the challenge and review their business model so that they become the service provider – communicating no longer to a driver but to a ‘mobility customer’ – they can then take advantage of their expertise and their position as a historical player. The most convenient means of transport are cars, and building a car is highly-skilled work.”