Businesses are blind in front of digital competition

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The main concern of the C-Suite regarding to digital is the transformation of the competitive environment that forces them to change their habits if they want to be able to respond to threats they can’t see coming with their old approaches.

That’s, in short, the main take of the 2015 edition of the IBM C-Suite Study that was published a few weeks ago.

Businesses can’t see their competitors until it’s too late

We’re witnessing the end of an industry-based competition world to enter a cross-industry competition one. Before, watching one’s competitors was easy : they were known and the competition happened on a day-to-day basis. Today, competition can come from any adjacent sector or from a digital pure player.

Industry convergence is the major trend as seen by the C-suite for the upcoming years.

 

industry convergence_ibm_CSuite_2015
Source : IBM C-Suite Study 2015

Digital help new competitors to come on the market with cheaper products/services and an improved experience and competitors from other industries to enrich their existing offering and compete on adjacent sectors.

From my point of view, one cannot dissociate this trend from what we call the experience economy. Before, customers used to build their own experience but putting together product and services from many industries and vendors. Today, one of the vendors can easily integrate third part services in his offering by simply sharing and setting data in motion. As a result, they don’t compete vertically but on global customer experience chains.

If you’re not an experience you’re not a brand…if you’n not a platform you won’t be an experience

Back to industry convergence. We often hear that “whatever your industry, you’ll be in the technology and data business or you’ll be dead”. Digital allow to deliver experiences at scale for a close to zero marginal cost through platform approaches, which rely on tech and data, whatever the service delivered.

I strongly advise you to have a look at the platform manifesto and to read the PWC CEO Survey 2015 where the idea of cross-industry competition was already well developed.

Facts are here : when competitors can come from anywhere and mainly from places that are not on your radar, new approaches to competition are needed. With digital your customers are everywhere…so are your competitors.

Hence the fear of being ubered.

Businesses must fight against digital pur players on the fields of engagement and ecosystems

Better than reacting, businesses must anticipate and take the lead. One of the options identified by the C-Suite is customer engagement, which is the field were digital disrupters focus first. The study mentions one worthy figure :  businesses say they are able to understand 90% of their customers. A quite good one but it has another meaning : we’re still far from the individual understanding of “markets of one”, the famous one person market segments. What confirms that if customer understanding is a success factor, most of businesses are still lagging far behind (knowing that businesses always overestimate their level of customer understanding, far behind what customers expect).

Another path is to go and and find innovation where it is, most of all outside of the company. Partnerships and joint-ventures are very popular. But it’s not enough without a suited decision and execution structure and, regarding to this point, the study shows how difficult it is for large businesses to go off the beaten tracks.

A panoramic vision to anticipate

The faster the world is changing in an unpredictable way, the more businesses need a large and deep vision at the same time.

 

IBM_CSUITE2015_future
Source : IBM C-Suite Study 2015

There’s no surprise in the technology ranked even if I consider that a purely technological approach to prospective is dangerous : what matters is the business case, not the technology used. Businesses have the bad habit of starting from technology and find a problem to solve instead of going the other way around. What often makes them leave the road.

I note with interest that cognitive computing is making it way in the C-Suite radar. I think it’s going to be really revolutionary, much more that anything else listed here.

That said, businesses seem to be caught between two fires. First, they know they must anticipate so “try” and “test” while being aware that they’re not good at differentiating the hype from the real deep trend. They know at, the same time, the price to pay for a bad strategic decision … and for the lack of decision. The solution lies in innovation models that allow to quickly start from a need, test, and improve a solution before deciding to bring it to the market or not. So there’s no surprise that approaches like design thinking, fast prototyping, agile methods etc. are very popular.

Be the first, be the best or be nowhere

This trend is confirmed later in the study. To be agile in such a context, leaders see interesting opportunities in “living laboratories” that allow to quickly assess initiatives. An indispensable approach in my opinion but it comes with a limit one should be aware of.

As a matter of fact, if businesses are aware that they’ll have to reinvent their business model, their product portfolio, their operations etc., such a lab is really what they need. But it won’t help to figure out what will be the human impact of change at scale. That’s the only field where experimentation at scale is hard to do.

Then, with no surprise, the study recommends to innovate off the beaten tracks, to allow time and means to assess the impact on people and get ready to grow fast in case of success to seize a moment no one knows how long it’s going to last.

So this study is in line with what one can read and observe and is a excellent thinking framework for the C-Suite (backed with figures, insights and verbatim).

But I’d like to add one point from my own reflection.

In digital competition, the enemy is both outside and inside…

Two years ago, I noticed that businesses often put the blame on the market complexity and competition to explain their struggle. We can see every day how actual the issue is. However focusing on markets and competition only is a too easy approach.

As I wrote at that time, there si a huge internal issue. No matter the pace at which things are changing outside, everything is ok as long as the internal side is not incapable of being responsive and agile. I advise you to read Yves Morieux on that matter. It’s illusory to believe that a new vision and a better technology adoption will solve anything as long as businesses don’t start to simplify internally. As long as organization, management, reporting… are not questioned, technology won’t help to accelerate but only to limit the effects of slow-down.