“There is no denying it,” writes the staff at Easy Communication & Technology, “competitiveness moves the market. … But just as it stimulates, it also requires companies to come up with strategies to survive by standing out in such a challenging universe.”[1] They go on to note, “Competitiveness is the rivalry between a company and other businesses in the same industry. And to stand out in the market, a business needs to satisfy the needs and expectations of customers efficiently and economically.” Notice how quickly the focus of their article on competitiveness moved from competitors to customers. The late creativity guru Edward de Bono once stated, “Companies that solely focus on competition will die. Those that focus on value creation will thrive.” That sentiment was echoed by the late Harvard Business School professor Clayton Christensen. One of Christensen’s last books was entitled Competing Against Luck: The Story of Innovation and Customer Choice, coauthored by Karen Dillon, Taddy Hall, and David S. Duncan. In the book, they discuss the Theory of Jobs to Be Done. According the book’s introduction, that theory helps companies understand their “customers’ struggle for progress and then [creates] the right solution and attendant set of experiences to ensure [they] solve [their] customers’ jobs well, every time.” Stated another way, the Theory of Jobs to Be Done suggests that creating value for customers is the best way to compete.
Competing in the Digital World
Today, the business world is wrestling with how to compete in a digital world. They are asking, “How do you create customer value in the Digital Age?” According to McKinsey & Company analysts Eric Lamarre, Kate Smaje, and Rodney Zemmel, “How companies navigate the technology world to achieve sustainable competitive advantage is the defining business challenge of our time.”[2] They add, “This challenge isn’t new. But it’s an increasingly pressing one, with deep implications for how companies navigate a world where digital and AI are fundamentally reshaping how we work and live. Companies understand they need to meet the challenge, but most of them are struggling.” Companies that have mastered digital transformation are demonstrating the value of becoming a digital enterprise. For example, the McKinsey analysts point to the banking sector. After analyzing 20 digital leaders and 20 digital laggards in retail banking between 2018 and 2022, they found, “The results were startling. Digital leaders improved their return on tangible equity, their P/E ratio, and their total shareholder returns materially more than digital laggards. Digital excellence is translating into financial outperformance. … This outperformance was propelled by a deeper integration of technology across end-to-end core business processes.”
One of the ways businesses can leverage AI is using it to improve business decisions. As Bain analysts, Michael C. Mankins and Lori Sherer, explain, “The best way to understand any company’s operations is to view them as a series of decisions.”[3] They add, “We know from extensive research that decisions matter — a lot. Companies that make better decisions, make them faster and execute them more effectively than rivals nearly always turn in better financial performance. Not surprisingly, companies that employ advanced analytics to improve decision-making and execution have the results to show for it.” That’s one reason Enterra Solutions® is focusing on advancing Autonomous Decision Science™ (ADS®). Enterra ADS® solutions provide companies across a broad range of industries with data-enabled prescriptive and anticipatory analytics and insights. ADS represents a new way of problem-solving and decision-making, going beyond advanced analytics to understand data, perform analytics, generate insights, answer queries, and make decisions at the speed of the market. This powerful capability uniquely enables end-to-end value chain optimization and decision-making at scale and allows clients to uncover and understand the inter-relationships that lead to innovative new product development and innovation, heightened consumer understanding, and targeted marketing, revenue growth tactics, and intelligent demand and supply-chain planning. ADS is a foundational part of the Enterra Revenue Growth Intelligence System™ (ERGIS™), which performs holistic optimization and autonomous decision-making across the drivers of revenue for consumer packaged goods and retail companies, delivering more revenue growth and profitability and increased efficiency with limited human interaction at the speed of the market.
The McKinsey analysts conclude, “Clearly, for digital and AI to deliver on their business transformation potential, the top team needs to be ready and willing to undertake the organizational ‘surgery’ required to become a digitally-capable enterprise. There are no quick fixes. You can’t simply implement a system or a technology and be done. Instead, success means having hundreds of technology-driven solutions (proprietary and off the shelf) working together that you continually improve to create great customer and employee experiences, lower unit costs, and generate value.” Creating value is the aim of the competitive game.
Transforming to Create Value
McKinsey analysts suggest that becoming a digital leader requires companies to focus on six areas: 1) Aligning on value creation; 2) Ensuring the right talent is available; 3) Improving operating models; 4) Leveraging the right technologies; 5) Gathering and democratizing the right data; and, 6) Implementing and scaling digital solutions. Below are some of their thoughts:
Aligning on value creation: “Take the time to establish a common digital language, learn from other companies that are further along the journey, develop a shared vision among the C-suite, and explicitly agree on a set of commitments that match your ambitions. … Successful companies … focus their efforts on a few important business domains, such as a production process or the customer journey, and transform them from end to end. As many as 80 percent of successful interventions in struggling digital and AI transformations are based on reanchoring the scope to spur a concerted effort against a few well-defined domains.”
Ensuring the right talent is available: “Being digital means having your own bench of digital talent — product owners, experience designers, cloud engineers, software developers, and so on — working side by side with your business colleagues. Digital transformations are, first and foremost, people transformations.”
Improving operating models: “Developing the right operating model to bring business, technology, and operations closer together is perhaps the most complex aspect of a digital and AI transformation because it touches the core of the organization and how people work.” Look closely at your business processes. As Bill Gates once noted, “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.”
Leveraging the right technologies: “The main purpose of technology within a rewired company is to make it easy for [people] to constantly develop and release digital innovations. This requires a distributed technology environment where every [person] can access the software development tools, data, and applications they need.”
Gathering and democratizing the right data: “In established companies, data is often a source of frustration. As much as 70 percent of the effort involved in developing AI-based solutions can be attributed to wrangling and harmonizing data. Unless data is thoughtfully sorted and organized for easy consumption and reuse, scaling solutions can be a big challenge. The ability to constantly improve customer experience and drive down unit cost depends on giving each digital and AI team (near) real-time access to data.”
Implementing and scaling digital solutions: “Developing a good digital solution can be complex and difficult. But getting customers or business users to adopt that solution as part of their day-to-day activities and then scaling that solution across the enterprise are often the biggest challenges.”
Concluding Thoughts
As businesses transform into digital enterprises, they shouldn’t forget a valuable lesson from past business successes: Successful businesses simultaneously focus on improving people, processes, and technology. Keeping those efforts in balance is important even in a new digital world. Business expert Channa North-Hoffstaed observes, “The traditional elements of people, process, technology, and data continue to be relevant to digital transformations. … One of the fundamentals of successful digital transformations is to focus on value and not on cost, often the end goal. Digital transformations are significant investments, and the long-term objectives must emphasize business outcomes. It is important for organizations to celebrate cost reduction but focusing on the value provided must be paramount.”[4]
Footnotes
[1] Staff, “7 tips to improve your company’s competitiveness,” Easy Communication & Technology, 27 may 2021.
[2] Eric Lamarre, Kate Smaje, and Rodney Zemmel, “Rewired to outcompete,” McKinsey & Company, 20 June 2023.
[3] Michael C. Mankins and Lori Sherer, “Creating value through advanced analytics,” Bain Brief, 11 February 2015.
[4] Channa North-Hoffstaed, “Stay on pace for success with a supply chain transformation plan,” Kinaxis Blog, 7 July 2021.
