Reframing growth strategy in a digital economy
Companies need to reframe the way strategy is formulated
Dr. Didier Bonnet, Corporate Vice-President and Global Practice Leader at Capgemini Consulting, shares tips on how to stay ahead of the game in an evolving market
In this new digital economy, CEOs are faced with the dual challenge of protecting their backyards from upstarts and incumbents, while simultaneously devising strategies that will guide their growth for the next five years.
For most, this is a daunting task, so what's your play?
Some Fortune 500 companies are doubling down on defensive strategies, promoting cost efficiency and productivity to protect their core business. Others are attempting to "future-proof" their business model through acquisitions. For instance, following a five-year acquisition spree, Walmart's $3 billion deal with Jet.com signals a serious commitment to competing with Amazon.com.
None of this is wrong. But it's not sufficient to sustain the growth of your business and demark you from competition longer term. To rise above the fray, you need to find ways to fight a battle you're well positioned to win. For leaders of big companies, this means capitalising on an ability to do things the disruptors simply can't - set an ambitious vision, plan globally, invest strategically, and mobilise considerable resources to assert digital dominance. In other words, elevate above the level of the disruptors and transform your scale from a liability into an asset.
This isn't easy. Too many companies are still formulating growth strategies based on traditional growth planning approaches - yearly cycles, historical analytics, and incremental thinking. In the digital economy, traditional growth planning has reached the end of its useful shelf life. It just won't get you there.
Companies need to reframe the way strategy is formulated around three fundamental truths:
Truth 1: You can't analyse your way to the future; you need to invent it.
Traditional strategic planning is important as a means of understanding the world of today. However, if you aspire to a strategy that will enable your company to achieve disproportionate growth and create competitive advantage, you need to push beyond pure analysis.
What if the razor industry, dominated by giants Gillette and Schick, had looked beyond known competitors to anticipate the value in a direct-to-consumer subscription service? Would the e-commerce razor delivery company Dollar Shave Club have had such a meteoric rise? And would powerhouse Unilever, which acquired the startup in 2016, have expanded as meaningfully into the shaving business?
Successful digital strategy requires a blend of deductive analysis and the type of inductive reasoning that powers the creative leaps that anticipate and open fundamentally new markets. To help your organisation see into the future, focus on creating an organisation that values a mix of inside-out and outside-in thinking.
Think about what the world will look like five to 10 years ahead - across a range of different industries, not just your own. How do the needs of your current consumer change? Are there new opportunities outside of your existing consumer base or current product offerings?
Next, imagine removing your company's existing business constraints from the equation. How would you use digital technology to overcome barriers and capture these opportunities? Run this exercise with a tiger team of out-of-the-box thinkers from across your organisation. Let these inputs form the basis of your strategy formulation process.
Truth 2: Competitive evolution is no longer linear - it is exponential and disruptive.
Defining a destination point that's three to five years out is critical for focusing resources. However, the strategy can't just be a fixed game-plan, it needs to be a living process. Much like software development has evolved from traditional waterfall models to agile development, strategy formulation must adjust to rapidly shifting conditions. Without dynamism and capacity for adjustment, companies will simultaneously miss opportunities and create attractive windows for disruptors to attack.
As late as 2008, former Blockbuster CEO Jim Keyes stated that Netflix was not "even on his competitive radar screen." Yet within two years, Blockbuster, which built its name on brick-and-mortar video-rental shops, was bankrupt. Netflix, meanwhile, has just passed 100 million global streaming subscribers. Hastings knew that Blockbuster's traditional advantages - retail network, inventory, and sales staff - would quickly become unsustainable liabilities in the digital world.
Well-defined and rigid strategic planning cycles are over. You must design a process through which you can continuously assess market dynamics, monitor the impact and opportunities presented by business and technology changes, and adjust direction toward the stated goal. Don't make digital strategy a slave to your budgeting process. Create a dynamic series of sprints with a clear endgame in mind - and build flexible investment capacity.
Truth 3: Ambition for growth isn't the problem. Catalysing the organisation into action is.
Big companies don't lack ambition. Leaders' primary challenge is to put sufficient tension on the company to start the digital transition. Many organisations believe that defining a goal is sufficient. In reality, many of today's Fortune 500 companies are not designed to make bold moves, they are optimised for efficiency. Many companies are staffed with employees focused on performance, implementation, and risk mitigation. In addition, capital flows to the lowest-risk ventures. Within public companies, this is exacerbated by quarterly earnings reporting and earnings per share management.
Barnes & Noble first failed to invest aggressively in online bookselling during the early rise of Amazon, then played laggard in the e-reader race. Reeling from a series of brick-and-mortar closures over the last five years, the book retailer is struggling to galvanise action behind a solid growth strategy.
From Six Sigma to agile development, strategies within today's modern organisations are devoted to constant process improvement. While there is value in these models, if your efforts are focused on perfecting established processes, it is difficult to devote time, energy, and investment to new digital plays. Provide room across your teams for experimentation and ideation. Build tolerance for innovation in your organisation's objectives and performance indicators.
For any growth plan to succeed, you must have a plan to catalyse action across the company. So how do you go about it? Give your team a common enemy to rally against. Create a persona of the disruptor-of-the-future - where will it happen, and how? Socialise this personification widely down to individual function.
Planning for the future by focusing exclusively on the realities of today is a shortsighted approach, and one that may result in the eventual demise of leading global companies. Big corporations can use their scale to fight back. To achieve the desired result, your digital growth strategy needs to be future focused, dynamic, and should provide a rallying cry that unites your entire organisation.
Dr. Didier Bonnet is a co-author of the best-selling book, Leading Digital: Turning Technology into Business Transformation, published by Harvard Business Review Press. Leading Digital makes the provocative argument that the next phase of digital technology adoption will make everything that's happened so far look like a prelude. Based on researching over 400 global corporations, Leading Digital presents the DNA of Digital Masters, those companies that have mastered digital transformation to gain strategic advantage. What strategy to adopt; Where and how to invest in digital; and how to lead the transformation.
Dr. Didier Bonnet, Corporate Vice-President and Global Practice Leader at Capgemini Consulting