Disruption seems to be everywhere these days. Blockbuster LLC, Circuit City, and Borders are stern reminders that companies clinging to once profitable lines of business may be extinct in just a few years if they don’t watch where trends are headed. “Companies employ financial incentives that motivate short-term thinking and doing ‘more of the same,’ ” says Amanda Setili, author of The Agility Advantage: How to Identify and Act on Opportunities in a Fast-Changing World.
Leaders become wrapped up in daily challenges and business as usual, which keep them from investing time in imagining what the future might hold or how they might take advantage of coming changes. They fail to effectively bridge corporate silos and encourage real debate regarding their company’s future direction.
Setili argues that companies must learn to be more nimble and agile – or face dire consequences. She cites the cautionary example of Microsoft, noting, “While the company had enviable profit performance under former chief executive officer Steve Ballmer, it focused too much on protecting their historically strong products, Windows and Office.
They failed to make the changes necessary to succeed in the smartphone and tablet markets, and as a result, their share of Internet-connected devices declined from 90% in 2009 to only about 20% today. If you want your company to become more agile – and avoid the same fate – here’s how to do it.
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Place small bets
“Agile companies don’t abandon what made them successful,” says Setili, “But they put a focus on objectively understanding the changes going on in their business environment, and taking steps to capitalise on those changes. New strategies often entail risk, so they devise ways to test and experiment. When you are afraid to change, place small bets that you can learn from. This way, you’ll minimise risk while maximising the speed with which you adapt to market change.”
Learn from those outside your industry
It’s often better to learn from companies outside your industry, says Setili, because “when you compare yourself to others in your industry, it’s tempting to simply copy your competitors, rather than innovating something new that could potentially provide a lasting competitive advantage.
Therefore, observe companies in industries and markets outside your own, and identify aspects that you can emulate, leverage, or learn from. For example, even if you’re in a totally different business than Google, you may be able to learn from its rapid pace of innovation; its diverse, ever-evolving product line; and its pricing models, which provide almost every product other than advertising (and there are many) for free.”
Talk to your smartest customers
Most executives understand it’s a good idea to learn from their customers. But not just any customers, says Setili. Make sure you’re speaking with “your most demanding and forward-thinking customers – those who are on the cutting edge of changes in the marketplace.” Their perspective may be key to understanding the future.
She suggests asking them questions like:
• What problem does this product or service solve for you? How is this problem changing?
• What are the other ways you could have solved this problem?
• How is the way you use the product or service changing?
• What new problems does the product or service create?
• How could the experience be improved, or customised for different types of users?
Strategically invest—and divest
Your company has limited time and resources. So the first and most critical leadership decision is where to focus. “Current profitability is often not the best metric for deciding what to invest in and what to shed,” says Setili.
Google, for example, invests in businesses not based on profitability, but based on the degree to which the business is built on a technical insight – that is, a new way of applying technology that brings down cost or increases the usefulness of the product. Shed those parts of your business which are the most distracting and resource-consuming, relative to their ability to satisfy future customer needs in a distinctive and defensible way.
Invest in those parts of your business which are best aligned with what customers are likely to want and need three to five years in the future, and in those parts in which you can build a distinctive competitive advantage.
One of the crucial things that businesses need to invest in today is data governance to understand customers better and improve operations, products, and services. Data governance refers to the process of organising, presenting, managing, and securing data using technologies and methods to ensure data accuracy, consistency, and accessibility to verified users. Businesses need to up their data governance game by investing in a data governance tool from a reputable solutions provider such as Ovaledge.
Become a trend-spotter
If you want to succeed in the future, you have to understand what’s coming, says Setili. That’s why she says it’s critical to closely monitor changes in several key areas, including:
“Technology: The ever-increasing availability of computing power and connectivity (via mobile devices, sensors and the like) are powerful drivers of technological change, but every industry has its own form of technical change. There’s DNA sequencing and designer medicines; new materials; 3D printing; and nanotechnology, just to name a few.
Customer behaviours, needs and values: The best innovations take advantage of both new technologies and new customer behaviours, needs and values. For example, Uber and Airbnb are helping to create and grow the sharing economy.
The competitive environment: These days, competitors spring up out of nowhere, as companies can easily outsource almost any element of their value chain – from research and development to manufacturing to sales and marketing. New business models spawn new types of competitors, which can often blindside us.
Suppliers, business partners and channels: It’s important to stay aware of the evolving capabilities of your suppliers, potential business partners and sales channels. Keep these players apprised of your goals, and how they can help you stay ahead of changes in your market.”
How is your company staying agile in today’s business environment?
Reposted with permission on Leaderonomics.com
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