27 Aug Seeing clearly through disruption
Is your company or industry being disrupted by current technology and market place developments? Maybe, maybe not. Determining what’s noise and what’s a signal is crucial. Overreact and you may send your company off course. Do too little and you could put your company at risk.
Here’s a quick diagnostic that can help you separate the truth from the trends and see more clearly through disruption.
1) What kind of growth are we experiencing?
There are three ways to experience growth, or the lack thereof:
- Accretive: Accretive growth is growth above market rates. By definition accretive growth means you are gaining market share, relevance and market power. This type of growth occurs when current customer and market trends work in your favor. In this case, you are either the disruptor or you’re enjoying the fallout from someone else’s disruption.
- Incremental: Incremental growth, or growth below market rates, means you are making your plan, but losing share. You’re technically growing but you’re not building a foundation for the future. Such growth sometimes appears accretive, and that can give executives a false sense of security and make them subject to the negative effects of disruption. For companies in this phase of growth, deeper change is probably required. Re-defining or narrowing the ‘market’ is a symptom of deferring to disruption and a sign of the need for deeper change.
- Flat: Flat or negative growth indicates that you are losing market share. That’s obvious. But digging deeper is required, particularly if falling share is the result of declining customer relevance—an indicator of disruption.
2) Do we need to add staff to improve service levels?
Measuring operational fitness beyond cost control is critical in a disruptive environment. This is a particular concern in a digital environment where technology deflates some costs and hides others as transaction mixes shift. Advertising is an example of this digital effect, as revenue dollars have shifted from relatively few and expensive media outlets like television to billions of digital micro advertisements.
Staffing strength is one measure of operational fitness in the digital economy. Most businesses have addressed their digital front end—engaging in digital advertising, for example—but few have addressed their digital backside.
Treating every transaction with equal value is a sign of disruption, particularly when your transaction cost structure is based on prior technology. Digital technologies change transaction economics. Executives see increased transaction volumes created by digital channels. They add staff to maintain or raise service levels without accounting for the lower business value of those transactions. The resulting “human middleware” reflects a gap between internal operations and external expectations. It is a sign of disruption that requires changing operations to reset the resources required to support a blend of traditional and digital transactions.
3) What is your current view of customer needs and how will those needs be different by the time you are ready to launch a new product?
This question looks at your agility and ability to respond to changing market considerations. It’s a point examined in the book “N=1: How the uniqueness of each individual is transforming healthcare”. The question highlights the breakpoint between the internal and external rates of change that can systemically leave the company playing catch up.
Customers have always wanted better, faster, cheaper. Now that the supply of just about everything exceeds demand, they can get it. This fundamental disruption between customer demand and a company’s supply cycle times creates market lagging product and service introductions. Rather than accelerating the release of products—good or bad—it’s time to think of building living products. Products that start with serving core customer needs and then expand as both parties understand the fit between evolving products and expanding needs.
4) Are we attracting and retaining the best talent?
A market consists of more than customers. Challenges attracting talent is a precursor for disruption as it accelerates demand for the best-qualified people. These people vote with their feet and choices. When that happens it takes longer to fill positions and that means companies have a harder time innovating and serving customers.
Attracting and retaining highly skilled people is a constant challenge. Digital disrupts the labor market. Traditional executive skills were scarce and developed over time. Today technical skills and customer centric thinking are scarce. These are skills found more often by people at the start of their career. Rethinking the workforce model involves more than making work “fun” but recognizing that this high-demand workforce seeks challenges and achievements as much as compensation.
5) Are we expanding our relationships with the best partners?
A common strategic goal calls for positioning the company at the center of an ecosystem. Too often this strategy results only in redrawing linear supply chains into circles of suppliers. Making a new PowerPoint slide of your supply chain does not actually make it new.
Disruption replaces vertical integration with the multi dimensions of coordination. That requires executives to concentrate on supplier relationships as much as customer relationships. If you base a relationship only on selling more, growing margins or reducing costs, chances are you won’t be finding yourself working with the best partners.
Separating truth from trend requires clear answers to hard questions.
Every trend carries a kernel of truth and the impact of disruption is real but it is unevenly distributed and sometimes difficult to see. Every rumor provides a view on reality, but often with the burden of a bias. Cutting through both Executive inspection of these questions and facing the possibility of disruption is a start.
Recent articles by Mark McDonald
- Grounded truth” in business
- What’s the business value of the Industrial Internet of Things? Part One
- What is a digital strategy?
- Precision and Diversity—Hallmarks of the Digital Future