The current business environment can be described as extreme Darwinism. This Covid-19 pandemic has made that more obvious. The time available to adapt to compete successfully for customers has narrowed.
The speed of technological innovation accelerates apace and raises the bar on customer expectations. Throw the pandemic into the mix, and it is little wonder that having scrambled to support employees remotely, many firms are caught in the oncoming headlights cast by the unfolding chaos.
This disruption was already on the cards.
In the first decade of this century, we had time to become familiar with the internet and its potential to reach out to customers. Then Apple gave us the smartphone, and suddenly wherever we were, we could connect. Social networks added an exponential capability for consumers to reach each other, share ideas, opinions, and recommendations. And the rise of cloud computing and advances in AI in the second decade of this century accelerated these connections. The cascade of new technologies continues apace with IoT creating connections between people, processes, and things. And so it goes on. With 5G, edge, AR/VR around the corner, Quantum Computing on the horizon. How we live and interact with each other and with brands or businesses we consider relevant will change. The challenge facing every business – to remain relevant, has massively ramped up.
Lessons from the 1990s don’t help much
Back in 1997, Fred Wiersema and Michael Treacy in their book, The Discipline of Market Leaders, maintained that any business must choose to be excellent and one of three critical disciplines:
- Operational excellence
- Customer intimacy
- Product leadership
The advice given at the time was to pick one of them rather than be tempted to excel at all three. Operational excellence would help to drive down costs and improve predictability and product quality. Ensuring a smooth path from sourcing to product development and provisioning, supported by sales and marketing and some post-purchase support. Excelling at customer intimacy meant getting a deeper understanding of customers’ wants and needs and using that to increase the attractiveness of the brand. The final option was to out-innovate competitors and shift the goalposts in favor of the innovator.
An implicit assumption back then was that businesses had the time and space to develop their discipline of choice. But in today’s extreme Darwinian environment they no longer have this luxury. First, let’s consider where we are today.
Based on research at Omdia (formerly Ovum), from 2017 to 2020, the overwhelming majority of large and mid-sized businesses struggled to make headway with their omnichannel digital transformation initiatives. Barely 10% of businesses felt they had it cracked. There are several reasons behind this glacial progress:
- A lack of clear purpose and leadership, leading to employee confusion.
- Linear industrial-age thinking, a departmental silo at a time – little evidence of joined-up coherent thinking.
- Poor inter-departmental collaboration.
- Fragmented customer data locked away in multiple systems. Leaving businesses flying blind.
- Little customer insight beyond the transactional.
- Absence of an over-arching business and digital transformation strategy
Time to update the three value disciplines for the digital age
The value disciplines of the 1990’s need a complete makeover. A lack of technology is not the problem. Sure existing IT landscapes may contribute to organizational sclerosis. But it is really the whole approach to customers that must change and a realization that the organization must act as a system of value creation and delivery. Organic and fluid not mechanistic and hard-wired. Siloed thinking must be replaced by holistic systems and human-centered design thinking to create an environment fit for customers (and employees).
Of the three Wiersema & Treacy value disciplines, I’ll keep Operational Excellence. We now have better ways of delivering it. Dr. Jeanne Ross of MIT hit the nail on the head at a Pegasystems conference I attended three years ago and explained fully in the book: Designed for Digital: How to Architect Your Business for Sustained Success ( MIT Press 2019. Ross et al.). The way to deliver operational excellence is to develop what she called an operational backbone for the enterprise. A digital spine, if you like (with a central nervous system).
Customer intimacy, to my mind, has now been and should be replaced by Customer Experience as a value discipline. On the positive side, advanced CRM applications have steadily morphed into what I first called back in 2018, Customer Engagement Platforms (CEPs). I’ll discuss those in more depth in a later blog. One of my final acts at Omdia (November 2020) was to research and author a detailed analysis of the top 10 available to Omdia subscribers. These advanced platforms go way beyond the traditional sales, marketing, and service trio. When deployed wisely, they create a unified environment for customer engagement and the subsequent customer experience. I describe the main components of a CEP in this blog.
As for product leadership, I’d replace that with Continuous Innovation. New business models are constantly spawning, not least product-as-a-service. All will have a significant digital element and depend on acute customer insight from AI-assisted digital means and good old-fashioned human observation and imagination.
CEOs need to think about how they can embrace and master these disciplines as an integrated whole, informed by acute insight. It may need new skills, but above all, it demands holistic, systemic thinking and a perpetual focus on the customer and what outcomes the customer wants. CEOs must provide a clear customer-centric purpose and support their employees as they seek to create and deliver value to their customers. These integrated value disciplines will accelerate transformation, but first, the CEO must step up to the mark and not leave it to marketing or sales to figure it out. There is too much at stake.
But now there is a fourth essential value discipline – ESG
It is no longer enough to create exciting new products and deliver a fantastic customer experience. Increasingly, today’s consumer is concerned about ethical behavior and sustainability. So this fourth value discipline must also be developed, or firms risk alienating customers, and non-compliance with regulations = fines, often substantial.
Organizations that take a platform approach to their operational and customer engagement systems, will be in a far better position to manage their ESG commitments. I shall be writing about this in more detail in a future blog. Watch this space!