The technology rat race is sometimes seemingly unwinnable, and the technology-enabled competitive advantage seems ever fleeting.
The technology behemoths and digital natives like Google, Amazon, Facebook, Microsoft, Tesla, and Apple have a deep and abiding advantage in the technology innovation that, at the moment, is insurmountable for legacy companies.
So, even as significant, legacy companies keep spending billions of dollars in transformation initiatives, they cannot bridge the gap. Most companies in almost every industry have become de facto technology companies, but the skill and competency levels remain uneven. In addition to the widening chasm with the digital native technology firms, any competitive advantage with peer groups also is minuscule and ephemeral.
The Reasons your Technology-enabled Competitive Advantage is Diminishing:
There are several reasons for these lower returns on technology investments.
- The Competition is not Staying Still: This is the reality. Standing still will leave you behind. Walking fast may help you keep pace. Sprinting hard for a marathon distance is the only way to stay ahead. As your company is spending tens of millions on digital transformation technologies, so are your competitors. Thus, moving the needle takes more than spending. A sound strategy, holistic long-horizon planning, and excellent execution are the three pillars of staying transformed.
- Implementing Technology to Solve Yesterday’s Problems: In most large companies with extensive and complex business and technology landscapes, the spending on “keeping the lights on” far exceeds the discretionary and innovative projects and programs. Furthermore, even while investing in “systems of differentiation,” the planning horizon is seldom long, and the scope is to solve known problems, not build the resiliency for what comes next.
- Silo’ed Approach to Technology Investments: In a typical enterprise, one team works on a sliver of the problem in a particular business unit. Even if not, the approach to project planning is primarily vertical, occasionally horizontal, but seldom enterprise-wide. For example, companies may have a project for “Lead Capture,” a functional area. Or sometimes, a process (or value stream) such as “Online Purchasing.” But, in both instances, no one thinks about a broader net, and a more comprehensive solution such as a “Digital Experience Platform” could resolve these two issues on hand and propel the company towards offering personalized, omnichannel experiences.
- The Blank-Slate Competition: Even as the peer group keeps the pressure on, a new wave of competitors with no legacy to worry about is becoming more of a threat. For example, the Fintech firms unbundling banking as we know it does not have monolithic systems, antiquated processes, or the fear of cannibalization. Instead, their next-generation technology combined with a lean and mean operating model provides them a distinct advantage that is difficult to overcome.
A company that strives to emerge as a leader with technology as a competitive differentiator and a moat has to rethink and change from the current state of “Doing Technology” to an exponentially higher state of “Being Technology-driven.” This will not be an easy challenge but is doable with prudent planning, long-term horizon, and flawless execution.
Building Technology Competitive Edge:
Here is a playbook for how to build sustainable technology competitive edge in the marketplace.
Identify the Blind Spots
Self-awareness is a critical first step in understanding where you stand vis a vis where you want to be. Unfortunately, in most companies, it is difficult to acknowledge the stark realities, and those firms end up rearranging the deck chairs on the Titanic.
It is challenging to acknowledge weak spots; it is the first step toward building long-term resiliency and building a successful company.
If necessary, hire a consultant. But be honest in your self-assessment. An excellent place to start is a SWOT analysis that is thorough and thoughtful. Zeroing in on Strengths and Weaknesses is about being fair and dispassionate. Identifying Opportunities and Threats will necessitate future state envisioning and forecasting macro and micro trends impacting your industry and the company.
Once you identify your company’s blind spots, strategic planning becomes more realistic and not a highfalutin pie-in-the-sky dream.
Envision New Sources of Revenue
Relying on cash cows may satisfy Wall Street Analysts but will be detrimental to your long-term success. It is essential to build a pipeline of future stars (some of which can be duds), which means thinking about revenue more broadly.
Successful companies generate the bulk of their revenues from products that may not have existed a decade ago.
Become a Data-Driven Company
Many firms claim to be data-driven, but it is not often the case. Instead, most firms are data hoarders and not necessarily the data-centric organization.
Today, the concepts of big data and the ability to process both structured and unstructured content, combined with sophisticated AI/ML models, have resulted in data-driven decision-making a reality.
Don’t just speculate on why customer experience (NPS score) is suffering. A treasure trove of data can provide actionable insights from website analytics, visitor behavior, clickstream analysis, and shopping cart abandonment.
Harness the data and data culture.
Foster Select Enterprise-Wide Initiatives:
Decentralization and bottom-up rolling up of capital budgeting requests can be good in elevating the needs of the business units.
But in this digital and cognitive age, some initiatives should be enterprise-wide and need to have a multi-year horizon. Only then does true transformation occur. Only then the improvements in people, processes, and technology can rise to create a competitive moat.
One example is a project to get the enterprise data house in order. Unified data architecture can provide a 360-degree view of the customer.
Another example may be building holistic experiences for customers, employees, and other stakeholders across channels.
And for some other initiatives, creating a centralized COE (Center of Excellence) combined with COP (Communities of Practice) will elevate the discipline to become the nerve center and a focal point for innovation.
Build Competencies and Capacity
Technology-enabled competitive advantage is not just reliant on licensing software platforms and infrastructure. Instead, a primary benefit is in people – their competencies and the overall capacity to deliver.
Upskilling and reskilling is the challenge of our times. With technology talent scarce and the Competition fierce, companies will need to find different avenues to onboard talent in artificial intelligence, data science, cloud, security, and automation.
Companies are developing innovative measures to augment tech talent, from building relationships with educational institutions to offering apprenticeships, from exploring offshore technology hubs to acquiring startups primarily for talent.
Find Opportunities for Co-opetition and Partnerships
The boundaries between friend and foe, competitor and partner, are somewhat flexible and thin in the modern business world.
Suppose long-time sworn enemies like Microsoft and Apple can work together. In that case, legacy companies must embrace different players with diverging motivations and build an ecosystem of partners, frenemies, and opportunistic collaborators.
If traditional companies have not capitalized on one thing, it is harnessing the power of platforms and ecosystems.
Invest in Long-Horizon Projects
Think beyond annual budgets. Invest in some moonshots. And some programs with a 5-10 year horizon. In a world where Wall Street measures progress every quarter, this is tough. But visionary leadership means looking beyond the horizon.
Technologies such as Artificial Intelligence, Augmented and Virtual Reality, Blockchain, Internet of Things, Quantum computing – each of these are in their infancy, and taking these nascent emerging technologies to a next-generation revolutionary concept requires experimentation, bold thinking, and a commitment toward the long-term.
Be Agile, not just do Agile.
Most companies today preach and practice some agile methodology. But there is a significant difference between being agile and doing agile.
In fact, in many large firms, agile is relatively fragile.
Being agile means a lot of different things. Quicker decision-making. Lowering the layers and bureaucracy. The ability to be proactive and responsive to market dynamics and not reactive. And a culture of cohesion, transparency, and collaboration.
Yes, building a sustainable technology-based competitive advantage is challenging. But, if it were easy, everyone would excel at it.