April 26, 2015 Not Your Father’s Business Model

Volume 18 | Issue 2

Market forces are redefining the concept of competitiveness, with a shark fin replacing the bell curve in the face of technology adoption.

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To outcompete the competition in this highly complex, volatile, ambiguous business environment, successful companies are agile, adaptive and aligned, a triple “A” advantage discussed in the article.

Just when you thought the world of business couldn’t be more volatile, the price of oil dropped for seven consecutive sessions in the first half of March, and the Energy Information Administration reported that crude inventories more than doubled. Just when you thought it couldn’t get more complex, regulatory agencies upend the rules. And, when you thought business couldn’t move at a faster clip, enter the speed of digital.

Digital disruption has dramatically shortened market lifecycles. Back in the day, a product or service lifecycle was represented with a bell curve, with adoption gaining momentum gradually and sustained success over time. That pattern allowed numerous players to grab their slice of the pie.

Today, with the market changing rapidly, the new product and service adoption curve looks more like a shark fin than a bell, as it is characterized by sudden, even violent success followed by a short brilliant period of dominance ending with a dramatic decline which prompts a new product enhancement or extension. Another disruption occurs and the cycle continues. For instance, Kinect, an add-on device for Microsoft’s Xbox 360, sold 8 million sensors in just two months. Then, the market became saturated and Microsoft moved on to the next innovation.

Digital is also opening the floodgates to contestable markets – those with low barriers to entry and exit – so that upstarts and traditional players can emerge from nowhere and quickly gain market dominance. That’s a feat. Historically, it took decades to build a billion-dollar company. Today, we see digitally-charged companies achieving such growth in a matter of just a few years.

To grab opportunities in the face of this rapid, complex and volatile landscape, companies need to become much more agile, adaptive and aligned as they create new business models that are more suited to today’s business environment. New times necessitate new strategies.

The Triple Advantage: Agile, Adaptive and Aligned
To be competitive in today’s marketplace, companies need to compete on all three of these cylinders: Agility: In today’s digital world, competitive strength partly hinges on a company’s ability to deliver better products and services cheaper. Management needs to change their operating models to make them more flexible. Doing that requires de-cluttering – eliminating bureaucracy and simplifying management tiers, or setting principles within a company to encourage two key growth engines – productivity and innovation.

To achieve agility, companies also need to lower their fixed costs by permanently eliminating waste and reinvesting the resulting savings in areas that offer opportunity for growth.

Adaptability: Adaptability, our second “A,” has never been more important. Competitive markets are changing, moving in ways that were not possible or even envisioned before the advent of digital. Consider the seismic shifts in broadcasting networks and cable TV with the rise of Apple TV, Google and Netflix. Industry observers suggest that Apple’s continued push into the television market may “unravel the pay-TV bundle” model.

Today’s marketplace is much more fluid inside and outside organizations: Competitors are now partners, rivals are collaborators and other industries become critical links. Leading companies see ecosystem collaboration as integral to their path to success. For instance, Phillips announced a healthcare-focused partnership with Salesforce.com to create a cloud-based platform for clinical information sharing, and another to introduce an app that allows immobilized patients to control Philips products via a brainwave scan.

In the study, Traits of Truly Agile Businesses, Accenture found that C-suite and senior level executives at leading organizations in particular see partnering important to their continued success whether it meant partnering with their customers (80 percent), suppliers (64 percent), governments (56 percent), other industries (52 percent) or in communities where they work (48 percent).

Aligned: Lastly, companies need to meet the expectations of their customers, stakeholders and society at large. Be aligned with them.

Ten years ago, if a company’s ethical standards were sub-par, the likelihood of the public finding out was slim. Not true today. With social media, organizations are under unparalleled levels of scrutiny. Everything is transparent and traceable. So news of unsafe working conditions at a factory in Bangladesh becomes world news in relatively short order. And, the effects go straight to the bottom line.

Companies that “walk the walk” of ethical business practices – when it concerns people, profits and the planet – can use their behavior as a differentiator. Consistent with that, Accenture research revealed that 93 percent of CEOs see sustainability as important to future success and 80 percent see it as a route to achieving a competitive advantage in their industry. Likewise, 78 percent of investors believe the adoption of sustainability practices can set industry leaders apart from others in their competitive set.

The Bottom Line
The business environment is markedly different today. Digital is redefining competitiveness and your father’s business model won’t be sufficient to win in the market as the shark fin replaces the bell curve. Surviving in this highly complex, volatile and oftentimes ambiguous business world requires having the triple “A” advantage: being agile, adaptive and aligned. Your business may have one or two of these characteristics woven into its business model, but it will take all three to get ahead and stay there. And, given the speed at which today’s marketplace is moving, there’s no better time than the present to build out your triple “A” advantage.

Chloe Barzey, a managing director in Accenture Strategy, has more than 24 years consulting and industry experience. She works with clients across industry sectors to help them identify opportunities to generate strong business value, and has particularly deep experience in the communications industry.

Chloe earned her MBA from the Wharton Business School, and an electrical engineering degree from Cornell University. She resides in Atlanta, Ga.

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