Rick Veague, CTO, North America, IFS, outlines the three actions challengers must take to go toe-to-toe with the biggest industry players.

Consumer tastes are changing in ways that marginalize established brands and the products that made them so successful. This represents an opportunity for smaller but agile companies who can quickly get products to market to satisfy new consumer demands ahead of leaders with substantial brand equity in goods which are difficult to adapt. Whether it is by creating new business models or building customer trust through radical supply chain transparency, challengers are in a stronger position than ever to threaten the dominance of market leaders using disruptive technologies.

Customer demands are not the only determining factor in how challengers are preparing to use disruptive technology to their competitive advantage. We are seeing the impact of economic and geopolitical changes give some challenger companies an advantage over others, with premiums being put on global sourcing agility and economic environments supportive of innovation. We are also witnessing market-leading companies acting as insurgents—flanking themselves with new technologies and business models before competitors can do it for them, as well as offering aftermarket services on products they sell.

But will these technology developments prove to be the ‘great equalizer’ that gives challengers the advantage on the field, or will dominant companies gain more access to capital and tech initiatives and prevail? To try and answer this question, IFS has conducted a primary research study of 600 companies across process and discrete manufacturing, commercial aviation and defense manufacturing and trade contractors and manufacturing service providers. Respondents were asked to classify themselves based on their market position—whether they are a niche player, a credible number two or three challenger in their product or service category or the market leader.

IFS was then able to compare how these challengers, market leaders and niche players answered a series of questions about their businesses and their plans to harness disruptive technologies. The findings went some way to answer the question as to what will give real advantage to challengers. There are three key actions challenger companies must take to seize market share in the future.

1. Adopt a challenger mindset

Challengers can be small, middle market or enterprise-size companies, but what sets them apart more than revenue is their mindset. How strong is their desire to either gain market share or protect territory through proactive business processes and product innovation? For smaller and middle market companies, ambition counts for more than the size of annual turnover, whereas for larger businesses it is about realizing how quickly they can decline if measures are not taken to regularly reinvent themselves to adapt to changes outside their four walls.

Even the very largest companies leading the way in their respective product or service category today need to adopt a challenger mentality in order to evolve their offerings. This involves constantly flanking existing products and transforming business operations—something typified by modern technology giants Amazon, Google and Facebook.

While challengers aspire to knock ‘that’ market leader off its perch, the IFS study found it is in fact market leaders who are often more progressive in the use of disruptive technology. Why? Because their enterprise software is likely to integrate AI into core business disciplines, which enables them to deliver not just products, but cognitive services to their customers that support their businesses in new ways.

It’s flexibility that gives challengers the edge

It is easier today for new entrants to come into the market with disruptive technology, largely because they are made up of less physical infrastructure than current leaders. This is where challengers can gain true competitive advantage because it is especially difficult for a product originating from a larger company to be drastically changed to meet consumer demands. Take process manufacturers in sectors such as food and beverage for example. Leaders are under constant pressure to reinvent themselves but are likely to have significant brand equity in a product which cannot be modified without sacrificing the brand position. It is here where smaller, agile companies able to rapidly get new products to market can seize advantage over entrenched consumer packaged goods companies.

2. Capitalize on the potential of AI

Market leaders may have multiple layers of employees focused largely on internal processes that are ripe for automation, whereas challengers are more likely to be concerned about enabling growth rather than increasing efficiency. But what will be a key determining factor for challengers to steal market share from leaders is their expectations for AI projects.

The IFS study found just 43 percent of challengers plan AI projects that add value to the products and services they sell to customers. While small gains in efficiency and increased productivity are initially the most direct routes to return on an AI investment, the true potential of AI is in its ability to create net new products, services and business models that were previously unachievable.

Drive business operations, enhance products

The study revealed that the overwhelming majority of challengers plan to invest in AI, but the more successful ones will be those who make strategic use of the technology.

AI can be used to create a strategic advantage in two ways. First, it can be embedded in enterprise software to drastically transform business processes. This would involve enabling a manufacturer to offer predictive analytics on customers’ equipment, or allowing a company to schedule the distribution of products to precise locations due to intelligent forecasting, which improves product availability and customer experience. AI can also be integrated in discrete products. Consider recent examples of food company NotCo’s AI-enabled line of plant-based analogs of animal-based food products, or the use of autonomous farm robots such as those from Dot Technology.

Efficiency and productivity gains aside, AI can add greater value when used to solve problems differently. This requires decision makers to ask hard questions about the problems facing them and perhaps how they may solve issues that were previously intractable. It is then about finding the right AI tooling to solve a specific problem in a novel and unique enough way for a company to differentiate themselves from competitors.

Cloud Transformational Technology Advantages, Industry Today
Companies who run in the cloud are at an advantage when it comes to adopting transformational technologies that hold strategic advantages.

3. Make cloud choice a priority

Companies who run in the cloud are at a serious advantage when it comes to adopting transformational technologies that hold strategic, structural advantages. Advanced techniques such as data lakes or information from sensors in the field, for example, are easier by an order of magnitude when enterprise applications are in a cloud instance which can be easily integrated with external data sources.

Challengers, and indeed market leaders, must not underestimate the importance of cloud choice. According to the IFS study, challengers are more inclined to run their enterprise software through software-as-a-service (SaaS), whereas market leaders are most likely to own the license for their enterprise software and run it on their own hardware.

SaaS entails paying a monthly subscription to use an instance of the software on a vendor’s server. This offers unique advantages for companies who want to preserve their capital spending capabilities because the software is paid for as an operating expense. Cloud-based models including SaaS and managed services also make it easier to support users regardless of their location, wherever there is internet connectivity. This means it is especially useful in mobile operations such as construction, field service or for mobile salespeople. It may also work well for companies with far-flung locations.

Consider all scenarios

But what happens if a challenger organization starts a subsidiary in a country with poor internet connectivity and needs to run the software on-premise, on its own hardware? Or if they reach a point where it is more affordable or strategically important for them to purchase a license to the software outright, for instance to enable them to pay for software as a capital asset rather than an operating expense?

From the perspective of both challengers and market leaders, it is vital to make cloud choice a priority so that the software they integrate supports them irrespective of how their business evolves in the future.

A forward-looking strategy and enterprise technology gives challengers a leg up

Challenger companies may hesitate to plan large investments in enterprise technology because it takes substantial due diligence to successfully specify applications and is difficult to audit transformational initiatives such as AI once embedded in software. This is why the degree of imagination and boldness of vision of executive teams will play a crucial role in helping challengers overcome industry peers and threaten the superiority of market leaders.

The key for smaller companies is to realize that winning the battle against dominant companies will depend on their strategy. The right enterprise software will help them capitalize on their ability to bring products and services to market, while also boosting productivity and efficiency. Only this way will they gain true competitive advantage from the latest technology available and seize market share against large incumbents.

Rick Veague IFS, Industry Today
Rick Veague

Rick Veague, Chief Technology Officer, North America, IFS
As Chief Technology Officer of IFS in North America, Rick Veague has overall responsibility for the product and industry solutions offered to IFS customers and partners in the United States and Canada. As a well-respected panelist and speaker, Rick regularly speaks on IFS solutions and IT strategies at tradeshows and industry events throughout the country.

Rick joined IFS in 1999, and has held various pre- and post-sales positions developing, marketing and delivering high-value business applications including ERP, SM, EAM and MRO solutions. He holds a degree in Computer Science and Mathematics from Knox College.


Previous articleShipping Over Troubled Waters
Next articleCaring For New and Used Metalworking Machinery Tools