Why do organizations exist and how can they navigate the changing business landscape? Every strategy context is unique, however the strategy context can be determined instead of letting it determine. The framework below forms the basis of the discussion. It briefly focus on each circle or dimension of the changing business landscape or strategic context framework.
The strategic context can be looked at from industry, organizational and international (global) perspective. In the industry context, strategic issues would revolve around the question of whether the industry circumstances set the rules of the game to which organizations must comply with, or whether organizations have the freedom to choose their own strategy and even change the industry conditions. From an organizational context perspective, the key strategic issues have to do with the question of whether organizational circumstances largely determine “what” the strategy should be. Looking at the international perspective, key strategic issues would revolve around the adaptation of the diversity of the international context, whether organizations can choose or determine “what” their international strategy should encompass. The following section will analyse each of the changing landscape or context dimensions.
Have you heard the saying that you can either be a disruptor or be disrupted? According to Professor Clayton Christensen in the Harvard business review 2015, “What is disruptive innovation?” Disruptors first appeal to low-end or un-served customers and then migrate to the mainstream market. They often build business models that are very different from incumbents. A typical example is Netflix; its initial service wasn’t appealing to most of the Blockbusters customers. After some, eventually Netflix appealed to Blockbusters core customers, offering a wider selection of content with an all-you-can-watch, on demand, low price, high-quality, highly convenient approach. And it got there via a classically disruptive path.
There are more disruptors we can discuss, for example fintechs are disrupting the financial services market offering convenient, low cost products or services and better customer experience. Smart grids are revolutionizing the energy sector etc. Established organizations may have the muscle to transcend these new digital disruptors due to their market experience and large customer base however those that fail to respond appropriately might be disrupted.
Customer expectations are being reshaped by innovation and digital technologies, to name a few mobile, big data & analytics and social media platforms. Today’s consumers are using mobile technology to their advantage and have the power to go online to search for product information, compare products and get reviews from other consumers. These digital technologies also offer competitive advantage for organizations, for example taking away manual processes, reducing waste and introducing automation (digitization).
Consumers are now more demanding than before and continuously seek better products and improved service levels. Organizations that focus on providing excellent customer experience, for example using digitalization will be able to retain their customer base and attract new customers. We are also witnessing the rise of a new customer that is tech savvy, taking over the reins from the old generation, the Millennials and Gen Z. This generation of customers are born into a world of Digital and Technology. They interact with the world in a completely different way to their parents or grandparents. They are the ‘digital first’ generation and have grown up with computers, email, mobile phones, internet and social media, as an integral and accepted part of their everyday life. However the old customers are still in the picture. Some if not most of them still prefer the face to face human engagement. For established banks this means their branches are still relevant however, it would be ideal for them to modernize their branches to gain competitive advantage and attract new customers.
Regulations and regulators
Does regulations impede digital revolution? Digital has become the heartbeat of the economy as it offers great benefits for many industries, for example, big data & analytics offers retailers and insurers unprecedented opportunities etc. In fact regulations are necessary to stabilize, protect and advance the economy. For example, weak regulations led to the 2008 global financial crisis. At the same time over-regulation could restrain the economy. There needs to be a balancing act between the two. Regulations need to be proactive and flexible, rather than reactive and should be able to predict the future of the economy. This however will require collaborative efforts between regulators, public enterprises, private sector and consultancy firms to create a conducive environment for businesses to succeed. Otherwise regulations could make it difficult for some organizations to advance their strategies or vice versa depending on contextual factors.
It was Professor John P. Kotter in 1995 who observed that the rate at which our world is changing is increasing but our ability to keep up with it is not. In most industries, organizations and internationally this is still the case. Could it be that we are unable to adapt to change quickly and to challenge the status quo? Kodak is a typical example in that it did not move into the digital world well enough and fast enough.
According to Professor Klaus Schwab, founder and executive chairman at World Economic Forum, now we are witnessing profound shifts across all industries, marked by the emergence of new business models, the disruption of incumbents and the reshaping of production, consumption, transformation and delivery systems. On the societal front, a paradigm shift is underway in how we work and communicate, as well as how we express, inform and entertain ourselves. Equally, governments and institutions are being reshaped, as are systems of education, healthcare and transportation, among many others. This refers to the fourth industrial revolution.
Internet of Everything (IoE), is bringing together people, process, data and things to make networked connections more relevant and valuable than ever before – turning information into actions that create new capabilities, richer experiences, and unprecedented economic opportunity for businesses, individuals, and countries (Cisco, 2013).
Innovation and entrepreneurial drive are the key success factors to unlock technological opportunities.
Changing market and economic environment
We are definitely living in times of uncertainty where both global and local macroeconomic context is unpredictable. This was evident with Brexit and the recent US elections. The global GDP growth for 2017 is projected to be 3.6%. South Africa GDP growth figures are not improving projected at 0.2 % in 2017. The country faces a recession, junk status and a tough economic environment coupled with weak employment, higher inflation, tight credit conditions, political uncertainty and weak domestic demand. In fact some industries, for example, retailers, insurers, banks etc. are feeling the pinch. Amidst all these economic challenges the rand is still resilient, though taking a lot of strain. How can organizations navigate the changing market dynamics? At Buhlebenkosi 4.0 consulting, we work with organizations and government on the how, who, when, where and what of strategy.
Why organizations exist?
In most cases what organizations do is well known, as we have seen most Billboards and marketing campaigns etc. The purpose of an organization can be defined in two ways:
The organizations exist to make money.
They exist to serve the interest of multiple stakeholders, including customers etc.
According to Simon Sinek, people don't buy what you do; they buy why you do it. In light of the changing business landscape, it is essential for businesses to re-imagine (why) and re-invent (what) their business models. They need to work on the how (analysis/insights) and what (strategies needed) to navigate the changing landscape or context (where). It is important to keep in mind that changes in the external competitive environment may trigger changes in the organizations internal basis of competitiveness.
Stay tuned for more!