Assess Business Implications – Surviving the Techstorm

ASSESS
BUSINESS
IMPLICATIONS

The next step in the Analyze – Assess – Adapt model is to assess how your shortlist of emerging technologies will affect your future business from different perspectives. Drawing inspiration from Henry Mintzberg, Michael Porter, Alexander Osterwalder, W Chan Kim and Renée Mauborgne, to mention but a few thought leaders in the area of competitive and strategic analysis, the goal with this hands-on guide is simplification. The aim is to introduce something that is easily accessed and possible to use in a hectic operative business environment. As discussed earlier, one should not believe that it is possible to get a full overview and understanding of the business implications of a new technology. Instead, this whole approach is aimed at creating a new mindset and overall understanding of the intersection of business and technology.

Emerging technologies have an impact in all areas of business, ranging from how an industry changes, to how customers react, to the inner workings of a company and new operational challenges and opportunities. Based on this, and in an attempt to simplify but not over simplify, we can list a total of nine areas that need to be considered:

From an industry perspective

Existing and new competition

Suppliers and collaborators

Standards and regulations

From a customer perspective

Value proposition

Products and services

Markets and segments

From a company perspective

People and processes

Marketing and sales

Procurement and production

Next comes making an assessment on the business implications of the new technology. How will this change the competition? How will this change client behavior? How will this change our internal processes?

Because of new innovations and applications, business model development can be both an opportunity and sometimes a necessity to fight the competition.

FROM AN INDUSTRY PERSPECTIVE

One of the very first and most important business issues relating to an emerging technology is how it will affect the existing competitive landscape in your industry. All companies have at least one, but often many, competitors, especially if you include different customer segments. It is therefore important to see how a technology will affect every different aspect of competition. How will your competitors react to new enabling technologies? Are they usually quick in adapting to the next big thing, or always late to the party? Are they innovative and likely to find new market opportunities coming out of the technology? All these things are essential perspectives, and highly relevant as part of a competitive technology assessment.

In the case of substitutes or new, and sometimes unexpected, entrants, it is important to assess most of the above aspects of competition. Also, new entrants can sometimes reap the benefits of simply being “new”. They start from scratch, meaning no potential sunk costs in an existing organization, distribution network, infrastructure or traditions. Instead, a new entrant can attack with a fresh perspective, meaning they often come from industries that are familiar with relevant technologies and can put them to work in totally new settings in new industries. In this scenario, it is important to look for emerging competition in similar industries that have already adopted the new technology, or (much harder), try to spot signs of interest from previously distant industries.

From a technology perspective, it is important to take part in discussions and to understand emerging standards and how these could affect competition or supplier strength.

When it comes to the technology perspective of suppliers as well as that of partners and collaborators, challenges and disruption often come from areas that were earlier considered “friendly”. This has been seen in recent years, one very good example being the then CEO of Google Inc., Eric Schmidt, also serving on the board of Apple Inc. The companies collaborated in internet search, for example. Then when Apple launched the iPhone, and Google acquired the Android mobile OS, the partners suddenly became fierce competitors. With this in mind, be sure to stay informed about what your suppliers and partners are up to. Are they expanding their businesses into new areas fueled by technology? Are they showing a sudden interest in what is happening in your part of the industry? Maybe they want to renegotiate a contract for no (initially) obvious reason? Are they hiring people with fundamentally new skill sets? From your company? As long as you stay informed and follow activities in the market, the chances are high that you can stay on top and ahead.

Standards and regulations are a sometimes strange combination of “good and evil”. On the one hand, they provide stability, entry barriers and cost efficiencies in, for example, a production unit with standardized pallets or dimensions of raw material entering the facility. On the other hand, they limit flexibility for individual companies as well as for whole industries, sometimes creating inferior customer experiences.

From a technology perspective, it is important to take part in discussions and to understand emerging standards and how these could affect competition or supplier strength. As technology evolves, what new standards will emerge? With the introduction of a new technology, will the government enforce regulations? Is it possible to identify the different interest groups working on ways to change policies and regulations?

FROM A CUSTOMER PERSPECTIVE

The definition of a customer value proposition is that, in a convincing way, it explains why a customer should buy a product or service and also why the offering is superior to the competition. Traditionally, this superiority is either a price or quality advantage. There are also three types of customer value proposition. The first is a simple list of benefits the offering might deliver, the second is based on differentiation in relation to competing offerings and the third (and most favorable) is made up of the key points of difference with the greatest value to the customer. With this in mind, the fundamental question is, of course, whether an emerging technology will in any way change (or take away) any part of the value proposition that the customer finds most relevant.

There are a number of relevant perspectives where technology can change a value proposition.

The first and most essential question today is whether your fundamental product or service is becoming digital, and also whether there can be a relevant future combination of physical and digital products as well as offerings adding relevant services to existing products.

Imagine, for example, how mobile connectivity and social networks are changing customer service, and how a community of engaged users can vastly improve a company’s service and support function. Also, the use of customer data and advanced analytics is essential when working with new value propositions.

With the increasing flow of new and improved digital tools, there are also new ways to approach the development of products and services. The first and most essential question today is whether your fundamental product or service is becoming digital, and also whether there can be a relevant future combination of physical and digital products as well as offerings adding relevant services to existing products. Do we have a good understanding of the customer’s behavior, meaning do we know what they do and why, where and how they do it? New services can also be developed by expanding reach in mobile and social media, and while using customer data acquisition and analysis in new and innovative ways.

How will existing markets and segments change, and where will new market opportunities emerge? Will customers expect new and more tailored solutions, faster service or a lower price? To understand these parameters, you can assess new market opportunities and potentially interesting customer segments using digital methods to acquire relevant data through direct customer interaction, as well as from social media activities.

FROM A COMPANY PERSPECTIVE

In an organization, new technologies are always working their way into operations, people and processes. The trends here are very clear towards (for example) online broadband mobile technologies that let us work anywhere, anytime, often resulting in a demand for 24/7 availability from employers. For some, this is a good combination that creates freedom, but for others, this creates a constant conflict between work and life. That said, we can already see new ways of handling this, and as this technology enters the transformation phase, a relative balance will be found.

When we see new levels of white-collar automation and software assisted decision-making, what will happen to the role of the middle manager? Will new technology platforms provide quantum leaps in efficiency and cost reductions/quality improvements that ensure your company stays competitive? It is worth stressing that operational excellence is a great competitive advantage since it is very hard for competitors to understand and copy the performance of an organization.

Emerging technologies and innovations are also changing the way in which companies handle their procurement and production.

INDUSTRY

Existing and new competition

What are existing competitors doing, and are they early adopters or laggards?

Are other industries already using this technology?

Will we see new entrants into the industry?

Partners and collaborators

Will this give more power to our existing partners and/or collaborators?

Will this give us new partners and/or collaborators?

Are your partners and/or collaborators expanding into your area?

Standards and regulations

What new standards will emerge?

Will new regulations emerge? New legal requirements?

Who will lead this work? The government? Large industry players?

CUSTOMER

Value proposition (and offering?)

What new value can you deliver to your customers? How can you deliver it?

How will customer needs and expectations change?

What parts of your existing value proposition will be less important or obsolete?

Products and services

Can your product or service be digitized and automated?

Can you add products to your services or vice versa?

Can the customer take part in the development and/or production of your offering?

Markets and segments

Are your markets or segments open to new innovations? Which are most affected?

Can you take your offering to new markets or segments?

Areas where you see high (even exponential) growth from low levels?

COMPANY

People and processes

Will this change the way we organize work?

What new competencies will we need? What old ones will disappear?

Can this improve your operational excellence?

Marketing and sales

Will this improve understanding of your audience?

Will this provide new ways of reaching and interacting with your customers?

Will this change your branding and/or positioning?

Supply chain

Will this give more power to your existing suppliers?

Moving up the value chain?

Will this open up for new suppliers?

Will this mean new production processes? Warehousing? Logistics? Other?

With new communication tools and social media, the customer is easy to reach and often willing to broadcast their opinions in an instant, which is regularly the case when a product or service does not meet expectations.

In marketing and sales, new technologies are rapidly changing the playing field. With new communication tools and social media, the customer is easy to reach and often willing to broadcast their opinions in an instant, which is regularly the case when a product or service does not meet expectations. With all communications, and often also transactions, happening at high speed, this creates new challenges for everyone in marketing and sales. What communication channels to use? What level of transparency to aim for?

Of course, all this communication and socialization also creates many opportunities. Today, there is less guesswork involved in targeting existing and potential customers with personalized advertising, and with data analytics tools it is possible to optimize the marketing budget. Emerging technologies and innovations are also changing the way in which companies handle their procurement and production. With new and more efficient methods of communication, using large quantities of data, come improvements in all parts of the process, from software that can visualize and predict sufficient order volumes, to in-depth collaboration with all partners in the supply chain.

With innovations in manufacturing, for example more autonomous industrial robots and 3D printing, come new challenges and opportunities for any organization that handles physical goods. When should we use 3D printers for prototyping, and when will the technology be useful for large-scale manufacturing (if it is at all)? How could a company use software and data analytics to increase warehouse efficiency and at the same time limit back orders?

With these nine perspectives on how new technologies change the ways in which companies operate and interact with their environment, it is interesting to see that this all comes down to sometimes small, but often big, changes in existing business models. There are five different situations in which technology drives this reinvention.79

1. Reinventing industries, where a whole industry is transformed because of a new technology.

2. Substituting products or services, where digitalization replaces your existing offering.

3. Creating new digital businesses, where new technologies are creating (not replacing) products or services, thus adding revenues.

4. Reconfiguring value delivery models, where a company uses products, services and data in an innovative way to change the power balance within an industry value chain.

5. Rethinking value propositions, where new disruptive technologies are used to target customers or needs that are not met with existing offerings.

When discussing the intersection of technology and business model innovation, the “innovation landscape map”80 gives a very good overview of the innovation challenge based on two dimensions: the degree of technological change and the degree of business model change. The result is four categories of innovation:

Routine innovation, where existing technological competencies are combined with existing business models (and customer bases). IKEA serves as example, with a solid business model for the past 50 years, and with technology innovation and adaption according to needs in operations and also in customer interaction.

Disruptive innovation, where the innovation focus is on new business models while taking advantage of existing technology. The tabloid daily Expressen is a good example here, having successfully moved most of its focus to digital while still maintaining a rapidly declining print edition. Interesting here is that the publishers are also rapidly moving into technology innovation themselves, and not just trusting others to do this.

Radical innovation, where the innovation is only technological. Wolfram Research has been a very innovative software company for the past 30 years, and a highly successful innovator in the computation industry. Interesting here is that as the competitive landscape changes, and the app economy is emerging, Wolfram Research is experimenting with new, innovative business models.

Often, disruptive innovation is only the starting point, and continuous, routine innovation is then necessary to fight off competition in the long run.

Architectural innovation, where a company engages in both business model and technology innovation. This is by far the most difficult quadrant for any company, especially for an incumbent with technological and organizational structures already in place. Starting in 2006, Spotify attacked the music industry with a radical new business model, “all you can eat” music subscription, and at the same time was first to offer a cloud-based music streaming service.

It is interesting to see where your own company is positioned. It is important to understand that all four quadrants can show equal growth potential, and different kinds of innovation should be seen as complements rather than substitutes. Often, disruptive innovation is only the starting point, and continuous, routine innovation is then necessary to fight off competition in the long run.

MERGING TECHNOLOGY ANALYSIS WITH BUSINESS ASSESSMENT

By using a radar analogy, it is possible to gain a simple and straightforward view of business implications. One radar image per technology is useful to get an overview. Map each business area (implication) on a scale from low to medium and high impact. Remember not to take the time perspective into account at this stage, concentrate on business implications for now.

Former US President Dwight D. Eisenhower was said to organize his workload and priorities according to two parameters.81 These were “important”, as in activities that have an outcome that leads to us achieving our goals, and “urgent”, as in activities that need to be taken care of immediately. When put in a matrix, these two perspectives create a simple and powerful tool for time management.

The same analogy can be used in the analyze-assess-adapt model when considering technologies’ impact on business. With what urgency should the technology be addressed, and how important is the impact on the future of the business?

By mapping each of the technologies according to levels of urgency and business impact, and plotting them in a matrix similar to the Eisenhower Principle, the result is a visual representation of the relative importance of each technology. Based on this tool, it is now easy to gain a good overview of the strategic technology landscape for your organization. By keeping it close at hand, you will have updated alerts as the business and technology environment changes.

So what we look at here are two perspectives of urgency and importance that will give the user four views of strategic technology priority. By mapping each individual technology from the two perspectives, it is easy to set priorities between technologies. Also, mapping progress over time gives trends on where and at what speed a specific technology is heading.

1. Act, when a technological threat or opportunity is imminent, and will have significant impact on your business environment. If you are not already embracing this technology, and unless you have a very good reason not to, now is the time to act.

2. Prepare. These are the technologies that you need to understand thoroughly and for which you need to plan once they take off.

3. Monitor. These technologies are, by definition, not relevant for your business – as of today, that is! As technology evolves and goes from experimentation through expansion and then eventually transforms society, the use and implications of a technology are bound to change.

4. Watch, when technology disruption is imminent but not relevant to your industry or business. That said; do not fully discard the technology, since the landscape might change rapidly.