Saturday, September 14, 2013

Three Imperatives

Every company in every industry faces an imminent and urgent challenge to address three imperatives and respond to a once in a lifetime transition -- from an industrial economy to a computation economy. I don't mean to say that this is a change that will be apparent in one year or three years, but if organizations hesitate to embrace the change that is upon them they risk falling behind over the coming decade of digital transformation. These three imperatives are related to:

(1) Customer expectations are changing and with them the underlying operations of markets will transform.

(2) The definition of competition (and of competitive products and services) is changing and with it -- who competes with whom, where they compete, when they compete, and the business business models that govern that competition.

(3) How real value is created is changing and challenging all of our assumptions about how our organizations function in the process of innovating, producing and delivering products and services.

Many have recited the list of businesses that have fallen from leading positions to irrelevance. The leaders of those businesses failed to anticipate the macroeconomic changes that would engulf their industries. But we need not blame those leaders for their failure -- not while we ourselves are also failing to anticipate the impact on our own businesses.

It is easy to underestimate the transformation underway or to believe that it can happen to someone else but not to our own industry or company. While it might be that one industry (media, technology, retail...) is impacted why should we believe that another (automotive, industrial products, business services...) would be? We are simply not equipped to recognize the larger structures -- the macro trends that are remaking the very foundations of our civilization.

There is a precedent for this -- In 1776 Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations a work which was itself derivative of a set of thoughtful contemporary economists. Together these early thinkers explained a transformation that was largely a product of mechanization. This process began perhaps as early as 1725 with Basile Bouchon's first improvements of the draw loom or even earlier with the first demonstrations of a commercial use of steam engines by Thomas Savery in 1698.

Today we can with 20/20 hindsight look back on these thinkers and see that if the leaders of that time, say George the III (King of England), had understood the macro trends of his day that he would have implemented a different course of evolution for his organization. Giving proportional representation to the American colonies in Parliament, for example, could have averted the American Revolution. But he didn't believe that these new ideas might fundamentally change the importance of the monarchy and so instead his "business" found that the "market" had moved on and his monarchy became irrelevant...

200 years later a new transformation began, the result of computation. We are now well into the new macro trends (think mainframe, minicomputer, personal computer, Internet, mobile computing...) and yet like George the III many business leaders are ignoring the implications of the new economy or think that somehow it won't apply to them.

But it will apply -- these trends will remake every industry and every company.

In order to navigate the transformation underway, leaders must make the right decisions to guide their organizations through the three imperatives or risk joining the ranks of those that have lost their footing and eventually fallen from success to irrelevance.

First - Customer Expectations - Leveling the playing field

The computation economy gives individuals information and connectivity that transforms the role they are capable of playing in the marketplace. Where the industrial economy was dominated by producers, the computation economy levels the playing field and gives individuals more power in the marketplace interaction. As a result there is a fundamental rethinking of what marketing is and the role it plays in an organization -- integrated and collaborative with sales and service in creating an overall integrated customer experience.

Second - Digitization of Products and Services -- Integrating information into everything

Every product, every service, and the ways in which those products and services are delivered and consumed by customers will be transformed by computation. Bring external information into a product. Collect information from the use of the product. Instrument the delivery and service experience... technology gives both customer and company new ways to enhance the usefulness and value of the product or service, connecting customer and company throughout that delivery and consumption experience. What new controls or insights can the customer have? Or the company?

Third - Operational Transformation -- Remaking how we work and who we work with

Organizations must develop a new set of competencies and disciplines and break down organizational barrier -- both internally within functional groups and also externally with vendors and partners. There is a new operating model, a networked organization that is agile and operates at a faster speed...

Over the next few posts I will detail the work that organizations must do to address these imperatives. Every company is somewhere on the journey toward a new condition, a new state of being. Accelerating progress toward that new state will be the measure of difference in success for organizations over the next decade. Maybe I'll even make T-shirts:

"Don't Be George III"

Building a Customer Solutions Practice

1. Features vs. Benefits

2. Three Imperatives

3. ...