13 Jan How to achieve competitive advantage through digital change
In recent years the rate of change – especially in technology – has vastly increased, and even more alarmingly, the current rate of change is also the slowest it will ever be. The most successful businesses and organisations will be those that are able to embrace and utilise change.
Most businesses spend the majority of their IT budget on maintenance and “putting out fires”. In a 2013 Forrester Research survey of IT leaders, respondents estimated that they spent an average 72% of their budgets on such “keep-the-lights-on” functions as replacing or expanding capacity and supporting ongoing operations and maintenance. This means that organisations are constantly investing money which doesn’t provide any lasting improvements.
Currently IT departments are often unfairly seen as causes of decreased productivity within the organisation as they struggle to keep all of the systems and hardware running effectively. This has the potential to be transformed as many CEOs and CTOs are trusting technology to be able to help employees work more effectively, rather than hindering them. This gives a fantastic opportunity to transform IT departments making them the frontrunners of driving innovation and collaboration within the organisation.
Google conducted a study tracking Digital Transformation against financial performance. You can see in the following image that by following the point when the company commences its digital transformation, the financial performance has improved.
This current acceleration of change of technology has a lot of business opportunities, but it also has a lot of risks as organisations fall behind others who embrace this change. Google’s UK Head of Enterprise, Thomas Davies, made the following statement when talking about the threat of companies who embrace digital change:
Lots of companies have taken advantage of this technology to disrupt the business models of other companies. What you tend to see is a company will look at another companies value chain; They will look at the end to end process of what that company does and will say “How can I disintermediate it?” or “How can I start to fragment that?” They will do a piece of it incredibly well, often around engagement, web technologies but also incredibly strong customer service.
An example of a company like this is Uber, which has revolutionised the way that the taxi business operates. Uber was founded in 2009 and by 2010 had released an app allowing consumers to book, track and rate their drivers, using the Google Maps API. This app is connected to the customers bank account, taking the hassle out of paying with cash, and allowing the driver to concentrate on giving excellent customer service. By 2011 Uber had raised US$49.5mill (£32.7mill) in funding and within a few short years had shaken what was a very traditional market. As of December 2014, Uber was available in 53 countries, 200 cities and worth US$40 billion (£26 billion).
Another company that has very quickly disrupted its industry is Nest Labs, founded by former Apple engineers Tony Fadell and Matt Rogers. When Fadell had taken a couple of years off work to build a vacation home, he was unimpressed with the available thermostats. In 2010 Fadell and Rogers started up the home automation company which designs wifi enabled, self learning, programmable thermostats and smoke detectors. By 2012 they had 130 employees and in Jan 2014 Google acquired them for US$3.2billion (£2.1 billion) with 460 employees.
So how should existing organisations combat against losing market share to new companies that do this? They themselves need to look at their own end to end process and analyse if it can be improved by embracing the constant stream of new technology that is released. This will not only minimise the risk of losing market share but will put the organisation at a competitive advantage against their rivals.
Dr John Kotter, who is often referred to as the godfather of change management, has has said that in the 21st Century we need to strive to make our organisation’s “something that can be reliable and efficient now and can be fast and agile in helping you manoeuvre through this faster moving environment. It creates more wealth, better products and services and a terrific place to work and perhaps most importantly profitable growth.” Companies need to be mindful of this when putting together the digital tools to help their organisation work and ask themselves; Do these tools allow our organisation to be able to work now? Do they allow and help the company change and adapt quickly when needed?
If you are interested in finding out how your business can be transformed to become a digital organisation or have questions about this article please comment below or contact the AppsCare team on +44 (0) 113 366 2008 or email firstname.lastname@example.org.