Strategy, Structure, and Their Impact on Organizations
Founded in 1985, Blockbuster LLC was one of the world’s leading providers of video game and home video rentals for more than 20 years. In 2004, the company had almost 9,100 stores and employed more than 84,000 people.
However, in the early 2000s, Blockbuster began to experience steep competition from video on demand providers, as well as Redbox kiosks and the mail-order service Netflix. Because the company failed to adapt its business model to keep up with technological developments and consumer preferences, it began to lose revenue. In 2010, Blockbuster filed for bankruptcy protection.
Interestingly, in 2000, Blockbuster had the chance to purchase Netflix for $50 million. Thinking it was a minor, niche business, CEO John Antioco declined the offer, as Business Insider reports. But now that Netflix has become the leading provider of streaming entertainment in the world, as well as the producer of popular branded TV shows and movies, the company has a market capitalization of approximately $155 billion, according to Bloomberg.
Technology Bypasses Business Design
As this example illustrates, until around 2010, strategy and structure were ahead of technology in determining competitive advantage. But today, technology has bypassed business design in most companies. The question is no longer, “Can we do this with the existing technology?” Instead, the key question is, “If we use the latest technology well, how can we make things we do more client-centric and more relevant for the client, as well as easier and cheaper?” If a company doesn’t answer this question itself, the competition will answer it.
In this white paper, we’ll discuss how technological advancements are driving business strategy and what the impact is on organizations. We’ll also examine how Stanton Chase can help enterprises during their executive search to find leadership talent who can help drive business strategy with technology.
The Demand for a New Skill Set
Answering the key question above — how to use new technology to provide the client or customer with a better experience — demands a specific skill set. Managers are already used to dealing with scarce resources to optimize profits and growth. But now, to stay competitive, creativity and understanding of technology are also required, since leaders have to rethink the business model, as well as create a strategy and structure leveraging state-of-the-art technology.
Furthermore, it should be clear that technology comes with a completely different price to value ratio than it used to. As such, every investment decision has to be built on a new set of parameters that delineate how much value a company can offer its customers using the latest technology. In short, today’s leaders need a different skill set — one that encompasses a deep understanding of the potential, value, and cost of technology.
Observations on the Current State and Recent Developments
In order to gauge how technology is driving strategy, it’s important to first examine the current state.
Many of today’s profitable business models — like e-commerce — were invented in the 1990s, but they weren’t successful due to the lack of appropriate technology at the time. Today, however, the rate of change is accelerating, including the shift of focus from products and patents to brand and experience, from a waterfall business model to an agile one, and from command and control to design and execute.
In addition, technology is becoming more affordable and faster to implement. Yet companies aren’t leveraging it as much as they could. For example, while the number of people involved in manufacturing a car is declining, numerous workers are still required to handle compliance — although compliance could be 95 percent automated through machine learning.
Moreover, if lifecycles shorten, building on products and patents isn’t a sustainable business model — with the competition releasing the same or better products at a rapid pace, any competitive advantage isn’t sustainable. In contrast, new, digital-born companies use the concept of the minimal viable product —or the most basic, lean form of a product upon which upgrades can be built — to create the minimal viable organization — or the leanest form of an enterprise needed to operate.
Impact of Technological Advancements on Organizations
While many companies still try to do “business as usual,” it’s important to understand that technological advancements most definitely impact business models. According to Harvard Business Review, industries can be transformed when companies utilize a business model that can connect a technological innovation to an emerging market need. If you take the example of Blockbuster, it’s clear that with Netflix, Redbox and video on demand services offering more convenient ways for consumers to get videos and games, the company’s business model simply became obsolete. Today, thanks to cloud computing and high-speed Internet, Netflix — as well as a host of other companies — can offer consumers maximum convenience via streaming video that’s delivered right to their TV, computer, or other device. Similarly, although e-commerce sites were cutting-edge in the 1990s, today we expect most brands to have an online store.
What this means is that business models aren’t necessarily state-of-the-art anymore. When the focus is too much on products, it puts profit margins at risk. On the other hand, if a company’s business model is cutting edge, its automation level might not be optimal.
In general, companies are still wasting too many resources on processes and tasks that are non-differentiating — and that could be streamlined and automated for a better outcome. And when resources aren’t optimally allocated, companies might lack power where it counts — at the client interface. As a result, clients don’t get the experience they’re promised — so they aren’t engaged.
Questions to Ask as an Organization
To create winning business models, organizations need to let their strategies be informed by technology. They need to ask themselves the following questions:
- Is there a clear understanding regarding what processes, roles, and technology are relevant for the client, what’s relevant to running the business, and what’s become obsolete?
- Are the company culture, strategy, and structure sufficiently defined for the organization to take advantage of change?
- How can the organization make the best use of technology to automate operations and free up resources to create agility at the client interface?
- Has the organization answered the questions, “Can I avoid it? Can I simplify it? Can I automate it? Can I outsource it?” for each work element?
- How resilient is the business?
- Why are so few white-collar processes automated? What can be done to change this?
- Is the organization fully client-centric and if so, how is this reflected in KPIs?
- If the company’s products become less important, how will the organization protect its brand?
- How does the organization create the best client experience to protect its margins?
Recommendations for Driving Business Strategy With Technology
In order to drive your business strategy with technology, you need to understand where your organization is in its digital transformation. At the same time, you should focus on developing your business’s core. Avoid creating decentralized startups around you, as they’re challenging to reintegrate afterwards. And finally, challenge your leadership team. You need people who understand your business, understand the potential of technology, and want to develop the core together. Thanks to our extensive experience helping organizations navigate transformations, we possess a deep understanding of the type of leadership talent that’s needed in transitional times. For more information, please contact our offices at your convenience.
About the author: Eric Krapf is a Partner at Stanton Chase Switzerland