In a world where digital disruption is becoming the norm, traditional growth planning will not guarantee sustainable success. Writing in MIT Sloan Management Review, Didier Bonnet and Pete Maulik propose new approaches to formulating strategies fit for the digital economy.
Their advice is aimed at large corporations, which face increasingly difficult challenges in defending their existing business against both established rivals and new players. At the same time, these companies are under pressure to develop future strategies that take digital technology into account.
Some respond with a strengthened commitment to protecting core business through productivity and cost efficiency measures. Others look to acquire digital businesses. Walmart’s deal with Jet.com and General Motors’ attempt to acquire Lyft are good examples. The authors, however, believe that neither of these approaches is sufficient.
Finding opportunities for growth is getting harder, due not only to exploitation of traditional market dynamics by disruptors but to the growing burden of regulatory and competitive conditions as well. Rapidly advancing digital technology can be used to overcome market barriers and create innovative business models, however, this is a complex task.
Big businesses can win
Encouragingly, Bonnet and Maulik feel that large businesses can rise above disruptors by taking advantage of scale – which is something the disruptors cannot match. By being ambitious in their vision, global in their planning and strategic in their investments, and by mobilising their substantial resources in the right way, they can become digitally dominant.
For this to happen, they must turn away from old methods of growth strategy formulation. In this digital era, with its rapid change and uncertainty, you cannot rely on yearly cycles, historical analytics and incremental thinking.
Bonnet and Maulik propose that strategy formulation should be reframed around three fundamental truths. In each case you need to work out how best to ensure your company’s continued growth and sustainability, and answer the authors’ question: “What’s your play?”
“Truth 1: You can’t analyse your way to the future; you need to invent it.”
If your ambition is to develop a great competitive advantage and grow disproportionately, your strategy needs to anticipate the future and not just address the present. For example, razor giant like Gillette should have anticipated consumer demand for an e-commerce-based shaving subscription service, rather than focusing on their obvious rivals.
Your predictive ‘play’ should include:
- Blending deductive analysis and inductive reasoning to make creative, prescient, market-opening leaps;
- Building a company culture that rewards inside-out and outside-in thought;
- Imagining future consumer needs – beyond your current product range, customer base and industry;
- Assessing the potential of digital advances for overcoming barriers; and
- Generating innovative ideas through collaborative exercises involving staff who can think outside the box.
“Truth 2: Competitive evolution is no longer linear – it’s exponential and disruptive. Your strategy needs to reflect these dynamics.”
While fixing a future goal is vital to resource allocation, your strategy must have the agility to adjust to market changes. Without this flexibility you will not only miss opportunities but open your business to attack by disruptors.
The story of Blockbuster illustrates this. As recently as 2008, its CEO dismissed Netflix as a minor competitor. Within two years Blockbuster was bankrupt and Netflix had millions of subscribers worldwide. While Netflix had rapidly switched from disc mailing to video streaming, Blockbuster’s shops, stock and sales staff had turned from assets into liabilities.
Your agility play should include:
- Assessing market dynamics continuously.
- Monitoring the effects and new opportunities of commercial and technological change.
- Adjusting direction to keep your goal in sight.
- Freeing your digital strategy from the constraints of your budgeting process.
- Responding with a series of sprints toward your goal – made possible through flexibility in your investment capacity.
“Truth 3: Ambition for growth isn’t the problem. Your biggest hurdle may stem from an inability to catalyse the organisation into action.”
Making the bold moves needed to grasp new opportunities can be difficult in large multinational businesses. Their tendency is to focus instead on things like efficiency, excellent performance and risk minimisation.
Bookseller Barnes & Noble, for instance, has lost out twice through its slow reactions. It failed to make an aggressive investment in e-commerce in response to Amazon’s rapid initial growth. Then it responded slowly to the trend for e-readers.
Your catalysing play should include:
- Allocating time, effort and investment to experimenting with digital possibilities and developing ideas;
- Recognising such work within your company’s key performance indicators or objective and key results; and
- Galvanising your staff into action by creating a persona of the hypothetical future rival who will disrupt your business, and developing strategies to beat that competitor.
Grow digitally or be disrupted
In conclusion, Bonnet and Maulik reinforce the message that global businesses who focus only on what is happening today are at risk of extinction. They can use their scale to fight back with an effective digital growth strategy, but this needs to anticipate the future, respond dynamically to change and be actively supported by your whole organisation.