According to a report by consultation company PwC, there are many things keeping corporate management awake at night. One of the biggest and constant concerns among management is the fast pace of technological advancement. Of particular interest is that while many established businesses are aware of the threat of digital disruption posed by fast advancing technologies, corporate management feels that their companies are not sufficiently prepared to face the challenges of digital disruption.
Professors Jeffrey Pfeffer and Robert I. Sutton from Stanford University refer to this situation as The Knowing-Doing Gap. However, according to them, the gap is not so much about incompetent leadership as it is about the built-in forces in organisations that hinder the process of moving from acknowledging an issue to acting on it.
But how can businesses better prepare for digital disruption?
Stop clinging onto old systems
As the pace at which business environments change increases, the ability to quickly adopt new technologies becomes increasingly important for maintaining a competitive edge. The financial and strategic benefits offered by new technologies are clear, but adjusting to them can take time. The slow pace at which established businesses change is particularly due to legacy systems. Long estimated useful life of legacy systems often results in a skewed picture of a business’ true competitive sustainability.
Another influencing factor is that in some businesses, it is felt that technological innovation will bring only a marginal competitive edge when compared to the size of the investment required. It is true that if a business is technologically out of date, instead of bringing a competitive edge, the primary benefit of new technologies is ensuring the continuity of business activities.
In this case, adopting new technologies is not so much about creating a competitive edge as it is about survival. With digital disruption shaking up the entire industry and its supply chains, the courage to invest in new technologies may save your business.
Give your business a fighting chance in the future
The impact of digital change on business activities can be approached through considering what kind of value a business aims to create for its customers. According to the well-known value discipline model by Treacy and Wiersema, businesses have traditionally strived to achieve a competitive edge by excelling in one of the three value disciplines:
- Product leadership, achieving a competitive edge with the best product features (e.g. Apple, Google)
- Operational excellence, lower costs compared to competition (e.g. Walmart, Lidl)
- Customer intimacy, superior customer experience (e.g. Nordstrom, Stockmann)
However, organisational theorist and author of the book Crossing the Chasm (1991), Geoffey A. Moore points out that in the world of digital change, businesses such as Amazon or Google are able to beat their competition simultaneously in several disciplines. With the use of various algorithms, these companies are able to both manage their supply chain more efficiently (operational excellence) and offer their customers top-quality experiences (customer intimacy).
Businesses falling behind in digital development today may be worse off than their competition in all the three disciplines tomorrow. Businesses with the courage to change in time give themselves a fighting chance against their competition in the future.