The past year brought into stark reality the need for organizations to transform with digital to become more resilient and responsible. Since the beginning of the pandemic, clients have repeatedly told us that they can never again be so unprepared for a disruption. There is also broad consensus that we’ll continue to regularly face major disruptions – whether societal, industrial, or technological – so now is the time for organizations to get serious about becoming more modular and agile, in order to sustain growth. We may not know what comes next, but we do know that regular change is a certainty.
The unrelenting challenge for organizations through frequent disruptions will be to keep focused on core business drivers, while still innovating new products and services to meet changing customer and employee needs. As we enter 2021, there are three actions you should take to manage both imperatives.
Rein in Your Disparate Digital Initiatives
At Avanade, we’ve seen organizations dramatically accelerate their digital transformation initiatives due to the COVID-19 pandemic. To recover and become a future-ready digital business, most organizations will move through three phases: Respond. Reset, and Renew. Unfortunately, many organizations have defaulted to siloed ways of operating to respond to the disruption. This has resulted in uncoordinated digital transformation efforts that have wasted money and left their businesses more fragmented than ever.
To survive, organizations must quickly get a grasp on the disparate investments they’ve made so far in response to the economic slowdown and adopt a more disciplined approach to digital transformation going forward. Insights from MIT Sloan’s Center for Information Systems Research (MIT CISR) show that what differentiates top performers is not how much they invest in innovation, but how their portfolio spend is balanced across both customer experience and operational efficiency outcomes.
“Unfortunately, many organizations defaulted to siloed ways of operating to respond to the disruption…that have wasted money and left their businesses more fragmented than ever.”
To get more coordination across the disparate digital initiatives in your organization, MIT CISR research provides some useful guidance on how to balance innovation investments to achieve specific business outcomes. Equally importantly, courage is needed to stop in-flight innovation projects that are not materially contributing to business outcomes. This action is particularly urgent at the start of 2021, to avoid further wastage and optimize limited resources as organizations shift focus from survival to future growth. Combining shorter project phases with more frequent “go/no go” gates and agile procurement mechanisms is key to managing risk in this environment.
Rethink how Your Business Will Grow
Most of our clients recognize that it will take several years to renew their business models and return to sustained growth, however the work has to begin in 2021. To remain resilient through continual change, organizations will require alternative business model options. It’s time to diversify from linear B2C and B2B go-to-market approaches that currently predominate and open new revenue streams across multiple ecosystems, including possibly those of competitors. MIT CISR identifies four ways that companies can potentially make money in future digital ecosystems, namely as:
- A supplier, operating in the value chain of another more powerful business;
- An omni-channel business, controlling an integrated value chain spanning physical and digital channels;
- An ecosystem driver, providing an open platform with interfaces that allow partners to integrate into the platform and increase value creation;
- A modular producer, providing best-in-class plug-and-play products or services that can add value to any number of ecosystems.
“It’s time to diversify from linear B2C and B2B go-to-market approaches…and open new revenue streams across multiple ecosystems, including potentially those of competitors.”
MIT CISR also advocates that organizations transform from inside-out, product-centric business models to a “life events” focus on how the needs of customers are met in areas such as home, education, energy, mobility, etc. For example, an insurance provider that currently sells by individual product lines could instead curate all of the products and services a customer wants to buy and insure a home from across its own portfolio, as well as the portfolios of partners and possibly competitors.
To become ecosystem-ready, organizations must rethink how they do business. Organizations have talked the talk for years, but true transformation has generally been limited by internal silos and stakeholder conservatism. The current global disruption creates a unique opportunity to break down these barriers and become an ‘outside-in’ digital business. To renew as a resilient and responsible digital business will require a complete reset of your talent agility and decision rights, the scalability of core systems, the modularity and data centricity of the products and services you provide, and customer experiences and care.
Reset as an Organization Ready for Constant Change
Making the shift to an outside-in digital business cannot be delayed. And no more Band-Aids; this must be a true reset. The seemingly unceasing journey of digital transformation has to end. Organizations that fail to transform to a digital business in three years will inevitably be sunk by either disruption or a lack of revenue streams, or both. It’s time for organizations to get serious about becoming more modular and agile, so they can make money across multiple ecosystems into the future. To be ready for continual change will require an evolutionary architecture. Gartner counsels an organization-wide focus on: “odularity, efficiency, continuous improvement, and adaptive innovation.” A liquid architecture also facilitates orchestration across ecosystems. Cloud-powered open platforms, democratized data, and an API-first approach will be key pillars of an evolutionary architecture, but this is not just about software and systems. The reset should be human centered.
“It’s time for organizations to get serious about becoming more modular and agile, so they can make money across multiple ecosystems into the future.”
In recent years, organizations have moved to focus more on customer and employee needs – and one silver lining of the pandemic is that care and safety are now a higher priority. However, much of this progress has been achieved by retrofitting traditional business models. Truly human-centered, experiences-led business models are still rare. That will have to change if organizations are to attract customers, partners, and talent across ecosystems in the future. Cooperation and standardization among partners will also be fundamental to human-centered, experiences-led ecosystems. The lynchpin of the shift must be a shared culture of transparency, ethics, and integrity.
So how do you mobilize a reset in 2021? Think plug and play across your systems and processes, but also talent agility. Gauge what’s necessary to create a workforce that is both emotionally resilient to and embraces disruption. Beyond technology solutions, consider the cultural behaviors and empowering processes that help employees thrive in, and be inspired by, constant change.
Agile-with-a-capital-A often arouses cynicism, but take the time to critically evaluate how you can harness key principles of the methodology like more flexible and autonomous teams, customer co-creation, and a test-and-learn approach. Be open and honest about the impacts of change, as well as experiments that “fail” and how they can translate to learnings. Intelligent data is essential to all of these principles – and will also be critical to differentiating your organization across ecosystems – but don’t wait until you have all the inputs. Start with some business outcomes-linked hypotheses and then conduct small experiments to learn and iterate.
Need help to prioritize where to focus in 2021? Assess your business against these 10 strategic levers spanning both operational efficiency and customer facing/new business models to identify investments that will reset your organization to be ready for continual change.
Author Jillian Moore is global advisory lead at Avanade. Read more from Avanade here.
