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Strategy is Digital | Digital routes of the future (resource hub)

New business models are emerging all the time. Speed of business used to be defined in months and days. Now it is counted in minutes and seconds.

Get ready for big digital transformation

3.2 billion people are now online, and they are already spending more time there than watching TV. They are making and watching videos about products they like – and tweeting vigorously about customer service that they do not like. Taken together this means that traditional approaches to marketing are obsolete.

Professor Mikolaj Jan Piskorski and Professor Carlos Cordon

 

Some companies have been at the forefront of developing new strategies as a result of what they have learned, but many have not, and there are a number of issues businesses need to consider before making their next moves.

100 senior executives with diverse industry backgrounds and expertise attended an IMD Discovery Event on digital and social media. They had the opportunity to analyze how these media have changed the customer decision journey and how they should respond to leap ahead of their competitors.

According to Professor Carlos Cordon, the world’s population is 7.3 billion, we are only halfway there! The internet has empowered us to change the way we gather and share information.
Social platforms – which account for about 22% of all time spent online – are at the forefront of this revolution.
Social media is a huge and diverse phenomenon that is constanlty changing. From mainstream platforms like Facebook, WeChat and Twitter to more specialized platforms like LinkedIn, Snapchat, Instagram and Match.com to thousands of smartphone applications, social media has changed the way humans interact with one another.
It has also transformed the customer experience in both business to consumer (B2C) and business to business (B2B) industries.
The evolving social media landscape is also impacting B2B industries, which today account for 10% of all e-commerce sales – a number that is expected to rise.
For example, Cisco has transformed the customer experience with its Certifications program, by creating a social learning community of Cisco-certified professionals, as an effective way to engage with its base of loyal users, identify customer leads, collect ideas for product development and raise the barriers to entry for its competitors. At the other end of the scale, IT professionals benefit from Cisco’s program not only by upgrading their skillset but also by connecting with an exclusive group of senior IT executives. This gives them the opportunity to exchange ideas, find solutions to technical problems as well as land new job opportunities.
Today customers search on Google, watch YouTube videos, read blogs and product reviews, rank a product or service and share information with their friends on Facebook both before and after purchasing a product.
All of this has rendered the traditional marketing funnel of awareness familiarity-purchase-loyalty obsolete.

For Professor Piskorski, the customer decision making process is no longer a funnel but a journey, on which customers consider, evaluate, buy, experience and bond with a brand.

This is particularly applicable to the consideration phase because now customers add more brands (rather than eliminate) as they go along, and in the loyalty (bond) phase, where customers are keener than before to collect and share information. The new customer journey has multiple touchpoints, both online and offline, which means companies have to be present in all of them. For this reason executives need to approach this challenge holistically – rather than having a Facebook strategy or a Google strategy, they need to devise a digital and a social strategy.

Influencers and your social strategy

Being present at every stage of the customer decision journey is a formidable task for most companies. One way they can address this challenge is by placing influencers – third parties who can raise awareness and facilitate purchase of a company’s products.

Firms that place influencers at the heart of their social strategy do so to increase their presence at each stage of the customer journey.

According to Matt Krautstrunk, one of the best ways to shape your social image is understanding how to target and influence lead users within your industry, people who shape and impact a community’s way of thinking.
According to Forrester Research, “a minority of people generate 80% of the impressions. 6.2% of the online adults generate 80% of the influence impressions. 13.4% of the online adults generate 80% of the influence posts.”

Klout offers a score to Twitter users based on their reach and influence. Look for people with high network influence, “engagement is measured based on actions such as retweets, @messages, follows, lists, comments, and likes.

Companies are using online influencers in two ways.

  • The first is by having other people talk about their brands, for instance by sponsoring vlogs (video blogs) by popular online figures. (Download Report: How Brands Use Online Video to Drive Retail Sales)
  • The second is creating communities using platforms such as Pinterest, Facebook and Twitter; research suggests that a typical Pinterest user is very likely to buy something she has “pinned” (placed on a virtual noticeboard) or seen pinned by others.

Such communities need not be consumer-focused: Cisco has made effective use of communities in the B2B space to build leads, collect ideas for product development and increase the barriers to entry for its competitors.

Reach out to them and ask for feedback on your content. Give them a bit of special treatment to deepen your relationship.  A few shares or retweets from brand influencers could be all that’s needed to shape your PR Strategy.

Though beware of boasting about your effective PR strategy.

Peter Shankman, Customer Service: New Rules for a Social Media World,’ believes, “there could be a potential backlash if you say, ‘we’re going after people because they’re influencers.’ Don’t share the methods of how you’re finding your people because there could be bad press.”

As Shankman mentions in the section “Always Be Aware – It’s the Thing You Don’t Think of That Can Kill You”:

Your PR strategy should be a mix of engagement and voice, (through brand influencers) targeted to your end users.

Using social media to create communities is the second way that companies can seek to influence consumers. Many companies have discovered that Pinterest – a website that allows users to search, “pin” (i.e. place the image of an interesting product on the Pinterest board) and eventually purchase a product – is a great vehicle for increasing brand awareness and engaging with customers.

In fact, according to Professor Piskorski, China is one of the most interesting places to observe how companies develop integrated digital and social strategies for competitive advantage

The Chinese spend more time on the internet than people in the West

 

The blurring of traditional industry boundaries

As the amount of digital and social data increases, companies find it beneficial to start digging into them for competitive advantage.

The exponential growth and availability of data – is transforming the business environment and changing the rules of the game.

Industry analysis, a key framework for strategy formulation for the last 30 years, assumes that industries are well differentiated, something that holds less value in the digital age.

For example, which industry does Apple compete in?

Is it manufacturing, services, electronics or the music industry?

Likewise, the concept of the core competencies of the corporation, which states that organizations should focus on what they do best (and outsource the rest) is becoming obsolete.

The blurring of traditional industry boundaries and the fact that many companies act as partners to others (as opposed to competitors, suppliers or customers) makes the business environment an ecosystem, a network of organizations involved in the delivery of a specific product or service.

In this environment, it is difficult to predict which strategy will be the winning one, since companies depend on their partners. And as Professor Cordón pointed out, most traditional companies are still not leveraging big data to create better business models for themselves.

 

 digital routes of the future

New business models are emerging all the time. Speed of business used to be defined in months and days. Now it is counted in minutes and seconds.

What is big data?

While there are many definitions of big data, IBM data scientists identified the four Vs of big data: Volume, Velocity, Variety and Veracity.

Volume refers to the scale and size of data.
For example, it is estimated that 2.5 quintillion bytes (2.3 trillion gigabytes) of information is generated each day.
Velocity is about the speed at which streaming data is analyzed. Streaming data comes in many different forms, for example the New York Stock Exchange captures 1 trillion bytes of trade information during each trading session.
Variety pertains to the different forms of data. Websites like Facebook generate 30 billion pieces of content each month, including tweets, videos, pictures and polls.
Veracity refers to data uncertainty and its relative usefulness.
Forward thinking companies like GE, searching for competitive advantage by analyzing the huge quantities of data created by people’s online voices and actions.Amazon is exploiting the advantages of big data by developing new services, including “anticipatory shipping”. The online retailer uses all its valuable data about its customers’ preferences and habits to  predict what they are likely to buy, and ships those packages to nearby hubs or even trucks, where they wait until the order arrives.

So how do companies like Amazon, with over 10,000 products on offer, decide which product to show any particular user?
They use big data to adapt their mobile device websites by processing the information at their disposal – such as geographical region, the type of device being used, and the user’s areas of interest (based on previous searches) – to better understand customers and predict what kind of product or service the customer will be most interested in.
By using big data, managers can move from ideas, code and data – the human aspect of website design – to machines learning, building and adapting by themselves. 

Big data is also creating huge opportunities for entrepreneurs who are willing to innovate. Strava, a California-based start-up, is a web and mobile app that allows users to track their athletic activity, such as running and cycling, and to share their results and routes with other users. On Strava you can find the best local circuit for your activity, track your run or bike ride, compete with friends and other users across the world, and see what your favorite athletes are doing.

The sports data business ecosystem is constantly evolving. Consumers benefit from this because the ecosystem’s role is to produce goods and services that add value for customers.

Large companies, such as Nike, have taken this same strategy and rolled it out across millions of their customers. Such a strategy allows Nike not only to provide improved customer value, but also to predict when the customer is likely to need a shoe, and what kinds of shoes the customer will like, and use this data to power its R&D efforts which results in more successful product launches.

Managers should therefore place a high value on collaboration and on developing partnerships that will allow their company to continue innovating within its existing ecosystem.

 

Mediq’s big data journey: From pharmaceutical compounding and distribution to customized patient care
The pharmaceutical distributor, Mediq, based in the Netherlands, completely transformed its business model to one that depended entirely on the use of big data. Mediq used to simply distribute medicines and medical devices. Its revenues came chiefly from the fees it earned on the medicines it sold. But when the Dutch government changed the law whereby pharmacies in the Netherlands would be paid a “flat fee” for delivering drugs, the profits of the average pharmacy in the Netherlands dropped 90%, from €500,000 per year to just €50,000. Mediq’s directors were forced to take the company off the stock market and rethink its business model. This involved going back to the core purpose of the company and asking, “Why are we here?” The result was a complete change in focus, from “moving boxes” to “looking after patients.” In other words, Mediq became patient-centric and its goal was to become a trusted partner.
Using big data, Mediq discovered that 80% of the medicines it sold were for chronic conditions for which patients had repeat prescriptions. It also found that 99% of patients always collected their medicines from the same pharmacy. This allowed Mediq to forecast 80% of demand and thus drastically reduce warehouse stocks and costs.
Meanwhile its pharmacists had more time to advise clients on how to take their medicines. Mediq used big data to check if patients were taking the appropriate drugs in the correct amounts and following up with patients when that was not the case. It also contracted a third party to calculate how much money insurance companies were saving as a result of Mediq’s services. It then used this information to negotiate with insurance companies, which agreed to pay half the amount saved each year to Mediq. This currently represents 50% of the company’s income. The company is now expanding its customer base to include medical doctors and homecare facilities and exploring new solutions such as wearable technology.

One crucial thing to remember is that the only data that is good is the data that is going to benefit consumers.

 

The winners of tomorrow will be those that are prepared to embrace the new opportunities and adapt their business models today and continue to do so in the future. For that they will need new tools to succeed in their big data innovation journey.

Explore the world when determining the company’s purpose. Articulating the company’s why and the reason for its existence also allows it to explore new business models that are aligned with its purpose.

Consider Apple. People buy its products not because of what it does but because of what the company stands for – thinking differently. 

The business model canvas is a useful tool to craft your value proposition, decide on the best strategy, and discover the differentiating parameters in order to maximize profit.

Employing lean methodology can help discard business models that are not executable and improve the success rate of those that are, by quickly defining minimum viable products, then using the learnings to enhance agility.

A last word: The three leadership skills to take your business digital

According to Professor Carlos Cordon, there are three leadership characteristics evident in managers who successfully help traditional companies transition into leading digital businesses.

 

They look for new questions instead of answering old ones

Finding and answering new questions could lead to you creating a new, great and successful business model for your company.

They test a portfolio of new ideas and business models

The digital world is one of testing, learning and improving. Digital companies which succeed don’t know which idea will be successful in advance, so they develop a portfolio of ideas and build on the most successful ones.

For example, retailers often test preferred customer collection techniques.

Do customers want to purchase online and have their goods delivered to their home or work?

Or do they prefer the newer approach of “click & collect”, where packages are collected from a local store?

Perhaps counter-intuitively, a retailer found that in one city “click & collect” increased sales by more than 10% almost immediately.

Experimenting with ideas is vital to improve the customer experience, particularly in the digital space.

They work with fast learning cycles

When it comes to testing and improving ideas, good managers work with fast learning cycles.

The way digital businesses do this is by testing ideas on a small scale, a process called minimum viable product (MVP), moving with agility and making things happen.

 

Big data is transforming society and remodeling every industry. These changes are also opening up new and endless possibilities.

By now many firms have understood the importance of incorporating social and big data strategies into their everyday operations, but we are nowhere close to being done with the digital revolution.

Artificial intelligence, such as IBM’s Watson project, and the Internet of Things, whereby sensors connect and embed intelligence in billions of objects and devices all around the world, are going to affect the productivity, health and safety of billions of people. They are also going to result in countless new products and services that will transform the customer experience.Creating machines that have the ability to learn and then develop prototypes also means empowering them to adapt websites to best serve individual customers. Thus, with big data, growth is no longer linear, it is exponential.

When big companies act like start-ups to innovate, great things happen.

Innovating involves experimenting with prototypes and failing – several times over.

This often requires substantial resources, which smaller companies may not have at their disposal. Larger organizations are more likely to have the necessary resources but their structure or culture may hinder their ability to innovate.

The winners will be those companies that can identify the disrupting technologies that matter and develop solutions that deliver value to customers. In many of these cases, having a social strategy – using social platforms to deliver social benefits – will be a key element of securing competitive advantage and a profitable future. 

Strategy is Digital

How Companies Can Use Big Data in the Value Chain

Carlos Cordon

By Professor Carlos Cordon with Pau Garcia-Milà, Teresa Ferreiro and Pablo Caballero
This book presents strategies and practices to allow everyday companies to cope with the fundamentally changing landscape of business models and to take advantage of the huge business opportunities arising from the advent of big data.
It develops several case studies from companies in traditional industries like LEGO, Yamato and Mediq, but also examines small start-ups like Space Tango, which is partnering with major multinationals to develop new business models using big data.The book argues that businesses need to adapt and embark on their big data journey, helps them take the first step, and guides them along their way.
It presents successful examples and deducts essential takeaway lessons from them, equipping executives to capitalize on big data and enabling them to make intelligent decisions in the big data transformation, giving their companies an essential competitive edge.
Springer, 2016 ● Hardback ● ISBN 9783319311319Buy hard copy or Kindle eBook

The Value Chain Shift

Seven Future Challenges Facing Top Executives

Carlos Cordon

By Professor Carlos Cordon with Teresa Ferreiro
Value chains today have a huge impact on multinational corporations’ right to exist and the way they compete. The future challenges associated with value chains are also huge and include new demands from society, emerging-market strategies, resource scarcity, risk proliferation and other issues.
Anticipating and addressing these future challenges are crucial if companies are to compete effectively.
IMD and several multinational companies created the IMD Global Value Chain Center (VC2020) in June 2011 to develop research about the future of value chains.
This book summarizes some of the key findings from this two-year project.
IMD Publishing, 2014 ● Paperback ● ISBN 9782940485086Buy hard copy or Kindle eBook

Strategic Supply Chain Management

Carlos CordonRalf W. Seifert

By Professor Carlos Cordon and Professor Ralf W. Seifert with Kim Sundoft Hald
The supply chain is at the heart of every successful business organization’s decision-making process. This textbook explains how to create a winning supply chain management strategy by spotlighting how senior executives in European and US companies have turned their supply chains into strategic weapons designed to convert threats, risks and outside pressures into competitive advantages.
Strategic Supply Chain Management contains twenty real-world cases, all of which have been field researched by a top author team and tested out in the classroom. Each case adopts an executive leadership perspective to illuminate the real dilemmas faced by managers.
The authors draw on their extensive classroom and industry experience to ensure that the writing style is geared towards an executive education readership. This elite case package will provide a complete teaching resource and authentic learning experience for MBA and executive education classes in Supply Chain Management throughout the world.
Routledge, 2012 ● Paperback ● ISBN 9780415591768
Buy hard copy or Kindle eBook

Cordón, C., P. Garcia-Milà, and T. Ferreiro. 2015. “Will big data create jobs – or destroy them?” IMD Tomorrow’s Challenge.

IBM. “The four V’s of big data” http://www. ibmbigdatahub.com/infographic/four-vs-big-data

Cordón, C. and T. Ferreiro. “Is your company ready for the big data revolution? (Part II)” IMD Tomorrow’s Challenge.

Misiek Piskorski is Professor of Strategy and Innovation at IMD Business School. He is co-Director of IMD’s Leading Digital Business Transformation and teaches in Orchestrating Winning Performance.

Carlos Cordon is LEGO Professor of Strategy and Supply Chain Management at IMD. He teaches in IMD’s Leading the Global Supply Chain.

Discovery Events are exclusively available to members of IMD’s Corporate Learning Network. To find out more, go to www.imd.org/cln