Businesses must be prepared for continuous experimentation and embrace the opportunities of digital as they look to a post-Covid future
The importance for companies to be agile and adaptable has been highlighted by the disruption of Covid-19. Nitin Rakesh, co-author of Transformation in Times of Crisis and CEO of IT services business Mphasis, discusses how digitalisation and an innovative approach can help companies prepare for a fast-moving future.
The pandemic crisis precipitated breakthroughs on an unparalleled scale, heralding a new age in science and technology. Whether in the fields of AI, the Cloud, IoT, robotics, neuro-technology, quantum computing or personalised medicine, we’re seeing advances that are changing our understanding of what’s possible.
Businesses are now reliant on these advances to ensure their future. It’s imperative for them to be open to continuous experimentation with new technologies, be design-led, agile and innovative with business models to create value in new ways.
The upshot is that every business is, or will be, a digital one, and competition can now come from anywhere. As in the instance of Apple, which reinvented its business models by venturing into new sectors and revenue streams, including entertainment, gaming, preventative healthcare and payments (with the Apple Pay credit card).
Rise of the Fourth Industrial Revolution
Covid-19 has also sped up the advent of Industry 4.0 – the fourth industrial revolution – creating a new economy.
In his book, The Third Industrial Revolution; How Lateral Power is Transforming Energy, the Economy, and the World, Jeremy Rifkin analyses the forces of change behind the industrial revolutions of the 19th and 20th centuries, and labels our current state as the third industrial revolution, driven by a fusion of internets – namely digital communication technologies, new forms of energy, mobility and the Internet of Things.
Rifkin’s theory is taken further by the executive chairman of the World Economic Forum, Klaus Schwab, who states that the third has evolved into the fourth industrial revolution.
This is due to the rate and scale of breakthroughs, and the convergence of digital, physical and biological spheres, the likes of which has never been seen before.
According to the European Patent Office, by 2023 almost 30 billion devices will be connected to Internet Protocol networks globally, the majority of which will generate data in real time.
When this data is merged with the strengths of AI or other technologies, businesses will gain deeper capabilities for automation and analytics.
As we’re propelled into a new world, those who are effecting digital transformation not just across standalone business functions but in the very models on which their businesses are based, particularly when it comes to data, will dominate.
Transform… or be destroyed
In a survey conducted before the pandemic hit, 92% of company leaders said that they doubted the viability of their existing business models, given the speed of digitalisation at that point.
Covid-19 compounded this further, necessitating more widespread transformation to adapt. Despite the obvious turmoil and pain caused by the crisis, there are lessons learned too. Companies must reinvent themselves not once, not twice – but continuously, to stay relevant.
Disruptive thinking was happening before the pandemic; Uber and Airbnb, for instance, emerged as leaders without owning a single car or property. They recognised that today’s consumers were opting to pay per experience and only for what they use, rather than full ownership.
Their on-demand models and technology platforms simply connect services with users, and this was a catalyst for a new breed of business model across industries.
In the automotive sector, for example, traditional players were pushed by the Uber effect to transition to new models to stay competitive, such as BMW and Daimler, who teamed up to introduce their Share Now car-sharing initiative in 2018. They’re branching out into parking, charging, and ride-hailing services, among others.
These two staunch competitors broke with tradition and created more than a partnership. They’re building an ecosystem, diversifying their revenue streams and guarding their positions against disruptive newcomers.
The takeaways are clear. It’s vital for businesses to develop their agility, a revenue model that facilitates a steady flow of cash, speed of response, diversified portfolio and asset light strategies. Above all, it requires leaders who dare to take chances on innovative new opportunities.
Agility and experimentation
Agility enables a design-led approach to business, which most lends itself to times of uncertainty. Truly agile businesses can develop and release a minimum viable product or service, amending the functionalities and characteristics afterwards according to real time consumer feedback to create a perfectly tailored result.
If implemented well, this agile development model can take an offering from concept to market in eight weeks or so. Apart from accelerating the product cycle, the important part is how agile you can make your business strategy – whether you can flip offerings and pivot your model fast in response to market dynamics.
Analysing the considerable benefits of agile transformation, McKinsey narrows it down to four main ones: enhanced operational performance, customer satisfaction, employee engagement and, last but not least, financials improved by 20-30%.
Agility also impacts how well a business can experiment. By using insights garnered from the development process, they can monitor the progress of the innovations or strategies they’re trying out.
Iterative experimentation is non-linear, so leaders can test out several strategies at once and quickly see which one yields the best outcomes. It’s like spreading your bets to accelerate transformational and financial success.
Covid-19 shone a spotlight on companies or industries where change is most needed, where sticking to the status quo is not possible. A crisis forces leaders to re-evaluate their business and revenue models; and a crisis of this magnitude calls for transformation on an equally dramatic scale for survival.