The competitive advantage of being stupid and looking at our companies that way

By Thomas Oosthuizen

It was around 1998 that Prof Gary Hamel – at the time one of the 100 most influential names in business – said more of what you need to know about your own industry, will come from outside of it in future.

This is one of the truest statements ever made about business, almost 25 years ago.

Shortly after that I was dealing with a UK-based research company that worked for a client of mine, they still believed a “telco” survey meant you asked people questions about the telco industry. The initial research questionnaire I had to approve, embarrassingly for them, contained the name of the previous client they did a similar survey for – a top three global telco.

So, we even build parity into what we ask customers.

Today, the largest companies in the world are all businesses that did not exist 40 years ago. Some not even 20 years old.

So, whatever constituted an “industry”, is no longer predictable. Lateral thinking is more important than data. So much of what we learnt at university reduced in importance.

Let us take an example we know, Apple. With the iPhone, Apple combined telco (the obvious), with a camera (not so dramatic), combined it with emails (Blackberry already did), created a back-end ecosystem of apps and content (a “mega-library”). On their own, none of these were dramatic. Yet the thinking and the way it connected all into one small device supported by millions of ecosystem connections, is unique. Added to this, was annuity income. Added a high “barrier-to-exit”.

No linear planning system would have done this. The traditional way of working treated these as different problems that had bespoke industry solutions. The change came from left flank, not from where anyone expected it.

There is almost no industry I am aware of, that is immune to Amazon. It will eventually compete with almost all businesses in some way. Retailers, cloud systems, CRM systems, data depth, marketing spend, their own brands (now the largest number, I believe), customer-centric data management, analytics, logistics (they are already larger than most logistics companies), movies and other content. For now.

Linear planning processes, perfected by the best management thinkers, at best gave companies anecdotal insight into the future. Fortunately for many, critical mass goes a long way, but will not last forever. We saw how fast things changed with COVID.

I have now seen a few surveys that found for people under 40 no longer see traditional banks as the place to bank.

What we know about our business, is now far less than what we do not know. The expectations from a board, executives and staff, need an entire overhaul.

In the past, we were rewarded for doing a particular job very well. When you became exceptional, you were promoted to manage a division. Hence, we institutionalised stagnation.

To be a specialist in one industry is now a competitive disadvantage.

This is what makes management in our time, such an incredible challenge. We live in a world where resource utilisation has become malleable. Cheap technology enables very fast change.

Companies separated functions to perform from the reasons why they are performed. Companies added layers of complexity and redundancy, recruited this way, designed the business this way and developed job titles this way.

How does any of this relate to customers? Many staff don’t know.

This is when being too clever, becomes a competitive disadvantage.

Now soldiers no longer fight wars, drones do.

The thinking at the very top first needs to change. Stop talking about industries. Bezos does not.

COVID forced much change much faster. It brought agility that we were forced to adapt to fast.

Process automation is the foundation for almost all companies. It produces a product or service, millions of times over, in the same way, using the same hardware and software and people with the same skills. Excellence is contained in the exact replication of each item or moment of truth.

People are hyper-specialised. Companies are mostly siloed. Many departments hardly talk. Information flow in most companies is slow or just do not happen throughout.

Executives are still remunerated for share performance, not business sustainability. So why bother? Worse, why risk?

Yet, risk is the new competitive advantage. Tesla was “never going to work”.

So many companies have stagnation built into their DNA.

We are not even able, as executives, to productively apply new technology, so anecdotal solutions will not help, we as humans need to change. In a McKinsey report of October 2021, it is stated, “We estimate that banks on average convert just five to ten cents of every dollar of tech spend into additional business value.”

How do you today explain that a major global bank, has a role for Growth (excluding M&A -customer growth in numbers and revenue/ customer)? Then, on the same level in another department, one for “Customer Retention”, then one for “Growth from existing customers”, then another one for “Customer Acquisition”.

In a recent McKinsey report, it is stated that, “The winners in AI-based insurance will be carriers that use new technologies to create innovative products, harness cognitive learning insights from new data sources, streamline processes and lower costs, and exceed customer expectations for individualization and dynamic adaptation. Most important, carriers that adopt a mindset focused on creating opportunities from disruptive technologies—instead of viewing them as a threat to their current business—will thrive in the insurance industry in 2030.” (“Insurance 2030–The impact of AI on the future of insurance”)

How many existing insurers can do this?

I now have a business bank account that incorporates, free of charge, accounting software. It gives me a P&L, balance sheet, tax calculation, sends invoices, follow-up on outstanding payments and even thanks the client for paying. So, in one small step, it replaced many other systems. For free.

Between the two major COVID lockdowns, a survey of 3000 executives found that 89% believed they will need greater innovation to escape the pandemic. Yet these same executives stated, they only had 21% of the inhouse resources to drive change.

So, executives agree to this, but only they can make the changes! It starts there. It is risky and needs to exclude holy cows. Not all will work.

Unilever, a company that just seems to get it right often, made a very important statement in the earlier days of digital, it stated digital is not for digital people. Specialists are required, yes, but everyone in the company needs to become digitally savvy. That demonstrated an entirely different way of dealing with corporate change.

Let us all be stupid again.

It starts with the executives and board – to set a new course creates a massive discomfort-zone. Yet, by setting the example, changing the way people are promoted, changing roles and structures, signifies being serious. Turn the way the company thinks around.

Try to erase your own “industry” from your mind. Then start thinking different. Exciting.

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