Bold and decisive agendas can help companies lead through market disruption.
Leverage “the five Cs” — challenges, capabilities, configuration, cloud and culture — to create lasting competitive advantage, regardless of market trends.
Focus on a bigger, broader picture to envision how to best serve your customers’ future needs.
At a time when technological disruption seems to be happening faster than ever, it’s easy to get caught up in the chase. A new platform or device shakes things up, and many businesses swing into reaction mode, thinking that if they can just roll out their own version, they will be able to keep their business relevant and competitive.
There’s a better way to set your business up for success: Stop chasing the disruptors. Instead, focus on making bold decisions now that will allow you to shape your own future — and make other companies follow you.
It’s easier said than done, of course, but there’s a simple way to get started. Focus on a few key decisions that can help you reimagine how you work and who you are in the digital era. These are big decisions, but one way to think about them is in terms of “the five Cs” — the challenge, capabilities, configuration, cloud and culture you need to boldly reshape your business model to create value for the long term.
Disruption from platform-based businesses often has companies scrambling to reconfigure their business models to follow suit. While digitization is critical, it’s important to recognize that technology isn’t the reason those businesses were able to break away from the pack — it’s that they focused on solving problems for their customers in innovative, lasting ways.
What’s more, disruption itself isn’t nearly the business threat many companies think it is. Technology changes fast, but the resulting marketplace disruption often moves far more slowly — typically in waves. According to a recent PwC analysis of 599 companies, the most common disruption pattern starts with a period of stability. This apparent calm can last for years, leading many dominant players to be complacent, while change is brewing beneath the surface. Then, disruption bursts out. Old ways of doing business no longer work, even in sectors that never dreamed digital technology would turn their world upside down. Consider, for example, the long period between the moment that smartphones became ubiquitous and the point at which ride-sharing companies transformed urban transport.
So even as new technologies emerge, you have time to get prepared. But you can’t procrastinate either. Your ability to shape your own future depends on making big decisions about the societal or customer challenges your organization will take on.
The bottom line: There’s no upside to postponing these decisions. As the saying goes, “The best time to plant a tree was thirty years ago. The next best time is now.”
To stay ahead of disruption, your goal shouldn’t be to try to guess exactly what’s coming next. That’s impossible. Nor should you focus solely on reacting to the market. That will make you a fast follower at best.
Instead, focus your leadership team on setting a bold agenda. Society is facing significant challenges — world hunger, sustainability, renewable energy, healthy living, smart transportation, access to affordable, quality education and more. At the same time, your customers are facing their own challenges. How can your organization help solve some of those problems? What challenges is your organization uniquely poised to help address?
The five Cs can show the way to achieving a lasting competitive advantage. The first two will help you unlock the big ideas that can be your North Star. The next three will help you realize those ideas and meet your customers’ most pressing needs.
We can no longer separate the challenges facing our society from your value proposition. These topics are increasingly the same. Step back and identify the big issues. Your goal here is not simply to check the box when it comes to a long list of ESG metrics, but to focus on the outcomes required for success. If you focus on these big-picture problems, rather than short-term trends or here-and-now products and services, you can shape your future instead of reacting to what others are doing.
If you make construction equipment, for example, don’t start with how to make a better bulldozer. Start with the construction site of the future — one that will help clients deliver their projects — and what your role in it should be. Thinking this way will help you establish what the market will be. It will also help you identify the right partners to create and lead the ecosystem that can meet your customers’ needs.
Building the right system of capabilities is about what matters most to the customers you serve with your unique value proposition. That’s why competitive advantage through capabilities can be so valuable — it’s bespoke to your organization. Nearly all forms of differentiation in business come from your distinct capabilities, rather than what you sell or deliver.
Prioritize the capabilities through which you can truly differentiate yourself. For everything else you need, find a good partner to help. This “ecosystem” approach means joining forces with other organizations with complementary capabilities in order to capitalize on each other’s strengths.
If you are very good at something, your advantage can build on itself, creating a “flywheel effect.” For example, the better your capability for acquiring and analyzing data, the more you can personalize the customer experience, which attracts more customers, who will give you more data. With all that data, you’ll be prepared to spot disruption early — or generate it yourself. Other capabilities can create advantages that keep growing, no matter how the world shifts.
Capabilities unlock flywheel benefits in two ways. First, the right capabilities almost always have benefits beyond the products they directly support. Most great capabilities outlast product life cycles, allowing you to innovate, create new products and services and enter new markets.
Second, strong capability systems can attract more suppliers and customers who will have their own networks that you can tap into to drive demand. The greater the demand, the more you can invest in your capabilities, which will help you further increase your competitive advantages.
The work required to solve the big challenges ahead is going to take a new organizational model, replacing the old “cross-functional team” with a combination of distinct and diverse resources that will build the capabilities you need to deliver on your promises.
These outcome-based teams should be built to bring together the right skills and talent from anywhere in the organization and focus on clear deliverables that drive customer value. Think innovation teams that bring together research and development, supply chain, marketing, finance and legal experts, regulatory management teams that include diverse government, legal and marketing talent and data experts who are being integrated into pricing teams.
There are also many examples in which the boundaries of companies have been significantly rethought — exiting manufacturing, teaming up with ecosystem players to drive distribution or even relying exclusively on others for innovation and technology.
These teams need to be permanent, not just formed with part-timers working together for the duration of a specific project. If you have capability gaps in critically differentiated areas, set those teams up with the right skills and leadership and make investments to fill the gaps.
This is also an opportunity for you to reevaluate activities you don’t have the scale to deliver well — they’re a waste of management attention.
The cloud’s abilities to navigate changes in demand and supply are priceless. These capabilities allow companies to scale up and down as needed, make remote work seamless, shift supply chain operations and automate functions like cybersecurity. That’s probably why a PwC survey found that 74% of business executives are personally engaged in cloud strategy. Yet most companies aren’t yet seeing the benefits. In that same survey, most (53%) business executives told us that cloud investments haven’t led to substantial value.
They aren’t alone. Despite large investments, relatively few of the technology investments companies are making are truly driving them toward a differentiating outcome that truly matters to customers. What’s more, our PwC Digital IQ Survey found that only 7% of executives believe their primary aspiration for digital outcomes in the next two years is to solve big-picture problems aligned with their organization's purpose.
It’s critical to shape your technology agenda so it enables you to build the right capabilities and deliver outcomes that not only fuel your competitive advantage, but help you solve the big challenges you want your organization to focus on.
As you consider the unique value you want to create for customers and stakeholders and the capabilities you need, ask yourself, how can technology help us excel at those differentiating capabilities? Having a clear answer will help you prioritize outcomes and technologies that advance your unique value proposition.
Perhaps the biggest obstacle to change is the fact that most people don’t like it. They would rather stay in their lane and do things the old way. If your organizational culture is resistant, you may get nowhere with your chosen challenges, capabilities, configurations and cloud initiatives.
In PwC’s 2021 Global Culture Survey, 72% of leaders and employees told us they think culture helps successful change initiatives happen. To build a culture that is laser-focused on your chosen challenges and capabilities, one that relies on your people to do amazing things, you’ll need to create a new societal contract with your employees that addresses their fundamental needs and allows them to connect with your purpose — that big challenge you will embark to solve. This is a significant undertaking. In a recent worldwide survey of employees across industries, only 28% of respondents reported feeling fully connected to their company's purpose.
You’ll also need to identify very specific behaviors resident in your organization today and consider how some of these can be positive reminders of what your organization must accomplish. Be specific in identifying the behaviors you want to develop, and help your leadership team lead by demonstrating them. A culture that is inherently collaborative may not always give you the results you want: It can drive incredible innovation, but it can also slow things down in places where this behavior doesn’t improve customer outcomes.
Inventory your starting point and use culture to drive the change rather than allowing it to resist where you are headed. This will also help you establish with your people the required agility and comfort with change that nearly all organizations need to address the fundamental challenge they take on.
The world is changing fast, but you don’t need to chase after the latest trend or your competitors’ latest moves. Instead, you can use the five Cs to reposition your business model for lasting growth. Carefully identifying a few long-term challenges to solve and the right capabilities to develop will help you focus on your areas of maximum competitive advantage. Building the right configuration, cloud initiatives and culture will help you solve these challenges, even as disruptions come and go. It’s time to make the big decisions that will shape your future.