Strategy has to take into account changes borne out by tech trends
Does technology dictate strategy? Any modern enterprise has today become short-term focused and managers focus on delivering quarterly profits. Targets for most organisations are at best annual and many managers carry quarterly and monthly targets and even incentives. Markets are highly dynamic, consumers and customer loyalty is waning towards brands, competitors are aggressive and value chains are collapsing. All this is happening at the back of innovation in all aspects of business, and technology is the catalyst of disruption and transformation.
It was in 1886 that the automotive industry took birth and came into mass market with Model T manufactured by Ford. Over the next century, the auto industry made great strides and created great societal benefits of freedom of movement, jobs and wealth creation. Over the past decade, the same industry has come under severe disruption from a variety of tech advancements. The industry is changing from within with the advent of electric cars which will have a very different value chain. Did all this come about because strategy dictated that companies to create new technology or new technology is forcing companies to create strategies to deal with disruption?
Over the past decade, a tectonic shift in technology has affected not just one or two industries but almost every industry. Rapid advancement in communication and IT infrastructure alone have disrupted industries right from automobiles, transport, hotels to even those which adopt technology at a slower pace such as education and health care. Technologies like mobile broadband, artificial intelligence, machine learning, cloud platforms and Internet of Things have created a huge disruption and businesses are rapidly transforming to be technology-enabled with newer models.
Now, to the answer the question, whether technology is dictating strategy, one needs to look at all elements of strategy. Strategy development is a long-term process and one needs to have a long-term view, between five and 10 years. None of the companies which have created new business models and used technology to create global scale came into being overnight. It has taken seven-10 years for each of the disruptions to be where they are today. The key questions that need to be answered while developing strategy are:
Where to play? What new markets to attack and what existing markets to defend? What are the product and services strategies that would help achieve this objective?
How to differentiate? What technologies to use or develop that will produce sustainable competitive advantage by either adding value or lowering costs or both? Which technologies can create game changing market dynamics?
How to play? Is GTM going to change with new products/services? How will customers be serviced? How would you sell? Will the distribution model change? How does a firm’s own capabilities change to deliver newer products/services?
When to play? In what sequence should the new products/capabilities be introduced in market?
What is the economic benefit? How would the business model change with technology?
The answers to these are highly influenced by tech trends. However, strategy development needs to look at political and regulatory shifts, business model changes, societal changes and environmental impacts. Companies like Amazon, Google and Facebook are thriving at the back of globalisation and global scale. Environment is a big concern and any strategy will need to account for its impact. For example, solar energy may become more popular and alter power generation over the next few years or decades.
Political environment around the world is changing and countries are having to rethink trade and movement of resources. This has a major impact on the strategy of companies. In such an environment of rapid innovation, technology allows firms to acquire global scale, however, if strategy doesn’t account for political and regulatory risks, they can end up expanding into countries without corresponding financial benefit.
For a successful business, the products borne out of technological changes need to be adopted by the customers. Societal changes need to be tracked. Ola and Uber are generating more trust by always being on time and offering reliable and cheaper services so much so that the younger generation may not buy cars in years to come. These changes need to be factored in strategy. If the younger generation doesn’t buy cars, what would the automotive industry do? What’s the impact on building development which today has multiple levels of car parking for employees, and what happens to car parking itself? What’s the impact on financial sector and government revenues through taxes? On the other hand, if they travel by public transport, how would that need to be augmented? If means of transport are becoming faster and reliable, what does that do to the cities, their demographics, economy and opportunities thereby? All these questions have profound impact on strategy.
A rapid pace of change has to be adopted by the education sector quickly to produce the right skills, else it might create an imbalance between not only companies but also countries.
In conclusion, technology trends have profound impact on strategy and its impact would need to seen in all aspects of strategy — product, promotion, place, price and people.
The education sector has to adopt rapid change to produce the right skills, else it might create an imbalance