Reinvention: The Future of Businesses and How to Survive
“The Perfect Storm”, an expression often used to describe an event where a rare combination of circumstances occur at the same time, resulting in an event of unusual magnitude.
Looking back over the last 30 years, some of the largest North American and European multinational companies have experienced a Perfect Storm. External circumstances coupled with a particularly favorable economic environment have allowed these organizations to experience extraordinary prosperity, profitability, and cost efficiencies. This track record gives these company’s executives plenty of reasons to remain optimistic about their future.
Some speculate, however, that this remarkable era has run its course and may soon come to an end. Current market opportunities combined with new emerging players brings a new competition pool that is swift, aggressive, and imaginative. This is cause for alarm for many larger companies, with their multiple management layers, who are unable to match or keep up with them.
Globalization is no longer an American company utilizing/benefiting from the inexpensive workforce in other countries. The companies based in these countries are now producing their own products, thus reducing the available workforce and creating competitive products for the American and European markets.
Let’s take a look at the top 5 challenges which lie ahead for today’s leader’s to remain tomorrow’s pioneers.
1. Internal Focus vs. External Focus
Most large Western companies focus primarily on their internal operations. Although some are aware and have identified their potential competitors, they are still challenged with calculating the cost and nimbleness gap between their organization and the new market entrants. This gap impacts innovation, supply chains, and investment strategies.
2. Short-Term Financial Performance vs. Long-Term Strategies
Most North American companies have adopted the philosophy of demonstrating short-term profit growth. Although this mindset has fared well with Wall Street, emerging market firms have adopted a new model. Smaller firms/technology companies have taken a long view, where they build their market share over time (years), at the expense of short-term profits. Adopting a longer term business model to make corporate decisions would improve returns, innovations, and other aspects of corporate performance.
Companies must be willing to self-disrupt and overcome the fear that a new product/service could not only take market shares, but also destroy their existing business. A study on capital expenditure allocations found that companies must become more nimble at reallocating capital in response to a changing market.
4. Intellectual Capital
Intellectual capital, profitability of ideas, or the intellectual property of intangible assets (not recorded on a P&L sheet), should be valued more as a prime asset. It’s been noted that half of the world’s most valuable brands are idea-based. “Assets such as data, algorithms, and software are also becoming more valuable.” Take for example data on consumer behavior and decision making. This data could be more strategically important than data on customer transitions or locations. Companies need to embrace idea thinking and implement platforms which support the profitability of ideas.
5. Talent War
Identifying, attracting, and keeping talented employees is getting increasingly competitive as more and more companies incorporate and evolve into “idea” based businesses. Talented employees are needed to generate these unique “ideas”.
With the increase/advancement of digital platforms for talent management, companies now have an opportunity to improve their recruiting, screening, onboarding, compensation, engagement, retention, and leadership development. Those organizations, which are able to quickly and strategically integrate these new technologies, will see an increase in revenue/productivity.
It’s been said, “To win the war on talent, a company will need to create an engaging workplace environment and maintain a solid reputation as a good employer.”
“It’s even more crucial that companies find and nurture ambitious, hard-working, and international-minded managers and technical staff. Executives, especially HR, need to rethink organizational structures, workplaces, flexibility, and job definitions for the new era.”
After three decades of unrivaled success, North American and European companies should realize that the global competition/economic environment is changing. To preserve/expand their earnings, these companies are going to have to reinvent themselves. Over the next decade, when the competition becomes more tenacious and less predictable, companies must display confidence, agility, and be watchful in order to withstand the winds of a perfect storm.