New Operating Model Enables Companies to Compete in the Digital Age

Competitiveness in the digital age is upending the way that many companies have operated for decades. Products and services used to enjoy a much longer lifecycle than the innovations brought to market today. Market cycles as short as just a few weeks are common. 

To survive, companies need to be much more agile, adaptable and aligned with their customers, shareholders and internal stakeholders.

One company that has experienced stellar performance on all fronts in this environment is Telstra (News - Alert), Australia’s largest phone company. Telstra earned a record $2.1 billion profit for the first half of the 2015 financial year—a 21.7 percent year-on-year increase. They did so by taking steps that contribute to agility, adaptability and alignment with stakeholders.

Agility

The first step involves reducing fixed costs to become more agile so a company can deliver new products faster, cheaper and better. 

While companies may approach this in different ways, Telstra simplified its business through a productivity program that included $550 million reduction in expenses. Others apply zero-based budgeting, strategic cost management or work to take costs out of their operations as they simplify their management structure.

Taking costs out is one thing. However, the key is taking the right costs out, and making the changes stick. That is not easy. The most successful companies achieve 75 percent of their cost reduction goals and sustain the actions for three years.

That requires visibility into the cost base so excess spending can be cut out with surgical precision, and then instilling the accountability, governance and financial control mechanisms to make sure the changes hold.    

Adaptability

Once a company achieves the cost savings, they should not just put the money in a “rainy day” fund. Winning companies use their new-found savings to fund new areas of growth and innovation that make them more likely to increase shareholder returns and realize the adaptability they need. 

Two areas where companies may want to invest to become more adaptable are their innovation capabilities, and mergers and acquisitions. Powerful innovation capabilities can enable a company to rapidly develop and market new products and services. Companies that meet changing customer demands put the customer at the heart of their innovation and redefine customer centricity.

Mergers and acquisitions (M&A) can be used by companies to identify, acquire and integrate new capabilities, to help them team more effectively as they redefine their business in today’s age of digital disruption.       

On a related note, as businesses and marketplaces change and industry lines blur, successful companies more frequently work with others to increase market share. They partner with other organizations in new, extended ecosystems to create a winning portfolio of relationships that capitalize on the strengths of each organization and complement or supplement those of the partners with which they collaborate.  

The quick identification of the right ecosystem partner can further aid a company in creating what becomes an unassailable growth and innovative advantage.

Gaining alignment with customers, shareholder and societal values

Companies also need a “license to grow”. Creating the socially responsible supply chains referenced earlier illustrates one way of achieving such alignment. It moves beyond the establishment of trust with local governments or complying with regulations.  

Those that adopt ethical business practices and make them an integral part of how they operate create market differentiators for themselves that can be formidable barriers for their competitors to overcome. But to be clear, creating this kind of advantage is no longer an “or,” it is an “and” for those that will win in today’s ever-changing, highly competitive environment. 

Telstra introduced a new strategy outlining a clear framework for minimizing and managing environmental impacts while aiming to create cultural, reputational, commercial and social value.  

A recent World Economic Forum report, Beyond Supply Chains – Empowering Value Chains, noted that such socially responsible operations practices generate measurable improvements – increased revenue (5 to 20 percent), reduced supply chain costs (9 to 16 percent) and boosted brand value (15 to 30 percent).

Some final thoughts

Businesses need to take steps to secure consistent growth by being agile, adaptive and aligned with their stakeholders before they fall prey to a competitor who is able to outmaneuver them in today’s competitive marketplace. And, given the pace at which the marketplace moves today, businesses do not have the luxury of watching, learning and then grabbing their slice of the pie. The time to act is now.

About the Author: Chloe Barzey is a managing director in Accenture (News - Alert) Strategy who works with Communications industry clients to help them design and implement business strategies that contribute to their profitability and customer satisfaction. She is the author of the recent paper, Not Your Father’s Business Model: Competitiveness in the age of digital.