Friday, November 1, 2013

Technology is changing how companies develop strategies

In “Your strategy needs a strategy”, the authors discuss how there are 4 (or 5, if you include “survival”) basic strategies that organizations can adopt to be successful in their industry. This involves assessing the industry in terms of the predictability and malleability. They give examples of one company in each of the industries. What is interesting is how new technologies like cheaper computing, internet connectivity, and smart-but-cheap devices, along with social media and concepts like crowd sourcing, may be changing the bucket that their industry falls into.

UPS, the example of a company with visionary strategy, although apt in the context of the article, doesn’t capture this aspect. It was in a predictable industry, and had the power to change it too. Consider Netflix which was in the DVD rental business, which was fairly unpredictable (knowing which movie would be popular beforehand would have been hard). With the move to the internet streaming model, they have obviously eliminated the requirement of physical DVDs which helps manage demand/supply much better. However the more interesting change has been that they are now able to capture very specific user habits and preferences, because of which not only can they source appropriate content, but also are developing content that their audience wants. They have used large scale data collection and predictive analysis to move their industry from an unpredictable to a relatively more predictable environment.

There are a few other industries where the above mentioned concepts are changing the core structure of the industries. It is possible that they have to change the strategies they use to make strategies.

Higher education, traditionally, has been a predictable industry with many small and a few big names which have dominated the market. However, with the development of Massive Open Online Courses, anyone with an internet access can take up courses, and the very existence of the higher education industry, as we know it, is being threatened. It is moving from a predictable to a much more unpredictable environment, which would require the industry to move from classical to adaptive strategies.

The music industry, although unpredictable to a great extent, had chosen to not change the market. It always had a few big and established players who dominated the market owing to their ability to support artists while they are making music, and their extensive reach in getting the music to a large audience. Cheap technology offers the ability to produce music using an inexpensive setup, and the internet and social media offer a large audience at no or low cost. Anyone can make music and it often become popular without the help of the big labels, and the industry is changing its structure with platforms like Spotify. The music industry may consider shifting their approach from adaptive strategies to shaping strategies.

There are some other interesting changes in industries like consulting and IT services brought about by concepts like crowd sourcing and cloud computing. Which are the other industries that are in flux such that the way they develop strategies needs to change?

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