Smart companies focus on building differentiation in what they do and how they operate rather than on what they sell. Get this right and the flow of products, services, solutions and experiences will follow.
That’s the view of Mahadeva Matt Mani, one of the global leaders of PwC’s Fit for Growth performance platform and co-author of a new book, Beyond Digital, on how great leaders transform their organisations and shape their future.
Think about Apple’s design capability, which has allowed it to disrupt every industry it has entered – be it computers, music devices, phones, cameras or watches – or Amazon’s retail interface design capability, which has been the driving force in moving almost every consumer category.
To those who fear the constant shift of consumer behaviour and how to stay relevant, developing such capabilities will be the best antidote to falling behind, or better, the best tools to continue to shape your value proposition, the authors note in the book.
Increasingly, Mani adds, the most successful companies are also those that are truly purpose driven. “Companies are getting feedback all the time from consumers but that’s not so much a matter of companies catching up as much as them recognising that they are an integral part of society,” he says. “If you can articulate your purpose and build your value creation system to deliver that value, then ultimately that generates stronger financial results.”
Sometimes an organisation has hidden strengths, and discovering and then leveraging them can prove a game changer
In this engaging and well-researched book, Mani and co-author Paul Leinwand outline seven imperatives for achieving change, with extensive case studies to illustrate their points. Some of that involves bold and creative thinking but on occasions organisations just need to look closely under the bonnet.
Sometimes an organisation has hidden strengths, and discovering and then leveraging them can prove a game changer. Amazon’s web services business was initially a cloud capability used purely internally by the company until it realised how powerful it could be as a service to others.
Digital-first approach
A digital-first approach can fundamentally change the nature of a business. Take software firm Adobe. In its previous model, it sold packaged software and knew little about its end users. Moving to a cloud platform provided it with significant insights into user experiences and pain points, to the extent that it could predict where users were struggling with a product knowledge issue, for example, and it could suggest answers in real time.
The double-whammy for Adobe is that not alone did it delight customers but, like Amazon, it also created a service model that it is successfully marketing to others. Adobe revenues doubled in 2016-2020 as a result of this insight, Mani notes.
Delighting customers is clearly good for business but it has another wider effect in that it raises the bar for consumers. Financial services giant Citi recognises this. Having to regroup after a near-death experience in the 2008 financial crisis forced the organisation to reappraise attitudes, including how it served customers.
As its former chief executive, Michael Corbat, tells the authors, Citi recognised that it needed to match or exceed what he terms “best-in-life” experiences. “If that’s their Uber experience or that’s their Amazon experience – whatever that experience is – if you are not at least getting to that place, you have vulnerabilities.”
One example of how Citi has removed so-called “friction” is how it now allows customers to open accounts with electronic signatures, a move that has proved popular during Covid-19.
Increasingly companies are recognising that they don’t have all the capabilities but need to work with others, especially when addressing purpose-driven objectives such as tackling climate change, for example. The notion of working as part of an ecosystem is gaining traction.
Risky business
Ecosystems are not without their risks. There is a danger that partners don’t carry their weight or that a company could be exposed to reputational damage from inappropriate action by one of its ecosystem partners but, as Mani explains, enlightened organisations rise to these challenges and see the bigger picture.
“All this [risk] means you have to dramatically increase the visibility of ecosystems within your company. Microsoft, for example, has an individual on its senior leadership team who is explicitly responsible for representing the ecosystem in the company. That individual is also responsible for investing in the ecosystem to ensure that, as much as Microsoft is benefiting from the ecosystem, it is also contributing to that ecosystem.”
"If you haven't substantially reallocated investments and if your budgets have changed only minimally, you are likely investing more in your past than in your future"
Driving change requires a high degree of courage and humility on the part of leaders but increasingly the risk is higher for those who favour incrementalism and maintaining the status quo.
There is a challenge for organisations in reframing performance metrics. Unilever’s Paul Polson famously abandoned quarterly reporting to discourage short-termism while Microsoft abandoned its mid-year review. As Mani notes, it is not a matter of abandoning what were previously seen as core metrics but is one of knowing how to introduce metrics that are more aligned with transformational objectives.
How you allocate budgets and how you manage the P&L is a powerful lever for change, for example. “If you haven’t substantially reallocated investments and if your budgets have changed only minimally, you are likely investing more in your past than in your future.”
Stakeholders, including even hedge fund investors, are also generally supportive of this longer-term agenda, as long as it is clearly articulated, he adds.
SEVEN IMPERATIVES FOR BEYOND DIGITAL LEADERSHIP
Create value via ecosystems
Many of today's problems are so massive no single company can solve them, and going it alone risks being left behind. Building ecosystems for mutual benefit allows you to leverage the capabilities of others.
Reimagine your company's place in the world
Figure out the ways in which you create unique value for customers, society and the systems of distinct capabilities that allow you to create that value in ways that others cannot.
Gain privileged insights with your customers
Customers want faster change, and their needs and desires have become more granular. They will share information, however, only if the value you offer resonates with them and they trust you to make good use of that information.
Make your organisation outcome-oriented
Create cross-functional teams focused on delivering specific goals and change how you do your planning and budgeting to reward the right things.
Transform the leadership model
The top team should be based on the right skill mix rather than on tenure and should focus on transformation rather than just responding to today's demands. Instil the notion of shared responsibility.
Reinvent the social contract with your people
Clarify roles, connect their purpose to the company's purpose, make sure they can contribute and be part of solutions, provide them with the time and resources required to build the company's differentiating capabilities and give them a sense of community.
Leadership strength and flexibility
Leaders today need to be both strategists and executors. They need to be tech-savvy and deeply human, capable of making big decisions but also having humility and awareness of their own limitations.
Beyond Digital, how great leaders transform their organisations and shape the future by Paul Leinwand and Mahadeva Matt Mani is published by Harvard Business Review Press
