This article is a three-part series, where I am going to be talking about Decision making, data, and Strategy.
The world of business is adapting to technology faster than ever and that is due to COVID- 19, According to a new McKinsey & Company Global Survey “Companies have accelerated the digitalization of their customer, and supply-chain interactions of their internal operations by three to four years.” This rapid change in the behavior of the companies due to COVID-19 has definitely created new opportunities in the market, which resulted in very high competition at a frantic pace. While at the same time, we are in a period where the world is gripped with extreme levels of uncertainty, an economic crisis is looming around, new variants of COVID-19 are popping up, supply-chain challenges, and so on. Therefore, Technology and Data have become the most valuable assets any company can own.
Even before COVID-19, companies have been investing in technology initiatives to invent new business models and drive efficiencies in their businesses. Thus, you see the unprecedented growth within the Markets. For example, The Big Data Market had grown 124.7% since 2015, but if we would like to take a closer look at what is actually happening, look no further than the Marketing Technology Space. Chiefmartec has published its annual Marketing Technology Landscape report showcasing the insane growth within the space.
The Marketing Technology Space had grown 5,233% since 2014, what is more, shocking is that 1 in 5 Marketing Solutions in this year (2020) were not there last year. All of this growth is driven by the increasing demand for Industry-specific tools which are emerging to capture new value from connectivity, data, and analytics.
The Name of the Game is “Business Building”
The latest McKinsey Global Survey stated that “Business leaders expect half of their companies’ revenues five years from now to come from products, services, or businesses that do not yet exist”. Which, leads to encouraging CEOs into building new businesses that make the most of your core organization’s existing assets and capabilities to create, while being separated yet, linked businesses offering new products, services, or business models.
This trend resulted in Business leaders starting to understand the rewards that come to an entrepreneur who is willing to take to risks. Therefore, the more business you, build the better experience you will have at building business. Thus, prioritizing business building tends to help companies to grow faster than their peers and, this explains why executives are prioritizing business building.
Goldman Sachs for instance sees the business building as a crucial pathway to the growth and durability of its earnings in the context of the company’s longer-term financial goals, which include ROE, efficiency, and CET. Goldman’s new businesses include digital consumer banking (with Marcus by Goldman Sachs as the flagship brand) and initiatives in transaction banking. These businesses are getting traction. At the 2020 investor-day presentation, Goldman said its digital consumer banking initiatives generated about $860 million in revenues in 2019, up from just $2 million in 2016.
Nonetheless, the urgency of building new businesses has been reflected in funding, and M&A (Mergers and Acquisitions). A report published by CB insights shows the insane boom into funding new startups in the Q2 of 2021
The Pandemic has accelerated the companies’ ambitions and appetite for digitalization. When the mass shift to remote working as a digital success story. It resulted in encouraging some companies to dramatically accelerate their investments into technology. Identifying promising opportunities and delivering new services require a much broader set of business skills and tools than historical linear business models. For example, some financial firms and asset managers are using novel, alternative data sources like satellite imagery and logistics data to gain an edge in forecasting financial performance. They are extending their ability to sense.
They are able to identify changing conditions sooner than their competition, recognize “weak signals” through new data sources, and see the unseen.
In today’s dynamic environment, companies need to expand their perception and enhance their tools, business models, and agility. But, it is difficult to combine the strength of an enterprise with the agility of a start-up. So, it is no surprise that the majority of organizations say “Business Building” is one of their top strategic priorities. It doesn’t only helps companies to have greater resilience to volatility and economic shocks. Also, the ability to execute and build new business in a complex, uncertain, and rapidly evolving environment is set to become a decisive competitive differentiator in the coming years.
Companies are thinking beyond the old and orthodox ways, Successful business builders also have an exceptional understanding of the markets in which they play, this helps companies build adaptive advantages by extending their sociality and developing social links, communities, and ecosystems. Sociality enables the co-creation of new services—for example, by companies participating in business ecosystems, sharing data, and leveraging innovation platforms. Extending an antenna to capture and broadcast new data sources can enhance an organization’s perception and augment the worldview of others, as well as, influence their actions.
An Age of Uncertainty.
The volatile and unpredictable markets are here to stay. Although, with all of this technology; companies are still struggling to retain their users. Technology alone is not sufficient for value creation. Companies need to build frameworks and mental models that help them to be adaptive and continuously evolve their business model. In today’s fast pace and uncertain environments, companies need to expand their perspective and start questioning their deeply held beliefs. Companies that lack agility are doomed.
An interesting observation by D.Clark “In 2020, the average lifespan of a company on Standard and Poor’s 500 Index was just over 21 years, compared with 32 years in 1965. There is a clear long-term trend of declining corporate longevity with regards to companies on the S&P 500 Index, with this expected to fall even further throughout the 2020s.” and this number is predicted to shrink down to 17 years in 2026. Even so, with all of these technologies available to companies to assist them with decision making or even adapting a Data-Driven approach, it didn’t sustain the average of companies’ terms on the S&P 500.
It comes to nobody’s surprise that fewer than 15% of firms are still in operation three years after initial funding, according to one study of venture-backed firms. Recognizing that not all risks are created equal and some risks may be less obvious at the moment than they appear in hindsight when a catastrophe has struck, is an important skill that every business leader needs to have. In the coming days, with the rapid acceleration of technology, we will start to have labor supply and demand problems, which we are already having. Research by the McKinsey Global Institute suggests that, across the world’s eight largest economies, more than 100 million people (one in every 16 workers) will need to transition into new roles by 2030. Nowadays business leaders are asking themselves ‘’Where will we get the skilled, digitally savvy workforce we will need in the coming years?’’
Conclusion
The ability to execute in a complex, uncertain and rapidly evolving environment is set to become more important than ever in a fast-changing world. This trend resulted in Business leaders starting to understand the rewards that come to an entrepreneur who is willing to take to risks. Thus, prioritizing business building.
Although, recently with the rapid growth within the data analytics markets, companies are heading towards a Data-Driven culture, if you are not careful enough it could lead to devastating results.
In the next article, I am going to talk about the Risk of the data-driven culture and the challenges that come with it.