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Dilemmas of a modern business

Dilemmas of a modern business

How a challenging context leads to competing needs

Today’s organisations do business in a tough context, where the political, economic and technological landscape shifts with great turbulence. It’s a pressured environment where it’s not easy to maintain the status quo, let alone flourish.

As a result, businesses are tangled in conflict that can seem insurmountable. The means by which we achieve new successes – disruption, risk-taking and transformation – fly in the face of the means by which we hold our current position – by taking a safer, more conservative approach.

To better understand the dilemmas this context presents, let’s look at what businesses are doing to meet these needs.

Strategies for driving unprecedented growth

Disrupting the marketplace with innovation

Many of the headlines we see tell of bold organisations and agile start-ups quickly entering and disrupting the marketplace.

Chinese innovator Revotek is building a platform to 3D print digital organs at scale – a landmark innovation in human history.

The Minerva Project is a virtual institution that’s reinventing university for the brightest, most motivated students, using cutting-edge technology to educate at a fraction of the cost of renowned universities around the world.

In the UK, Pavagen is pioneering a floor tile that converts the wasted kinetic energy from footsteps into a renewable power source – a people-powered innovation with the potential to create smart cities of the future, entirely through footfall.

These three organisations are differentiating themselves through innovation, going beyond incremental growth to deliver unprecedented results. Traditional businesses are under scrutiny to do the same – innovate, re-invent, and dramatically change – but this kind of innovation typically comes with significant funding requirements.

Transforming established business models and organisational design

In established industry, business models and organisational design are being reconsidered to drive growth.

Cycling tracker app developer Strava launched a successful application with strong adoption and recurring revenue, but found their innovation quickly imitated. The company’s recent strategy has been to embrace new opportunities to increase relevance and revenue, making its data available to city planners and opening a lucrative new income stream.

Andy Long, CEO of established global brand management group of fashion and sports brands such as Lacoste, Ted Baker, Kickers, Speedo, Berghause and Canterbury comments on recent transformational changes made in the organisational design of this historically people-values driven business.

“Our consumers and our customers are changing, and we need to change with them. These changes remove complexity in how we work and make us more agile and effective in the way we go after growth opportunities and integrate new brands into the Pentland family.”

Adapting to a new consumer world – and higher expectations

Finally, with the growing ease of communication and overwhelming innovations in technology, consumers are more demanding than ever before. Businesses are changing to keep up with expectations for fast, often instant availability, tailored products and services, and an easy omnichannel experience.

Companies like Amazon are giving people a refreshed version of a service they know, then packaging it into something that’s in line with social trends.

Each of these strategies have a few things in common. They are de-stabilising, contain risk, can be a challenge to core business and, in many cases, are high cost. Those traits come into conflict with the necessity of simply surviving in today’s harsh climate.

Strategies for survival and making ends meet

While agility, innovation and creativity fuel growth, these strategies are jeopardised by the harsh realities of dwindling margins, increased costs, and low market confidence. More than ever, investors, shareholders, partners and stakeholders are looking for organisations to be the bedrock of familiarity – and work within existing constraints.

‘Cost’ – the management strategy

As one illustration, the financial sector faces increasingly difficult challenges around cost. A recent analysis published by Deutsche Bank raises key questions relating to the pressure faced by the major financial institutions.

“From looming layoffs, to lower-for-long interest rates – impacting ‘Net Interest Margins’…” a key performance indicator for profitability. Wall Street banks have major issues to contend with in the months ahead. Cost management and cutting is high on the agenda. With a heavy proportion of fixed costs being people, this provokes a difficult question, “where will the savings come from?”

An inability to influence across the value chain

Many businesses are simply trying to maintain margins with new changes and expenses in the supply chain.

In the growing food industry, the UK privately-owned Samworth Brothers – a chilled food supplier to organisations like Sainsbury’s, Tesco and M&S – has faced difficult challenges when it comes to costs and margins.

“Things are getting tough this year because there’s been a sharp rise in raw material prices, in some cases up 30-40 per cent due to availability,” said Samworth Brothers CEO Alex Knight. “Whether it’s Brexit or China or how much money people feel they have, the reality is it’s happening and we are suddenly facing one of the strongest headwinds we have ever had to deal with.”

With so much out of our direct control, it is little surprise that businesses need to take a considered approach that allows for stability, prudence and consistency too.

Adapting to a new consumer world – and price sensitivity

Our dilemma is perhaps most apparent in the consumer world where expectations are unprecedented, yet people are more price-sensitive than ever before. Customers don’t just want a lot, they want it for less.

In response, clothing firm UNIQLO keeps prices low by buying in mass directly from suppliers. With a focus on largely utilitarian items like Oxford and polo shirts, the company admits to keeping its clothes on the shelves for longer than most competitors, wringing the most value from its existing inventory.

It’s a strategy that effectively addresses the cost and price side of the dilemma but, of course, doesn’t allow for the kind of product innovation or ‘brand’ equity development many businesses believe it takes to drive unprecedented growth.

Navigating your organisational dilemma

Meet expectations OR innovate beyond them. Put up with increasing costs OR disrupt your entire business model, your organisational structure and even your marketplace.

The actions we see businesses take to meet these necessary conditions are in direct conflict with each other. And the impact of these inevitable conflicts flows down to the people inside an organisation.

Do you see yourself or your organisation take actions that embrace and evade change simultaneously?

Don’t miss our next post as we explore the impact this organisational reality has on leaders and people – follow us on LinkedIn for updates.