The year-end is a good time to revisit the challenges faced and identify trends to address them. We at innovate.d believe that success will depend on focusing on five key trends – strengthening customer centricity, focusing on differentiating, identifying persistent profitability drivers, leveraging regulations, and hiring skills and knowledge rather than experience – when designing and revisiting the strategy and associated business model of your company
The new year is approaching at a fast pace. This means, preparing for the new year eve’s party. But it also means, especially for those of you overseeing strategy, innovation, and ultimately business success, to think about what 2020 will bring and what to do to shape the future.
Niels Bohr saying, prediction is very difficult, especially if it’s about the future, did not scare us to identify five key themes that we believe will shape success in the years to come. Most of these themes are not fundamentally new, but their relevance will gear up and companies dismissing them will have a hard time to compete successfully and remain profitable.
Business as usual is no longer an option. The stagnant will not survive!
1 STRENGTHENING CUSTOMER CENTRICITY
A lot has been said and written about customer centricity in the recent years. Theories like the jobs-to-be-done framework by Clayton Christensen, have been developed to better understand customers, their needs, their felt pains, and sought-after gains.
Now comes the time to put them into action. This first and foremost means putting yourself in the shoes of the customers when strategizing about your business, your products and services, and the value proposition offered. Customer centricity goes beyond offering a compelling user experience. It means understanding how customers value possible offerings allowing them to get their most relevant jobs done. And of course, acting upon those understandings.
2 DIFFERENTIATING IN A COMMODITIZED WORLD
In a world more and more impacted by technology, including artificial intelligence, internet of things, and virtual reality, previously compelling offerings become commoditized. It gets harder and harder to convince customers to buy a company’s products and services.
Therefore, it is never to early to start thinking about answering the question “why should a customer my product or service rather than that of one of my competitors”, taking the customer’s view. Customers rarely think in absolute terms. They evaluate options to address their jobs to be done and decide based on rational and emotional criteria.
Being successful requires understanding customer decision criteria and meet them in a distinct and valuable way. To avoid focusing on transient competitive advantages, it is important to aim at differentiating though uniqueness, rather than aiming at superiority. A key mistake to avoid is trying to be unique for all customers at the same time.
3 IDENTIFYING PROFITABILITY DRIVERS
You probably agree with me that profitability is key to success. In many businesses, especially those focusing on addressing commodity jobs to be done, growth is a pre-requisite for profitability.
It is a huge mistake, as many start-ups have learned the hard way, to assume that growth automatically implies profitability. No business model can be successful without a sound revenue generating capability. Successful firms know how to become profitable once necessary growth has been achieved, and this on day one on. As with the two previous trends, it all comes down to understanding what jobs customers want to get done and how much they are willing to pay, both considering rational and emotional traits.
4 LEVERAGING REGULATORY REQUIREMENTS
Many industries are becoming increasingly regulated. This is often seen as a hassle and a cost driver. But that has not to be so.
Successful companies address regulatory requirements in a way that allows differentiating from competitors. This can be achieved by going the extra mile, addressing the requirements 110%, rather than only 100% or less. To do so, you need to understand why and how regulations are of value to customers. Then, these understandings should be addressed through distinct and compelling value propositions.
Success depends on the ability to matching customer perception of value with fulfilling cost-inducing regulatory requirements.
5 FOCUSING ON SKILLS AND KNOWLEDGE RATHER THAN EXPERIENCE
One thing is certain, the future will be different from the past. So why then focus on recruiting employees based on their experience. Benchmarking the past will not help shape the future.
To be successful, you should hire employees that can address the challenges of the future, rather than those of the past. This means, focusing on conceptual skills and broad knowledge, ideally from diverse industries and covering multiple capabilities.
Having these five themes on your radar is the foundation towards success in 2020 and beyond.
Revisit your business model and prototype ideas to align your distinct strategy with these five trends. Take a customer centric view towards your business and focus on those aspects that are valued most by customers. This will support increasing your profitability in 2020 and allow you to become even more success.