As digital ways of working and technology continues to penetrate all sectors, organisations are faced with a range of strategic opportunities and threats impacting their competitive advantage (a key one being the potential impact of digital transformation on their non-current assets).
So what tools can organisations use to strategically respond to their rapidly changing competitive environment? Given the disruptive, unpredictable nature of digital it may feel like a completely new approach is required. But arguably the fundamentals of competitive strategy to identify, choose and implement strategic options to achieve differentiation and cost optimisation are still valid – the difference is how they should be applied in a digital context (for example using Porter’s Five Competitive Forces to analyse Digital Disruptors). Here are some further examples:
Please note: these tools have strengths and weaknesses – there are no absolutes in strategy development. Their value comes from understanding, tailoring and selectively combining these imperfect approaches together to gain the right critical insight about digital and its impact on an organisation’s competitiveness.
Value chain analysis: A model (defined by Michael Porter in the mid Eighties) that enables an organisation to identify the primary and supporting activities its business units perform to deliver its products or services. Such activities in isolation may have limited value but when combined become sources of competitive advantage.
This approach can be used to understand how an user centric Agile approach to digital transformation can positively impact an organisation’s operating model. This is because it identifies how using user experience design to make improvements to the “front end” customer experience can only deliver sustainable benefits if business unit activities effectively and efficiently support such change – the application of value chain analysis and user experience design as an integrated response to the challenges of competing digitally.
Resource based view: Popularised by Robert M. Grant in the early Nineties; this approach assesses how an organisation’s resources are sources of competitive advantage based on their fit to market needs and the ability of competitors to imitate or provide substitutes for them. Arguably organisations with high demand for their differentiated resources hold strong positions in a market.
Such an assessment can be used to understand how an organisation can maximise the competitive advantage of its greatest resources – its people – by empowering them to effectively adopt (and adapt) digital ways of working and technology. By applying the resource based view to inform talent development, organisational design and cultural values, an organisation can differentiate itself through its unique (i.e. difficult to imitate) people resources skilled in digital.
Balanced scorecard performance measurement: Developed in detail by Robert S. Kaplan and David P. Norton et al in the Nineties; it applies four different, interrelated organisational perspectives to measure strategic and operational performance:
If the right, well trained and motivated people (HR view) are doing the right things (operations view); customers are delighted (marketing view) and the organisation is profitable (finance view)
It provides a combined holistic view of an organisation’s strengths and weaknesses in delivering competitive advantage.
An organisation can use such perspectives to consider how using different digital ways of working and technology will impact its sources of competitive advantage. This could include how a Chief Digital Officer could potentially address challenges C-Suite may have about Digital Transformation.
If you would like more information about how competitive strategy tools can help your organisation maximise the benefits of digital transformation please contact the Sopra Steria Digital Practice.