• Ozzie Paez

Giving strategy its due in the digital age


Disruptive technological innovations usually affect business models before companies appreciate their strategy implications. Innovative technologies can lower costs, improve quality, change value propositions and change customer preferences. Companies in affected industries generally respond by upgrading their systems and processes. Market pressures and operational considerations drive these changes, with limited strategic guidance. Analysts often miss this important point and excessively credit or blame strategy in hindsight.

For example, the dot-com-boom period experienced repeating waves of technological disruptions. Early euphoria drove unprecedented investments in communications, networks and IT. New startups leveraged innovative technologies and business models to challenge established companies. Markets were in flux as traditional boundaries were redrawn. Strategy practices struggled to remain relevant during this period of relentless change. After all - Why spend time developing strategies that new technologies quickly rendered obsolete? Besides, markets were booming - then came the bust...

I was consulting in California at a digital cable startup when the bust began in late 2000. Tech workers, who had received leased BMWs as signup bonuses the previous year, were suddenly looking for work. Tech spending among telecoms crashed by 70% between 2000 and 2001[1]. Euphoria turned to fear and then to panic. Retrenchment and survival became paramount. Once visionary startups were going out of business at alarming rates. The bust crashed the value of Internet stocks by 1.7 trillion dollars in a year, between September 1999 and 2000[2].

Bad strategy is often blamed for the high rate of business failures during this period. I disagree. Startups frequently operated without well-defined strategies. Most consumed capital with little strategic discipline and relied on further funding to stay afloat. In fairness, there were no proven strategies, tools and methods available to help them cope with such unprecedented change. Companies in the dynamic high-tech sector had to learn, adapt and change as they went. Most fell short, while a few succeeded spectacularly.

These are important lessons for established businesses facing new waves of innovative technologies. The Internet-of-Things (IoT), Artificial Intelligence, Machine Learning and Robotics are today's disruptors. Startups built around these technologies and innovative business models are again challenging incumbents. Many established players acknowledge that they are struggling to keep up. History seems to be repeating itself. Fortunately, this time there are new, proven toolsets that can help businesses learn, adapt and thrive.

Digital strategies, for example, are introducing more aware, agile, disciplined practices. They incorporate experimentation, exploration and learning to evolve with changing technologies and markets. They also promote new approaches to subjects like competition, collaboration and value propositions. Their inherent flexibility and responsiveness are ideal for today's innovative, disruptive environments. In this context, digital strategies are indispensable to keep history from repeating itself.

I will discuss these toolsets in greater detail in upcoming posts of this series. Stay tuned!

References

[1] Gary Smith, My company survived the dot-com boom and bust — here's my decision-making philosophy for getting through turbulent times, Sep. 5, 2017, Business Insider, http://www.businessinsider.com/heres-my-best-advice-after-surviving-the-dot-com-boom-and-bust-2017-9

[2] David Kleinbard, Index of 280 stocks is down $1.7 trillion from its 52-week high, November 9, 2000, CNN Money, http://money.cnn.com/2000/11/09/technology/overview/

#Strategy #BusinessModel #disruption #DigitalStrategy #dotcom