One of the biggest effects of the Fourth Industrial Revolution has been the erosion of conventional boundaries between industries. As a host of emerging and mutually reinforcing technologies (like the Internet of Things, data analytics, and machine learning) have opened up a vast array of new opportunities for business, it’s becoming increasingly difficult to see the difference between, for example, a retail store and a retail bank, or an entertainment production company and a telecommunications provider. In addition, the relationships among consumers, suppliers, and producers are similarly blurring as a result of digital technology’s power to enable individuals to connect outside of the traditional value chain.
In such a confused environment, full of ever-shifting lines in the sand, how can a business differentiate itself from its competitors (who may not even be in the same industry), build digital prowess, and play a pivotal role in the Fourth Industrial Revolution? A recent article from Strategy & Business magazine offers the following nine principles as a guide:
Rethink the business model.
Today’s digital landscape is full of cautionary examples of incumbents who clung to outdated business models, only to lose ground to startups that leveraged flexibility and innovation to introduce new products and services at significantly lower prices. Businesses today need to realize that traditional industries have changed forever, and paths to profitability have changed accordingly. As a result, it’s time to take a fresh look at long-established assumptions about doing business, and develop a new business model that’s a more appropriate fit for this new era.
Build a platform-based strategy.
The value chain was the backbone of the old industrial system; in the new system, that backbone is the platform. A system that brings a range of vendors and customers together on a plug-and-play technological base, the platform has become widely recognized as one of the main driving forces of the Fourth Industrial Revolution. Companies must take steps to determine what role they will be able to play in a platform-based economy, such as a builder of platforms, an engager using platforms to provide products and services, or a developer of new technologies to serve existing platforms.
Design for customers.
The new infrastructure of the Fourth Industrial Revolution may be a web of digital connections, but it’s important to remember that there are still real-life people at the end of those connections. Today, digital technology has given businesses the opportunity to be closer than ever to their customers, and to discover (and fulfill) what those customers genuinely want and need. A customer-centric approach to design has therefore become vitally important.
Boost technological acumen.
Today, regardless of industry, software is the key to competitiveness. Over the next few years, every company, even born-digital startups, will need to improve its technological acumen in order to keep up with the pace of change and remain a competitive market force. This not only means recruiting software experts, it also means making training in digital tools and insight a key development focus for every single worker.
Innovate quickly and openly.
Large-scale disruptive innovation has garnered the lion’s share of attention in the digital revolution, but many companies are finding that a steady stream of smaller, incremental innovations is just as effective, in terms of both profit and feasibility. Today’s digital tools allow smaller innovations like new products to be prototyped, manufactured in small batches, and tested in the market within a greatly reduced timeframe; this is a huge advantage in helping companies understand how real-world customers will respond.
Most companies are well versed in gathering data. However, the next step is to ensure that they properly analyze the data for important patterns, which can lead to critical insights and actionable decisions. For maximum effectiveness, companies should ensure that their analytics teams are integrated, and that there are regular discussions across the company about what findings are coming to light and how this information could affect the business.
Embrace new financing models.
The old ways of raising money are having a harder time delivering when it comes to financing new large-scale technologies. Instead, financing is seeing the same kind of shift that cloud computing brought to software—that is, a pay-as-you-go model that emphasizes smaller but more frequent payments in exchange for more flexible installations.
Emphasize purpose over products.
Purpose is taking over from product as the main factor that differentiates one company from another. A clear value proposition, applied to everything a company does, is a must-have for anyone doing business in the digital age; consumers today want to know not only what a company provides, but why they provide it and towards what outcome.
Handle data responsibly.
Even small companies are now collecting vast amounts of data, and customers need to know that companies can be trusted with their sensitive personal information. This not only means that companies must maintain secure privacy safeguards to prevent unauthorized data access, but it also means that they must handle data ethically and transparently to avoid betraying consumer trust.