In the age of digital disruption, every company needs to think differently about their business – both to grow beyond their core markets, and to head off competition from new entrants. But often the exact skills that helped companies succeed in the past prevent them from finding success in the future. At Xerox we have reinvented the company multiple times as technologies and markets change over time.
While today’s chapter in our history is still being written, we have found several ways to think differently about our business. These six insights may be helpful to other companies with a similar need to transform and grow beyond their core business.
1) Focus on what your customers want, not what you make
Your customers buy from you for a variety of reasons, the most important is that you help them achieve the outcomes they want. But it’s all too easy to lose sight of that and focus only on improving your product or service to keep up with competitors. This tunnel vision can prevent you from helping your customers achieve their outcomes in new and better ways and exposes you to new entrants that have figured this out.
With this mindset, you focus on how to deliver your core value to your customers in new ways. For instance, auto manufacturers will still be around in the future, but they are starting to define themselves as “mobility services companies.” They will increasingly deliver transportation as a service that meets the needs of young people who have little interest in car ownership.
2) Innovate in business models, not just technologies
It’s also important to create business models that make it easier for your customers to adopt new products faster. The original growth story of Xerox with the plain paper copier was as much a business model innovation as it was a new technology. Xerox launched the product with a leasing model to make it easier for customers to buy an expensive piece of office equipment that was unknown at the time. This is an especially important consideration with new technologies, because they are often expensive to produce until they can gain economies of scale. In mature markets, a business model innovation can also change the value proposition, and competitive dynamics, in an industry that has shifted focus from features to outcomes.
3) Create a unifying vision of the future
All of your employees want your company to grow through innovation, and they all have ideas on how best to do it. It can be helpful to create a unifying and directional vision of the future to focus your employees’ ideas and energy. By defining a high-level but actionable vision that is aligned to your strategy, you can harness the creative energy of your employees with greater productivity.
4) Look both “inside out” and “outside in” for new opportunities
There are always many potential directions for innovation, and it can be difficult to evaluate and prioritize a large opportunity space. We have found that one effective approach is to look both “inside out” to apply your core capabilities in new adjacent markets, and “outside in” to identify new digital disruption opportunities sparked by new technologies.
Many companies stop with the “inside out” analysis. But it’s also important to understand how the world is changing to identify emerging, non-obvious market opportunities from the “outside in.” In our analysis, we believe the next major technology revolution is the convergence of the physical and digital worlds. This creates massive opportunities to transform how work gets done.
Our world has reached a critical mass of connected devices, collectively known as “the Internet of Things (IoT).” Sensors and electronics allow machines to perceive the physical world. Now enter machine intelligence, or what some call “narrow AI”, in which machines can understand and make decisions in domains that we have modeled with a high level of fidelity. Now you have a feedback loop that enables real world, real-time optimization. Add to that loop the machine’s ability to work collaboratively with people in knowledge-intensive workflows and learn from us. This area will be a very fertile ground for innovation over the next decade.
5) Break traditional tradeoffs to deliver greater value
With the emergence of digitalization in the age of the Internet of Things and Machine Intelligence, our customers have grown accustomed to personalized experiences that are also low cost. Consider your experience with Amazon, Netflix, Uber or Lyft. Digital natives, who now make up a large percentage of our customers and employees, demand these types of experiences in their personal and work lives.
In every industry, companies have to rethink competitive strategy. Formerly, we were forced to think in binary terms of either high quality or low cost. Digitalization means these tradeoffs no longer exist, because digitization adds the “and” to our strategies, i.e. high quality AND low production costs; personalization AND efficiency. Researchers (and marketers) have to rethink how we deliver on the “and” promise.
6) Adopt agile and open innovation
Inherent in the act of pursuing new markets is a lack of historical data to plan for the future. Innovation for new markets requires a human-centered, agile process that focuses on rapid learning and iteration, with explicit hypotheses and experiments to create new business options.
In addition, companies will likely not have all of the required technical expertise, so it’s important to look outside for innovation. However, when you pursue new markets, it’s a mistake to equate open innovation with technology sourcing. When there is high uncertainty, you can’t treat innovation partners like vendors. You need to share more information and manage intellectual property (IP) rights with a longer-term strategic view. Focus on what you really need to protect. Allow your partners to have sufficient IP rights and opportunities that will generate the return they need. These focal points allow them to share the risk with you.
There is never a one-size-fits-all approach to growth, so these ideas are meant to be a starting point for you to think about ways you can mix and match to suit your specific situation and goals.
Expanding into new markets is hard because it requires investment trade-offs from your core business into new, uncertain opportunities. These practices can help you produce a greater volume of new growth opportunities that excite your employees, fit with your abilities to deliver them, and are aligned to important growth trends in the world.
Copyright 2021 World of Media JLT