KUALA LUMPUR, Feb 18 — The sheer power of destabilising forces such as digitisation, globalisation and deregulation are gathering pace and affecting all businesses, making it harder than ever to plan for the future.
Competition from emerging economies such as Brazil, Russia, India and China (the BRIC countries) is intensifying consistently but in new and different ways. These new entrepreneurs are quick to identify market opportunities, do not feel tied to the old ways of doing things and seem able to motivate their employees in new and exciting ways.
Leaders must identify different ways of competing against these emerging, aggressive, innovative global entrepreneurs. They must develop not only appropriate strategies, but also the necessary leadership skills to deliver adaptive corporate cultures, management processes and innovation.
Without such innovation and strong leadership skills, strategic initiatives will fail. For example, volatility in the markets and the nervousness it can spark makes it a great time for financial advisers to rethink how they can create awesome service experiences for clients.
CEOs now find that they have fewer resources than ever and that those they have are constrained and overly structured. They have since discovered that what worked a couple of decades ago no longer works in the current climate.
For example, collaborative relationships with suppliers was a great idea but in today’s fast-moving markets these relationships may have become ties that bind and restrict fluidity. Thus, emerging entrepreneurs don’t necessarily have a past to refer to, or rules to obey. They can innovate, make up the rules as they go along and allow intuition to direct them.
Adaptability
Modern businesses, especially in emerging markets, use the Internet, Facebook, Twitter, e-mail, mobile phones, and a whole host of other social media and means of communication to rapidly connect with media-savvy customers all over the world.
The rapid dissemination and expansion of these technologies allow the customer to be in control of much of the purchasing cycle. For example, they can check whether they like design combinations of car trims and colours, or ask online communities for recommendations on what to purchase and for how much.
Customers, rather than suppliers, are in control and companies need to adopt new strategies with great speed to cope with this new paradigm or their businesses will retrench and ultimately collapse.
Cost leadership
The cost leadership strategy is typically only employed by large companies that can obtain products cheaply through economies of scale. They turn around and sell these cheaply purchased products to buyers, adding a minimal markup to keep the price low. The idea behind this strategy is to be the cheapest provider of a good or service making it difficult for a company’s competitors to compete. Because this strategy requires economies of scale, it's poorly suited to most small businesses.
Low-cost focus
The low-cost focus strategy is similar to the cost leadership strategy except that it focuses on a niche market. Instead of marketing a product to the entire population it is marketed to a particular segment of the population. The aim of the strategy is to then be the cheapest provider in that segment. For example, an electronics store might focus its market on a single town; its goal would then be the cheapest in the town but not necessarily the cheapest overall.
Differentiation
Companies that use the differentiation strategy offer unique products or services. Having a unique offering gives companies an advantage over their competitors because their competitors simply can't offer what they're offering. To develop unique products and services, companies often invest heavily in research and development something that many small businesses simply can't afford. Companies relying on differentiation need to be careful to not develop easily imitated offerings, because that can ruin the uniqueness.
Looking after existing customers and targeting new markets
A company’s existing customers could be competitors' target market. Companies should provide better customer service by being more responsive to their needs and expectations. Offering low-cost extras such as improved credit terms, discounts or loyalty schemes would help maintain customer loyalty and repeat business. It's cheaper and easier to keep the existing customers than to find new ones. Further, in terms of targeting new markets, selling into a greater number of markets can increase the customer base, improve revenue streams and spread the market/competitor risk.
Leadership and talent
New ways of thinking are becoming ever more important. To deal with the fast pace of change fast pattern recognition becomes more important than the ability to analyse preconceived scenarios and historical datasets. CEOs are the people who have to create the future and shape the market and competitive forces to their advantage. They will need to employ people with different talents who see change as a challenge and can cope with it, employees who see competitors in emerging markets not as threats but as something to understand and potentially follow.
In the past, to change cultural attitudes, managers would have followed conventional wisdom focusing on trying to align the attitude of large numbers of employees to new strategic objectives; often requiring steep resources, over long time frames. To keep up with competitors a company needs to change the minds of the few who can influence the actions of the many as fast as possible.
In the end, to be competitive, perhaps the most important strategy of all will be the ability to recruit and develop the very best of the worldwide talent. Seeking new recruits from other cultures, and other markets; learning from their behaviours and incorporating the very best of what they do into corporate cultures can help a company become nimbler, more intuitive, innovative, commercial, competitive and profitable.
* Your feedback is welcome at [email protected].
** Dr Viraj Perera is the CEO of PlaTCOM Ventures Sdn Bhd, the national technology commercialisation platform of Malaysia which is a wholly-owned subsidiary of Agensi Inovasi Malaysia (AIM) formed in collabouration with SME Corp Malaysia.
