bars for usability and user experience have been raised by rich, elegant interfaces incorporated into today's leading consumer devices. It's not just usability, but engagement. The same tricks that make games so addictive are being applied to business applications as well.33 Elements such as points, scorecards, badges, leaderboards, challenges, puzzles, reputation rankings, and progress feedback via levels and maps hit us in primal brain systems, as research in psychology, behavioral economics, and neuroscience has shown. By building these elements into products, processes, relationships, and applications – called gamification– companies can benefit through greater adoption and engagement, as we'll see in Chapter 18. We'll also take a look at Opower in Chapter 19, a company that is applying gamification to electricity consumption.
Information Technology in Context
All that notwithstanding, let us admit that IT isn't the only factor in competitive strategy. I purchase my groceries at Shop-Rite, not because its cash registers have patented, proprietary algorithms running on an advanced computing architecture but because it is the closest grocery store to me and its avocados seem to stay fresh a couple of days longer than those from the competition. So, let's clarify the context in which IT and thus digital disciplines matter.
At a high level, CEOs have a broad variety of tactics at their disposal. Going public, going private. Divestitures, mergers, and acquisitions. Global expansion, local focus. Cost-cutting, leasebacks, hedging, reverse takeovers, tax inversions, downsizing, and rightsizing. Stock sales, stock buybacks. Financial engineering, debt restructuring, organizational restructuring. Hiring, firing, training, compensation, and retention. Out-tasking, outsourcing, offshoring, onshoring, reshoring, insourcing.
Although these tactics may be helpful, they are not the essence of growth. Even a company that grows through acquisition has to acquire companies that are or can be successful. Companies need to look to innovations in business models, distribution, customer relationships, design, branding, endorsements, certifications, regulatory policies, positioning.
And, technology, of course.
But even if we restrict ourselves to technology, there are many technologies, not just IT. Nanotechnology is inventing new materials such as carbon nanotubes with unprecedented strength-to-weight ratios. Biotech is creating breakthroughs in everything from pest-resistant plants to new medical treatments. Chemistry breakthroughs are enabling new battery technologies and the manufacture of plastic literally from thin air.34
Even within IT, for every elegantly crafted application, there are many applications that are convoluted, unusable, late, overbudget, insecure, intrusive, or don't scale. Applications that ask you to press “3” for this and “#” for that or that offer cryptic Zen koans such as “Error: Unspecified Error.” We'll address these issues and gotchas in Chapter 20.
Finally, let us admit that technology itself – information or otherwise – does not directly correlate with profitability at the industry level.
On the one hand, for example, one of the highest-technology industries is surely airlines. Computationally complex operational processes for global scheduling of crews and flights; modern jet airliners made of carbon composite frames and titanium alloy turbine blades; state-of-the-art dynamic pricing systems. These are complex amalgams of physics, aerodynamics, control systems, entertainment systems, navigational systems, information technology, and who knows what else. Yet, as strategy guru Michael Porter points out,35 airlines are among the least profitable of all industries. Porter's Five Forces model – rivalry among competitors, threat of new entrants, threat of substitutes, bargaining power of customers, and bargaining power of suppliers – explains why.
On the other hand, the soft drink industry, which, after all, is just selling sweetened water – a century-old “technology,” if one could call it that – is among the most profitable industries.
However, the point is not that higher information technology investments automatically lead to higher profitability. The point is that within a given industry and its profitability envelope, technology in general, and information technology in particular, can enhance performance and profitability relative to competitors. It can also enable new means of creating customer value, create barriers to entry, and reduce the appeal of substitutes.
We live in an era of immense technological change, thanks to the confluence of key technologies such as connected things, cloud computing, and social networks. While traditional elements of competition, such as brand and distribution channels, are still important, information technologies can be ignored only at the risk of ending up like Blockbuster and Borders, overtaken by new, digitally savvy entrants such as Netflix and Amazon.com. Ignore IT and risk irrelevance or death; exploit it and survive or thrive. This is true across verticals: healthcare, manufacturing, consumer packaged goods, aerospace, pharmaceuticals, and so forth.
Regardless of the vertical that your company is in, whether it's old or new, legacy or startup, SMB (small/medium business), Fortune 500, government, university, or garage shop, B2B (business to business), B2C (business to consumer), G2C (government to citizen), P2P (peer to peer), or X2X (anything to anything), understanding and applying one or more of these disciplines is likely to be vital for survival and growth. You don't need to be a hip Web 2.0 company to exploit these insights; many of the examples in this book come from century-old manufacturers who are transforming their processes, products, relationships, and innovation.
While there is no silver bullet, the same patterns – the digital disciplines – keep repeating across winners in these industries, and while they don't offer a simple recipe for success, they do provide a benchmark template to customize and adapt in the context of your own firm's strategy. In short, the digital disciplines are where digital technology meets value disciplines – the foundation of today's and tomorrow's strategies – and could be just what you need to help your company attain market leadership.
Chapter 2
Value Disciplines and Related Frameworks
The digital disciplines framework is a direct descendent of the value disciplines model conceived in the early 1990s by Michael Treacy and Fred Wiersema in their Harvard Business Review article titled “Customer Intimacy and Other Value Disciplines”36 and their seminal, best-selling book The Discipline of Market Leaders.37 Before delving into digital disciplines in the next chapter, it's essential to develop a baseline understanding of the original value disciplines and related strategy frameworks.
Perhaps business success is just serendipity, but over the past few decades, there have been hundreds – if not thousands – of attempts to determine why some firms succeed while others fail; why some companies or industries are highly profitable and others aren't; and to develop models, frameworks, repeatable processes, and insights that businesses can utilize.
Some strategists, such as visiting professor Gary Hamel of the London Business School and the late professor C. K. Prahalad of the University of Michigan, have argued for what might be called an inside-out view. They claimed that companies should build on their core competencies to offer new products and services or enter entirely new markets. One example that they highlighted is NEC, which identified three major evolutionary trends in the 1970s: from mainframe to distributed processing; from simple components to complex integrated circuits; and from mechanical/analog telecommunications to digital. By focusing on developing deep internal knowledge and skills including process
Joe Weinman, “4 Ways to Win at Business by Playing Games All Day Long,” Forbes.com, October 15, 2013, www.forbes.com/sites/joeweinman/2013/10/15/4-ways-to-win-at-business-by-playing-games-all-day-long/.
Michael Treacy and Fred Wiersema,
