30 Nov 2011
The current recession has changed the way business is done – forever. This is not only due to the severity and depth of the current crisis, but also to the timely collision of critical trends affecting all European companies and organisations. Even before the economic downturn, organisations were under pressure to recreate their operations in a way that made them more agile, more dynamic and able to capture emerging market opportunities quickly. As European businesses adapt to today’s volatile environment, technology provides unprecedented opportunities for CEOs to transform their businesses.
While European organisations are particularly vulnerable to changing economic pressures, they are also potentially in the best position to make progress, thanks to comparably high rates of technology adoption and technology literacy – both at a business and a consumer level. This offers them good leverage as they take on the challenges of a fragile macro-economic recovery; limited access to credit; lower consumer spending; an increasingly stringent regulatory environment; globalisation; increased Asian competition; and currency pressures.
Indeed, European countries account for six of the 10 most competitive countries in the world, six out of the top 10 most innovative countries, and seven of the top 10 knowledge economies, according to the World Economic Forum. Maintaining this lead will depend on whether businesses continue to harness the latest technology, and whether they are willing and ready to take this to a new level.
IT, the industry disrupter
Resisting transformational change, facilitated by IT, is not an option. Whatever market you are in, it will be disrupted by advanced technology. Take the iPod, which has changed the way people consume and buy music. Similarly, advanced video communications are changing the way people connect, meet and collaborate with colleagues, business partners, suppliers and customers, collapsing company boundaries, geographical distance and time zones.
These breakthrough ideas could not have been predicted by customer research. As Henry Ford famously said: “If I had asked people what they wanted, they would have said faster horses”. Yet, by partnering with the CIO, executives can explore ways of using IT to their advantage – to disrupt rather than be disrupted. Industry leaders are doing this today, and their examples go a long way in showing what’s possible.
Among our own customers, we see healthcare providers turning to TelePresence collaboration technology to provide scalable, remote care. Utilities are building ‘smart grids’ with the potential to increase capacity by 30 percent without building new power stations, and to cut consumer bills by 10-15 percent. Retailers are revamping the online shopping experience using social networking tools and mobile access, while using IT in the store to serve up personalised video messages or capture real-time marketing intelligence and traffic patterns.
A recent McKinsey report claims that while many European companies realise they now need to exploit the opportunity to make bold, transformative moves to ensure their business continues to thrive in the current economic environment, only a small minority feel equipped to do so. Specifically, 74 percent of European business leaders believed their company was ‘very’ or ‘extremely’ exposed to IT-based market disruption, yet just 18 percent of European IT executives believed their companies were very effective at introducing technologies faster and better than their competitors. McKinsey argues, quite rightly, that the attitude of European business leaders towards IT must shift if their companies want to ride out the storm and emerge stronger.
Changing the investment equation
The challenge is to close the gap between what business leaders know is needed to accelerate the business, and what they are able to do today. Some organisations remain focused on pure cost-cutting. Yet, what are they really achieving, other than merely continuing to work in the same way as before, only a bit faster and with fewer people? By contrast, the more forward-thinking businesses are striking a balance between what’s needed to survive the short term, and what’s required to position themselves successfully versus competitors in the future upturn.
At Cisco, the business benefits we gain from honing the efficiency and productivity of our everyday operations are reinvested in the innovations that will drive our business tomorrow. In the last year alone, we have saved $4.4bn from exploiting web 1.0 and 2.0 collaboration tools, ranging from basic web-enablement – of our manufacturing supply chain, learning, HR, service and support – to collaboration applications which connect people intelligently and dynamically across all sorts of traditional boundaries.
IT is a genuine catalyst for transformational change at Cisco, facilitated by an architectural blueprint that delivers a clear vision and value for technology investment, whilst providing a platform for productivity, agility and innovation. By maintaining an architectural approach, rather than a product-by-product approach, we’ve ensured that our IT platform is future-ready and able to swiftly accommodate opportunities that have yet to present themselves. When we see our customers preparing for the future, they are typically looking to invest in two types of business transformations to help them compete. One is the ‘superior customer experience’, where companies are looking to identify and implement a truly unique and differentiating value proposition to their customers. Success here means increased revenues.
The other is the productive, borderless organisation, where businesses attempt to provide this customer experience as productively and cost-efficiently as possible through cross-functional collaboration. Ultimately, this will lead to them working in new ways with partners, customers, supply chain and communities. Success here will decrease operating costs. For real change that can be felt, organisations need to address both of these opportunities simultaneously and architect technology in a way that supports both business transformations. In many cases, it can also change the IT budget equation, dramatically reducing the proportion spent on operating the business and increasing the proportion spent on driving innovation.
The power of the CEO-CIO partnership
More than ever before, technology underpins every move a business makes and game-changing technology-based innovations are disrupting markets and changing competitive landscapes. In this economic environment, the role of the CIO will become critical to a business’s ability to embrace change, be more agile and drive growth.
Courageous decisions are the only means by which European organisations will thrive in the future. That includes promoting a mindset that fosters and rewards experimentation with new ideas. By joining forces, CIOs and CEOs can set a different agenda – one that is powerful and far-reaching, and one that will make Europe competitive in the global economy. The important thing is to set that agenda now.