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As the world is slowly returning to a new normal after the pandemic, companies have over a year of knowledge that they can go through and digest in their strategy rooms. While most industries plummeted by over 30 percentage points by the end of the first quarter of 2020 – and some by 50%, many remained underwater for the remainder of the year.

However, a capital market survey found that the top 25 companies that formed their own category generated 40% of total profits in the public market. Another survey shows that in today’s new business dynamic, the top 10% of businesses are taking home nearly 80% of the profits.

Staying afloat has become more or less a recipe for preparing for failure. How should management wade through this new reality, and what are the secrets of success that define or destroy a company in the new normal?

Today’s business ecosystem

In 2020, over 1.5 million new companies were registered in the US alone. In the rest of the world, too, while incumbents struggled to reopen after the first wave of hasty lockdowns, new entrants disrupted the competitive landscape by using technology to drive innovation and capitalize on new, evolving customer behaviors. For example, the availability of products became one of the main reasons that led 65% of customers to deviate from their preferred brands.

Companies across all industries have also faced a supply chain shock. In fact, according to our Digital Acceleration survey, over 69% of companies said they were negatively affected by supply chain disruptions. While technology helped in the early stages of business reboots, orchestrating digital business with excellence has not been easy for most – as many discovered the jurisdictions that regulated digital business for the first time.

Of course we live in a completely different world. A study by the Boston Consulting Group points to a grim reality where 33% of publicly traded companies will cease to exist in the next 5 years. In addition, it is becoming more and more difficult to keep the leadership position.

A survey by McKinsey & Company shows that the middle 80% of companies put together make almost zero profits, while the bottom 10% of companies destroy as much value as the top 10% create. Doing business in the digital age is no easy task – and the opportunity cost of mediocrity is higher than ever.

Understand profitability in a constrained environment

What does it take to shine in today’s restricted ecosystem? When most companies are trying to cut their operating expenses in order to get to the top after executing their digital agenda, top performers are not only profitable but are also quick to innovate to create new value propositions in their industries through deeper investments in digitization to deliver – and thus to further increase competition for the latecomers.

A good example is a 100 year old industrial equipment manufacturer who used IoT sensors and cloud technologies to mobilize and monetize their assets to offer an innovative subscription model to their customer base.

2020 also saw a mass exodus of customers moving to companies that excel at digital delivery – in other words, 24×7 services, lightning-fast responses to their problems, and simple but effective and seamless omnichannel experiences. At the same time, the top performers are also quick learners who can estimate the life expectancy of existing business models, which has fallen from 15 to 5 years, and proactively build and implement new ones.

Of course, it takes more than time and cost competitiveness to become and remain profitable in today’s economic reality. What are the secrets of outperforming in this environment and how can companies get there?

The secrets of the outperformers

The three main pillars of outperformance over the next decade include:

1. From planning to adaptability
Learning at the pace of change and adapting quickly to these changes will be crucial – compared to a focus on lengthy planning and forecasting.

2. A fluid perception of the world
New technologies are blurring the lines between the physical and the digital – bringing that flexibility into enterprise products and services is key to scalability and better customer focus, while lowering costs and reducing waste in the form of time and money.

3. Resilience through innovation
Maintaining availability and uptime will be the primary means of keeping the doors open. However, innovation will be critical to keeping traffic – both literally and figuratively, in the long run. This requires a highly efficient operating model that frees up funds for experimentation and innovation.

Technology: at the heart of the next generation business model

As already mentioned, the lifespan of existing business models is decreasing. But successful companies are ultimately driven by profitable business models. What remains constant across industries and regions is that successful business models are powered by flexible but powerful technologies that empower, rather than replace, the human workforce and enable them to innovate on the go.

In fact, large-scale digital delivery requires a solid technological core that can be constantly reinvented through high return on investment technologies such as Robotic Process Automation (RPA) and Artificial Intelligence (AI). Additionally, the CIO’s transformational concept needs to shift from a linear, one-off approach to an iterative, constant approach – driven by modularity and scalability, and geared towards experience.

To make that leap, however, companies need to shift their technology focus outside of the CIO office and into the boardroom.

An integrated technology and business strategy

Digital excellence is undoubtedly one of the decisive success factors of today – there is no longer any place in the boardroom to get excited about digital. The case was closed yesterday. What is required, however, is a seamless integration of the technology into the overall business strategy. Whether it’s a change in the business model, process improvement or a question of talent – the strategic approach to a business decision will inevitably be linked to digital technologies.

Here are three simple ways companies can incorporate technology into their business strategy and position themselves for digital success for the next decade:

1. Accelerate the digital transformation
As the lifespan of business models diminishes, rapid digital transformation is key to keeping the transitional value proposition. The response to the pandemic has shown that realizing digital paradigms such as remote working and collaboration was possible in a 40 times shorter timeframe than anticipated prior to the pandemic.

Technology partnerships are an essential step in achieving targeted, accelerated and profitable transformations. At the same time, it will be crucial to involve the affected stakeholders and keep them at the forefront of digital initiatives in order to promote acceptance and adaptability to change.

2. Design a bionic company
The success of transformative technologies – such as AI-supported up- or cross-selling, automated ticket generation and decision support – lies in a simultaneous and parallel transformation of the workforce. A digitally reinvented process can only succeed if the drivers have reinvented themselves. Therefore, company reinvention will be tied to an informed and calculated approach to technologically-driven workforce reinvention.

3. Focus on the central enablers
Digital excellence will be impossible without a solid technological core that can shoulder advanced technologies. As a result, the time and cost conscious introduction of cloud and SaaS solutions will be crucial to ensure success in later phases – whereupon strategic guidelines such as cost optimization or process renewal inevitably include a technological view of the business.

Conclusion

While digital excellence may seem like a daunting and unattainable goal to companies living in the old world, leaping into the future will be impossible without integrating technology into overall business strategy. As the performance gap between the leaders and the laggards increases, this jump becomes more difficult.

The urgency is real – because the first mover advantage is largely absent in core transformation initiatives. However, those who are committed to an integrated technology and business strategy will ultimately belong to the future of business, regardless of their industry – and digital excellence and consequently leadership will thereafter become a matter of time and a commitment to relentless innovation.

About the author: Amitava SenGupta is Executive Vice President, Digital Consulting at HCL Technologies.