Firms need a new formula for success to stay competitive in the age of the customer — agility is not enough. We see many CIOs and their teams doubling down on agility as a means to cope with the accelerating pace of business. This is a result of people and technology evolving in complex upward spirals (see the figure below). While agile is a good delivery strategy within a set business model, our research finds that to stay ahead of technology-human loops, enterprises must proactively rethink themselves and adapt or risk getting left behind.
We think these firms, which we call “adaptive enterprises,” will dominate firms that only deliver with agility. Adaptive enterprises will win by identifying future opportunities and proactively reconfiguring themselves. Forrester’s Q1 2019 North American Technology-Driven Innovation Online Survey shows that advanced adaptive companies have 3.2 times greater revenue growth compared to industry averages and that beginning firms are not growing at all.
Agility is a foundation, but to achieve this level of growth and future market leadership, adaptive enterprise firms must become more adaptive by doing several things better. Here are three from the report:
- Acting on insights. An adaptive enterprise alters its business concept based on insights that improve the company’s odds of fulfilling future customer demand. For example, CVS understood the customer trend toward self-service and clinic-based healthcare far ahead of its competitors in its pivot from beauty supplies to prescriptions and through its acquisition of MinuteClinic. It is carrying that conviction forward by transforming itself into a healthcare powerhouse through further acquisitions such as Aetna.
- Leveraging platforms to deliver new value. Technology advancements lower the barriers to change, so companies that are more technologically sophisticated will more easily transition to new business models. Mastercard was far ahead of its competition in building a big data analytics platform. Today, it has leveraged its technology platform to extend its core business with fraud solutions, B2B payments, and business optimization services like Mastercard Track.
- Building a culture that embraces change. Adaptive enterprises adopt new business models more quickly and thus require employees to have more mental flexibility and less fear of change. While the industry has overused Netflix as a platform example, we think its culture, as expressed by its now famous “five rules,” established a culture of adaptability. By inspiring employees, the company has evolved from an antiquated mailing service to streaming pioneers to original content production.
The idea of business adaptiveness is a core theme of our CIO research that draws together two research streams — technology-driven innovation and the future of work — as well as many other of our most important research ideas on insights, digital platforms, and agile delivery. It is an advanced concept that we are holding up as the bar for future business excellence. Is your firm becoming “adaptive”? We hope so.