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Five questions to find the truth in a trend

by Mark P. McDonald  |  February 8, 2019  |  Comments Off on Five questions to find the truth in a trend

When is a trend more than a rumor? Take the predication that 50% of the current Fortune 500 will not exist in 10 years time.  Technically, the prediction is  accurate, but what constitutes the top 500 is relative.  It does not say that half of the companies in the current F500 will disappear as opposed to be consolidated, transformed etc.  The distinction is important, but hard to see in the blizzard of media, dire warnings of future failure and data taken out of context.  How can executives separate the truth from the trend?

They can use 5 questions to evaluate its impact.

Disruption truths and trends

Disruption occurs when proven practices no longer produce predictable results.1.

Here are five questions that come to mind.  Each question concentrates on enterprise fundamentals determining future fitness.  Adopting a fundamentals approach investigates the drivers of disruption as the depth of a trend sets the depth of change required

Question 1: Is our growth accretive,  incremental, or flat?

It all starts with the strength of your market and customer position in terms of comparing growth rates.  Accretive growth is growth at above market rates.  By definition accretive growth involves gaining market share, relevance and market power.   This type of growth occurs when current customer and market trends work in your favor.  In this case, you are either the disruptor or enjoying the fall out from someone else’s disruption.

If you are making your plan but losing share, growth is technically true but it is not building a foundation for the future.  Incremental growth or growth below market rates appears accretive but often it provides a false sense of security and subject to disruption. Re-defining and narrowing the ‘market’ is one symptom of deferring to disruption and a sign of the need for deeper change.

Flat or negative growth indicates that you are losing market share that is obvious.  But digging deeper is required particularly if falling share is the result of declining customer relevance an indicator disruption.

Question 2: Do we need to add staff to improve service levels?

Measuring operational fitness beyond cost control is critical in a disruptive environment.  This is a particular concern in a digital environment where technology deflates some costs and hides others as transaction mixes shift.  Advertising is an example as revenue dollars have shifted from relatively few and expensive media outlets like television to billions of digital micro advertisements.

Staffing changes is one measure of operational fitness in the digital economy.  While most businesses have addressed their digital front end, engaging in digital advertising for example, few have addressed their digital backside.

Treating all transactions as equal is a sign of disruption.  Adding staff to raise service levels is the first reaction to disruption.  The existence and growth of such ‘human middleware’ reflects a gap between internal operations and external expectations.  It is a sign that disruption has happened and it requires changing operations to reset the resources required to support all transactions.

Question 3: What is your current view of customer needs and how will those needs be different by the time you are ready to launch a new product?

This question looks at your agility and ability to respond to changing market considerations.  It originally came out of the book “N=1: How the uniqueness of each individual is transforming healthcare” It points out the break point between company products and services and customer expectations.

Customers have always wanted better, cheaper, etc.  Now that the supply of just about everything exceeds demand, they can get it.  This fundamental disruption between customer demand and company supply cycle times creates market lagging product and service introductions.  Rather than accelerating the release of products – good or bad – its time to think of building living products that start by serving core customer needs and advancing based on shared understanding.

Question 4: Are we attracting and retaining the best talent?

A market consists of more than customers.  Challenges attracting talent is a precursor for disruption as it accelerates demand for the best-qualified people.  These people vote with their feet and choices.  When that happens it takes longer to fill positions to understand.

Attracting and retaining highly skilled people who are in high demand is a constant challenge.  Digital disrupts the labor market inverting the market where demand for scarce executive skills give way to new technology skills and ways of thinking held at people at the start of their careers.   Rethinking the workforce model in this environment involves more than making work ‘fun’ but recognizing that this high demand workforce seeks challenges and achievements more than compensation.

Question 5: Are we expanding our relationships with the best partners?

Positioning the company at the center of an ecosystem is a common strategy goal.  Too often this strategy results in redrawing linear supply chains into circles of suppliers.  Making a new PowerPoint slide of your supply chain does not make it so.

Disruption replaces vertical integration with the multi dimensions of coordination.  That requires executives’’ concentrate on supplier as much as customer relationships. Basing a relationship on selling more, growing margins or reducing costs and chances are you are standing still.

Separating truth from trend requires clear answers to hard questions.

Every trend carries a kernel of truth.  Every rumor provides a view on reality. Executive inspection of these questions and facing the possibility of disruption is a start.

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Mark McDonald, Ph.D., is a Vice President and Fellow Emeritus in Gartner for General Managers Program.






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