VUCA World Part 7: Meta-Companies
In the three previous articles, we discussed The Light Footprint Approach presented by consulting firm Roland Berger, regarding how to survive in the VUCA world. This approach is based on seven pillars divided into three areas: Innovation, Organization and Approach. These characteristics are found in top performing corporations in the VUCA world (volatility, uncertainty, complexity and ambiguity). Standout organizations are described as “meta-winners – firms so singular that they are game-changers in their industry.” Of the meta-winners, three organizations stood out above the rest, earning the designation of Light Footprint Champions.
LIGHT FOOTPRINT CHAMPIONS: What does it mean to be a meta-winner in today’s VUCA world? How can you turn your business into a Light Footprint champion? The following examples show how firms are successfully adapting to changes in their environment, leveraging innovation and restructuring their organizational setup to ensure agility.
NETFLIX: Netflix is an expert in market disruption. It started out as a service warehousing DVDs and renting them out to its online members, shipping the DVDs to them by traditional mail. Since then it has shifted its activities more than once, changing the rules of the game in each market segment it has entered. From being a pioneer in DVD rental shipping and later streaming/VOD, it is now becoming a successful producer of content. This constant reinvention has allowed Netflix to survive many threats from its competitors. In particular, it has been able to outmaneuver established players such as the TV networks, Hollywood and larger video rental chains and retailers. Indeed, it contributed to the downfall of traditional players such as Blockbuster. One key to Netflix’s strategy is to make use of large datasets on customers and viewing trends – in other words, its assets in cybernomics – to help people find content that is of interest to them. These data-mining capabilities have also had other consequences. Thus, Netflix realized that if a viewer had watched the BBC show House of Cards, there was a high probability that that same viewer had also watched movies featuring Kevin Spacey (e.g. American Beauty) or directed by David Fincher (e.g. The Social Network). Their conclusion was clear: They should produce a US version of House of Cards featuring Kevin Spacey and involving David Fincher. They did so, and the show is a hit.
FREE: French telecommunications player Free revolutionized the French telecommunications market with its low-cost products, first in the area of Internet access with its Freebox and then in the mobile arena. In so doing it drove down prices in the French market from among the highest in Europe to among the lowest. It also forced traditional French players such as Orange, SFR and Bouygues Telecom to redefine their strategies, pushing them to launch their own low-cost products such as Sosh, Joe Mobile and B&You. Free balances its sense of creating a show with extreme secrecy about its new products and versions. It has built a strong Internet community by allowing users to create product -related websites such as Univers Freebox, Le Journal du Freenaute, Free&Mac, and others. It organizes annual events and has developed new channels for its users to meet and exchange ideas, such as the Freebox Universe concept stores. CEO and founder Xavier Niel is personally involved in this strategy and meets regularly with journalists. This collaborative attitude to customers translates into two key competitive advantages. First, it secures customer loyalty. Polls show that Free’s customers are more willing to recommend it to their friends than is the case for competitors. Churn rates are also lower. Second, collaboration with customers enables savings in other areas. For example, the proliferation of user websites dedicated to Free’s products reduces its costs for aftersales services. The firm thus achieves a more favorable cost structure than other operators, with support functions and CRM/marketing representing around 15% of sales, compared to approximately 30% for Orange.
ZARA: Spain-based global apparel retailer Zara is extremely agile in the area of supply chain management, with exceptionally short production cycles. The brand was created in 1974, so before the advent of the VUCA world. However, it quickly became a leading actor in the industry thanks to its outstanding organizational agility. Zara is able to bring a fashion trend into its stores quicker than any of its competitors, usually in less than a month. Thanks to the constant feedback it receives from its stores, it can immediately identify new trends. It produces its collections closer to the stores than other retailers – in Europe and North Africa rather than Asia – which translates into shorter shipping times. As a result, it can update its collections faster and more often than any other fashion retailer. This quick turnover means that customers visit the stores more often: 15 to 20 times a year, compared to 4 or 5 times a year for some competitors. It also encourages customers to buy items now, as the item may not be available next week. All of this generates a strong performance: Over the past five years, Zara has grown an average of 11% per year.
CONCLUSION: In today’s VUCA world, firms can go rapidly from domination to stagnation and vice versa. Traditional players who fail to adapt will soon slump. A prime example is Kodak, toppled from its position of market leader into steep decline due to its inability to adapt to the digital revolution. The good news is that the “Kodak syndrome” is not inevitable. Our study identified several examples of traditional companies that have succeeded in transforming themselves into Light Footprint champions: BMW with its connected vehicles, Target with its ability to mine big data, Chanel with its mastery of secrecy. Most meta-winners were born into the VUCA world and so agility and flexibility form part of their DNA. Traditional players should implement the seven principles above to turn themselves into Light Footprint champions. In a volatile and uncertain world, profitable growth largely depends on your ability to react to changes in your situation in a matter of days or even hours. But there is no reason why that should be the prerogative of new players.
Traci Kingery, PHR is an HR Professional and freelance writer based in the Midwest, specializing in immigration and talent management. When she’s not improving unemployment, she keeps busy with her husband and four children.