Are the Current Approaches to Strategy Really in Need of ‘Revolutionary’ Change?

Posted by Nico Viljoen on 08 February 2018.

Nico Viljoen

MBA, Hons BCompt, HDip Tax (Jefferson School of Law USA), HED, AGA(SA) DBA Graduate Student, Business School Netherlands

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More about Nico Viljoen

Nico obtained qualifications from various academic institutions and currently studies towards the DBA at the Business School Netherlands. He is an associate member of the South African Institute of Chartered Accountants. After completion of his articles with PWC, he lectured in the fields of taxation, accounting and auditing at the Vaal University of Technology. Thereafter, he occupied financial executive positions in the heavy engineering, chemical, transport and automotive industry. Nico has owned and managed various successful businesses over the 20 years. Nico has been a business mentor for various organisation and serves as an external moderator for taxation and internal auditing.

Flow from IoT in the next 10 years,  B2B applications will account for approximately 70% of the value. Global dimension, and emerging markets, whose manufacturing-intensive economies often flow to final manufacturers, will be prime areas for IOT. Over the next 10 years the total economy impact from IoT will be greater in advanced economies (larger cost savings; higher adoption rates) (Bughin, Chui & Manyika, 2015:2).

The biggest competitive gain would be when IoT data inform decisions and optimize operations. IoT takes out the guesswork of product development by gathering data about how products; capital goods function and how they are used. Using data from equipment rather than information from customer focus groups or surveys manufacturers can modify designs so that new models perform better and to learn what features and functionality aren’t used and therefore be eliminated or redesigned (Bughin, Chui & Manyika, 2015:4). An IoT business-model shift will require product companies to develop and flex their service muscles. Product development becomes service development, where value is co-created with customers.

Aligning the organisation, IT will have to join with line managers to oversee IoT systems that are essential to improve both the top and bottom lines. Companies will need to align their IT and operational leadership tightly. C-suites and leaders of business units must be receptive to linking up their systems. Organisations must become more analytically rigorous and data driven. In some cases, the decision makers will be algorithms. IoT systems will make decisions automatically; managers will monitor metrics and set policy (Bughin, Chui & Manyika, 2015:6).

It is estimated that 40% of potential value on average will require different IoT systems to communicate with one another and to integrate data (Chui & Manyika, 2015:7). Many large organisations will have enough market power to specify that their IoT vendors make systems interoperable. This will lead vendors to choose common standards that will ultimately speed up adoption. Interoperability could also be achieved with software platforms designed to combine data from multiple systems. That will create new market opportunities for organisations capable of integrating data from diverse sources.

However, interoperability exposes more of an organisation’s units to cyber risks. Organisations must rely on vendors to mitigate some of these risks and embed methods of protecting critical information into technology architectures, business-model-innovation processes and interactions with customers (Bughin, Chui & Manyika, 2015:9).

IoT will soon become a differentiating factor in competition. Although price is based on value derived by the customer, sales people and account executives must learn to sell the new business model aligned with client relationships (what they sell, how they sell and to whom they sell), (Iansiti & Lakhani,2014:13).

Finally, IoT requires a paradigm shift to create and capture.