Competitive advantage to depend on pattern-spotting?
As the world economy begins to emerge from the recession, business leaders will be forced to re-examine their opportunities for growth, competitive differentiation, and cost controls, according to a report from Gartner.
The report, entitled 'Introducing pattern-based strategy', aims to provide a framework to help marketers identify, model, and adapt to leading indicators that form early patterns in the marketplace.
"Most enterprises and governments today are so invested in traditional processes and thinking that they can't see new signals," explained Val Sribar, group vice president of research for Gartner. "Many are not even trying to identify signals of change. And, even if they are, most are unable to get executives to pay attention, model the impact, or discuss how their organisation must adapt."
According to Gartner, it is no longer sufficient to look for changes in social, economic, political and environmental landscapes. Instead, the company argues that organisations must find ways to evaluate what they are hearing from their customers, and to act appropriately. They also need to look for new patterns, not just from traditional data stores, but also in the activities of people, such as the collective opinions and ideas of those using social media platforms.
Pattern-based strategy, as defined by Gartner, requires both existing and new technologies. There are existing technologies that will continue to evolve, such as business intelligence, rules-based engines, performance management, service-oriented architecture, business process management, recommendation engines, and so on.
But the strategy also demands the integration of these technologies with new or enhanced technologies: those that identify patterns of change to indicate opportunity or risk, those that model the effects on the enterprise, and those that enable an organisation to consistently adapt to new patterns and drive measurable results.
Most business strategy approaches emphasize the need to gather better information and insights to help make better strategic decisions, as well as the need for scenario planning and robust organisational change management. But few have connected this activity directly to the execution of successful business outcomes, Gartner warns.
The report suggests that organisations can achieve this goal by establishing the following disciplines and by using technology to enable each of these activities:
- Looking in new ways, and beyond traditional places Business and IT leaders have historically focused on information that exists within traditional, well-structured sources - usually reinforcing what they already know and validating their current strategic direction. But to ignore new patterns that form from so-called 'weak signals' in the marketplace, or to misclassify stronger signals to fit within the norms of a current business strategy, risks losing sight of exceptions that could provide valuable leading indicators of market changes.
- Modeling for pattern analysis Once new patterns are detected or created, business and IT leaders must use collaborative processes (such as scenario planning) to discuss the potential significance, impact and timing of them on the organisation's strategy and business operations. The aim of this modeling process is to determine which patterns represent the greatest potential or risk by qualifying and quantifying their impact.
- Adapting to capture the benefits Identifying a pattern of change and qualifying the potential impact are both meaningless without the ability to turn it into a successful business outcome. Business and IT leaders must therefore adapt their strategy, operations and even their teams' behaviour to realise the benefits of new patterns with a consistent and repeatable response that is focused on results.
According to Sribar, the ways in which Amazon and Netflix apply recommendation engines are good examples of organisations leveraging pattern-based strategy concepts. These companies seek new patterns in behaviour as customers browse and purchase, and then evolve their customer models dynamically to adapt promotions as other customers navigate through the web site. In many cases, this has led to increased revenue through cross-selling and up-selling, as well as higher levels of customer loyalty. Most importantly, however, the results of various adaptations are then fed back into how the recommendation engine looks for other new patterns, and how it models potential future adaptations.
The full report has been made available for free download from Gartner's web site - click here (PDF document; no registration needed).