Digital disruption will cause a transition and upheaval of products in nearly every industry. Sourcing and vendor management professionals will be driven to become more involved with third-party product development services providers. It is important to have in place some best practices to encourage sourcing teams to play a pivotal role in orchestrating and maintaining a relationship with PDS providers.
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By Charles Green
Fri, September 21, 2012
US neuroscientist Christof Koch believes we may soon find out – indeed, the complexity of the web may have already surpassed that of the human brain.
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In a whitepaper issued by Deloitte Digital, it mentions that “One-third of the Australian economy faces imminent and substantial disruption by digital technologies and business models – what we call a ‘short fuse, big bang’ scenario. This presents significant threats, as well as opportunities, for both business and government.”
In the report, Deloitte identifies six industries that are likely to be subjected to significant disruption in the near future. They are Retail Trade, ICT and media, Finance, Professional Services, Real Estate, and Arts and Recreation.
According Deloitte’s Technology Leader, Robert Hillard, the digital age will be “confusing and confronting” for many businesses, so business owners must be prepared to innovate.
“The idea of digital disruption is about how much additional change a business will experience in the years to come, and how business can realize its potential across a spectrum of digital opportunities by building on the way it currently uses digital technologies and organizes business processes.”
“Once an organisation arrives at a better understanding of the extent to which digital disruption will change its operations and outlook – and when – the next step is to decide how to respond.
The three primary responses leaders can implement are:
• Recalibrating cost structures – making changes in terms of people, supply chain and overheads to better control costs and compete with digitally-powered, low-cost newcomers
• Replenishing revenue streams – building new sources of revenue across segments, geographies and business models as legacy streams dry up in the wake of digital disruption
• Reshaping corporate strategies – reconsidering assets, risk and corporate agility to position the organisation for success in the increasingly digital world.
The problems facing businesses today are growing significantly. It is no longer just the day-to-day activities that they need to stay on top of.
Here are 5 of the main problems identified:
Companies are struggling to keep up with rapid technology changes and increasing complexities. They are unable to stay ahead with the pace of technological improvements. This can be solved by developing a long-term technology strategy while remaining flexible enough to take advantage of unforeseen technology developments. Improvements are now “built to change” rather “built to last”.
The global economy is becoming more connected, creating a much larger and more diverse population of customers and suppliers. Understanding foreign cultures is essential to everything from the ability to penetrate new markets with existing products and services, to designing new products and services for new customers, to recognizing emergent, disruptive competitors. This can be solved by understanding international markets and cultures through better information gathering and better analysis of what it all means.
A changing regulatory environment is always of concern. It increases costs for companies to be continuously reshaping, restructuring and remodeling to align with the way a business works.
4. Information Overload
The ability of companies, much less individuals, to consume and make sense of the information that is available (and necessary) to make good decisions increases difficulty responding to changing business conditions. The problem can be solved by using technology to gather and analyse this information and data, and then convert into valuable knowledge to decision-makers.
Outdated operational processes and systems constraints is having a greater focus on ongoing changes in skills, productivity, and workforce flexibility. This causes potential for organizations to be stranded or staying competitive. The problem is solved by getting ideas off the ground fast, eliminating bottlenecks and streamlining operations to suit opportunities.
“An old Japanese proverb says: ‘Strategy without action is a day-dream; action without strategy is a nightmare.‘
In the current turbulent 21st century, it is no longer adequate to simply adopt the past best practices.
It takes leadership to formulate the right strategies and to execute them successfully if we are to create a better future.”
~ Peter Tan, Regional Senior Vice-President of Strategy & Innovation, UCSI BOSRC
Business Owners and Entrepreneurs think that they are the only ones who can run their business. They then end up spending an excessive amount of time doing everything – from branding, sales, marketing, PR, through to bookkeeping. This eventually takes its toll on their families, health and lifestyle.
When you find yourself doing anything and everything required to keep the business running, chances are there will be no time left to do the work you’re good at. You must learn to delegate your weaknesses or pay someone to do the lesser-value jobs. You can’t grow your business by working “in your business”. Outsourcing will free up your time to work “on your business”
Outsourcing used to be a dirty word, bearing strong associations with cheap labour and redundancies. But in today’s entrepreneurial environment it’s the only way to go. To buy some time back, if you like.
Here are the 3 key things you need to identify when and what to outsource:
1. What is your time worth?
If your time is worth $100 per hour to do sales and marketing in order to bring in new business, then it’s worthwhile hiring another pair of hands to do the website’s content management or the bookkeeping. Paying them $30 an hour saves you $70 an hour for you to bring in more revenue. The outsourced expert will be a lot quicker than the business owner and better at it too, so you can probably double that saving.
2. What your weaknesses?
Focus on what you’re good at and let other people do what they are good at.
This is especially the case for specialised skills and only temporary or cyclical requirements that are impractical to bring in house.
3. What is most important?
Knowing the key drivers and measurements for your business to grow and be profitable helps you prioritise and manage your time and resources. You can hire and train someone else, while you stay focussed and attend to the important and highest priority functions.
Understanding the answers to these three questions will help you determine if, what and when to outsource.
Recent studies have shown that cost is not the reason for small to medium businesses lagging behind with the uptake of digital technology.
The main reasons according to the study are:
- Information overload: There is so much information available that the business owners don’t have the time to filter and absorb what is relevant.
- Lack of computer expertise: Business Owners know how to run a business. They are not skilled or knowledgeable on the technological aspects of how to use innovation to improve the way they do business in this digital age.
- Lack of time: Business Owners do not have the time to learn or be taught process improvements and technology advancements.
- Where to go or who to go to get help: The vast number of companies providing diverse and varied information creates another barrier and confusion to the Business Owners. What might work for one business may not necessarily work for another.
- Risks: It is a leap of faith into unknown territory, and that fear of what if it doesn’t work. Will they have wasted their time and money?
What Business Owners can do is to speak with other Business Owners in a similar field/industry and find out the hurdles, pitfalls, challenges that they faced and how they resolved these issues. Having a network and sharing information with a Support group can save the Business Owners a lot of time.
They can also refer each other to the Service Providers they used. This is a more effective and efficient way of establishing trust and credibility.
Another solution is to find a suitable Consulting company who provides holistic services and can deliver the entire solution. Outsourcing can be very cost-effective and time-saving. The Business Owners don’t have to search for multiple service providers and risk not getting the results that they expected.
Next week’s blog will give some tips on how to outsource.
The pressures from the digital revolution seem to have accelerated its impact on businesses in recent weeks. The iconic Australian chocolate maker, Darrell Lea, was placed into voluntary administration. The Services Sector continued to contract. Retail businesses, media, manufacturing, hospitality and tourism are going through an intense burst of accelerated restructuring. Online shopping, overseas travel and the cautious consumer are affecting retail. The Banking and Finance industry is downsizing due to the reduction in credit loans. The high dollar and cost pressures from our biggest ever mining and energy boom is squeezing a large part of manufacturing.
It is a period of great pressure and change for most businesses and investors. The fragility of business conditions is struggling to build momentum.
Businesses must adapt to new technology, a rapidly changing competitive environment and the new demands of your customers, in order to advance with the digital revolution and outlast your competition.
Gartner’s Global Head of Research, Peter Sondergaard, says IT trends are radically changing the world of commerce. He said social media, mobile, information and internet-based cloud computing trends would continue to develop aggressively in their own right, but their integration would deliver radical change in how business used technology.
Retail is the most obvious example of traditional business struggling to cope with technology change.
Within two years, Gartner predicts that there will be more mobile devices than desktop computers connected to the internet.
Today there are more teachers, preachers, coaches, consultants, mentors and “experts” at your disposal than ever.
How is a business owner meant to grasp all this, as well as focus on running your business?
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