Exercise equipment may make your pulse race. But if you’re an exercise equipment maker, how do you energize the company’s growth?
Nautilus, maker of such fitness-center mainstays as the Gravitron chin/dip machine and the variable-stride elliptical, has answered that question by out-innovating the competition. The company has a history of using technology to improve its new products, with the inclusion of eddy-current brake resistance systems that run quietly and smoothly, telemetric heart rate monitoring on the screen and computer-linked training programs, to name just a few.
But now Nautilus is taking a different approach to harnessing technology: using it to see what tomorrow’s markets look like. For example, the company has begun using real-time sentiment data to pinpoint future fitness needs in the United States. The software, which in real time sifts through the mountain of opinions about health and fitness posted on the Web, helps predict consumer intent based on insights into users’ likes and dislikes, what they think is missing in the exercise machines they use today and what they expect to see in the equipment of tomorrow.
Nautilus is part of a small but growing subset of companies that are using technology to help them anticipate and combat slowing growth and plan for their next surge with confidence and precision. These companies understand that any business that is satisfied to ride the growth curves of its current offerings is destined to stall.
Markets saturate. Competitors loom. Customers defect. Regulations change. Supply chains break down. Yet too many leaders still manage by focusing only on the financial “S-curve” of revenue growth—in which their businesses start out slowly, grow rapidly until they reach market saturation and then see their revenues start to level off.
|Truly great companies know it’s not enough to achieve greatness once, no matter how strong their market position, how steep their climb up the S-curve or how good their profit performance. Their leaders grasp a core concept: To thrive over the long haul, they must launch one successful business after another, routinely outperforming rivals during good times and bad. And information technology has a vital part to play in each of these cycles of renewal (see chart).
IT and the hidden S-curves
Specifically, these high performers actively manage against three hidden S-curves that flatten off well before the company’s financial curve reaches its peak. Doing so requires them to track trends and market changes to create a business vision that is informed by a clear sense of where demand will come from next, and in what forms.
They must also monitor the development of their capabilities to ensure that they have the right management team at the right times to generate new capabilities to support that vision. And they must spur the growth and development of their talent pools to maintain surplus talent—that is, to make sure they have a deeper bench of the skills and competencies than they immediately need.
Research into the hallmarks of high performance has established that technology is at the heart of innovation; therefore, it plays a key role in driving business change. Too often, however, the change is expected to come from technology’s impact on products or services, or on operating capabilities. Less often is it seen as a key enabler of early change in a company—change that prevents the company from peaking and then fading when its revenue growth stalls.
This is a subtlety that forward-thinking chief information officers now grasp. “The C-suite is now more aware of what can be done with technology, so they’re becoming more demanding,” says one former CIO. “This is forcing CIOs to step up to an agenda that has much bigger expectations of them and their future roles.”
Let’s look at how IT is playing a leading role in driving early change at high performers by improving those companies’ success within each of the three hidden curves.
Staying on the edge of tomorrow’s markets—from the edge of the organization
In any given market, the basis of competition evolves over time. The personal computer business, for example, began with competition over increasing functionality—often fancier features too—and eventually became standardized, commoditized and subject to unrelenting price wars. Of course, all executives worth their salt recognize that their markets don’t stand still. But not all understand why that is so or when it will happen—let alone how they should respond.
Leading companies deliberately search for insights that, when properly exploited, have the potential to change the rules of the game—the existing basis of competition. This requires “edge-centric” strategies—focusing on the leading edge of customers’ needs and wants. These strategies are implemented at the edge of their organizations (away from the corporate headquarters and the core business), where such needs and wants are often first seen and responded to; they operate at the edge of control in that they are neither centrally planned nor centrally run.
These companies typically have CIOs who exploit IT to enable their companies’ quests for such market-driven insights. They apply the latest in technology to watch and to listen to their customers—as Nautilus is now doing.
Their efforts are by no means restricted to analytics tools. They require a range of technologies that deliver a broad understanding of how markets are evolving, how market disruptions happen and what are the most appropriate ways to respond to these disruptions. They achieve this by applying IT to three forward-looking customer activities: watching, listening and co-designing.
Watching what customers do
The “watchers” actively track what their customers are doing. Some companies do this by examining historical data about purchases and returns, which they capture at the point of sale, hoping to learn from the patterns they identify. Some analyze data submitted by customers, such as satisfaction and opinion surveys.
Other companies observe what’s happening online, in real time, as current and potential customers interact with their website and the websites of retailers that sell their products, as well as with relevant online forums where, for example, consumers may discuss those types of products. Still others, like Procter & Gamble, deploy cutting-edge “eye-tracking” systems that monitor how shoppers act in a store.
What the watchers have discovered is that by using technology to examine the minutiae of their customers’ behavior, they can discover surprisingly valuable information that leads to insights that can identify hitherto latent market opportunities.
One cellular competitor, for example, has been able to improve customer retention in the mobile telecommunications industry, where customer churn is endemic.
|For example, the company indicates that its ability to mine its database of billions of customer records has helped it to reduce churn in its operations in the Netherlands—where there are at least 54 different mobile phone brands for consumers to choose from—by up to 12 percent a year in some customer segments. How? Data analysis was used to inform the company’s customer loyalty and retention campaigns; the teams leading those campaigns were then able to make the right offers to customers at the right times—a smartphone with a prepay tariff for some customers, perhaps—and through the most appropriate channels.
Some companies track users’ online behaviors in real time looking for patterns based on such factors as how much time shoppers spend on particular product pages on retail sites; whether they scroll through the whole page; or whether they highlight any text, click on any links or add any products to their shopping carts. Their analytics systems can then suggest products likely to please users based on inferences drawn from their behavior.
One e-commerce provider uses this approach to respond to customers abandoning their virtual shopping carts when they can’t immediately find everything they’re looking for. By integrating real-time analytics data with a recommendation engine, the provider has been able to target and win back “abandoners” with relevant email offers. In effect, it has found a significant untapped growth opportunity not in new customers or a new market but in the “near-miss” customers it has already successfully tempted.
Listening closely to customers
The companies that listen well are actively soliciting opinions and suggestions, going far beyond conventional feedback formats. Eavesdropping is accepted behavior here; it’s no longer unusual for smart marketers to “listen in” on customers’ conversations in social networks. The payoffs may not seem earth-shaking, but they can be very rapid and very effective, as South Korean carmaker Kia Motors Corp. can attest.
Within months of the 2012 Kia Optima marketplace launch, its seats were redesigned in response to criticisms “heard” in social media channels. Two points are noteworthy: Companies like Kia pay very close attention to customer sentiment in a host of online forums, and they act very, very quickly on what they see and hear there, without necessarily waiting for the next product launch cycle. The carmaker’s insight is that it can improve and innovate continuously, independent of the traditional automobile industry launch calendar, by using technology to listen closely to what customers have to say.
Co-designing products and services
Other companies are taking customer input a big step further—essentially asking customers to co-design products with them. The objective of this spin on crowdsourcing is not always to cut R&D costs; it is often to create lively communities of customers and, as much as possible, to lock in their loyalties.
That’s the case with Threadless, an apparel company whose product designs typically result from its customers’ imaginations. Most of the designs it uses come from the company’s ongoing open call for submissions from a worldwide community of artists and designers—many of them customers. Once ideas are submitted, Threadless’ community, which has more than a million members, casts votes that help the company decide which designs to put on the apparel they will then sell.
|Likewise, Fiat’s Mio concept car was designed through a crowdsourcing project that involved more than 17,000 people. One food company relied on this technique to come up with a new pasta. And South Korean electronics conglomerate LG Electronics is developing new mobile phones based on ideas generated this way.
To return to the business importance of residing on the edge: Leading companies recognize that important ideas come from regional operations or remote departments within the organization—and they use technology to foster cultures that enable and support those idea flows.
At Pfizer, Christopher Bouton, a former team leader in computational biology at the pharmaceutical company’s Research Technology Center, downloaded free open-source wiki software with the goal of creating a scientific encyclopedia for Pfizer’s internal research and development community. He believed that the wiki could help generate articles that could then be developed collaboratively by community members. (In 2007, Bouton won the prestigious 2007 William E. Upjohn Award in Innovation for conceiving of and implementing the organizationwide wiki, Pﬁzerpedia.)
But the Pfizer R&D community—independent of oversight or governance from senior management—took the wiki in a different direction. Researchers started using it to publicize their projects and to use the wiki’s search function to learn about other work at Pfizer. With thousands of users contributing content, the site grew at an astonishing rate to become a central index of everything to do with R&D at Pfizer.
Now the wiki has become an innovation accelerant. Bouton, who is currently CEO of biotech company Entagen, says that Pfizer researchers regularly told him that they used the wiki to find someone at the company doing related work, and that they have since launched new research projects with their new colleagues.
|Of course, being savvy about IT doesn’t guarantee that a company will get the edge idea. Many have long held to the virtues of centralized computing systems. However, such old-school perspectives will not help companies to manage their market-relevance S-curves. “It’s an absolute necessity for today’s CIOs to create awareness of what it takes to bring ideas from the edge,” affirms one ex-CIO.
Constantly matching the top management team to the market’s changing needs
By the time a company’s financial performance starts to taper off, it’s often too late to begin building new market-relevant capabilities—which can take five years, 10 years or even more to create—that can propel the enterprise toward the next big opportunity. The default is to maintain the status quo while the business is humming along—which is what many lesser performers do.
By contrast, high-performance businesses establish a pattern of early renewal of their top teams, coincident with the changes they know will be needed to drive renewal of the organization overall. They maintain a balance within their top teams, blending cognitive styles, tenures, viewpoints and other characteristics, with the intention of keeping one foot in today and the other in tomorrow. And they organize and manage the management team so that they maximize the effectiveness and productivity of the time the group spends working together.
Intel Corp. stands out in this regard. During its 43-year history, the semiconductor giant has had five chief executives—all of them homegrown. “We discuss executive changes 10 years out to identify gaps,” said one board member. Just months after current CEO Paul Otellini took over in 2005, the search had begun for his successor.
So how can IT help to ensure that the leadership team is all it can be as markets morph? We have pinpointed three areas: managing top talent attrition, actively managing career progression and enabling top management to collaborate better.
Managing top talent attrition
Enabling dynamism in the top team first requires ensuring that some portion of top talent stays with the company and grows to take on leadership roles. Some companies already practice predictive workforce analysis as a matter of course.
That’s the case at Alliant Techsystems. The aerospace and defense products company puts significant effort into accurately anticipating its labor supply and demand. Senior managers analyze the departures of key employees to create a “flight-risk model” that calculates the probability of any one employee quitting. The model paid off in 2010 by helping to project—correctly—unusually high turnover in a crucial plant maintenance group.
By getting smarter at predicting attrition among key performers, employers can make preemptive moves—by developing targeted recognition and retention programs, for example, or by preparing for departures with better succession planning, training and recruiting campaigns.
Actively managing career progression
For a number of years, Procter & Gamble has seen enormous value in advanced, IT-enabled HR management systems that track employee skills levels and support succession planning. The company uses a talent management system to track 13,000 middle- and upper-management employees.
The software captures information about succession planning across three main levels: country, business category and region. It includes career histories and capabilities along with education and community ties. It pinpoints top talent and the development needs of those “high potentials.” It also keeps tabs on diversity within the ranks of middle and senior management. P&G’s business leaders can use the talent management tracker to get a snapshot of who may be best placed to take on which leadership roles.
Enabling management teams to collaborate better—and be more productive
Technology can also play a crucial role in making senior executives more productive—individually and collectively. Increasingly, executives are using smartphones and tablet devices—often that they have purchased themselves—to maintain access to their companies’ information systems. Many IT managers fight such moves, often out of concern that the devices don’t fully meet their security standards. But astute IT leaders foster rather than fight those moves, recognizing how valuable improved leadership productivity is to companies.
Collaboration technologies can also significantly shorten decision cycles, reduce unproductive time spent traveling, and cut travel costs. Case in point: One large North American bank uses Cisco’s TelePresence Web-based video-conferencing systems to make decisions much more quickly, to boost productivity and to establish trust more rapidly, particularly among senior managers who may not work with one another frequently. An additional benefit of TelePresence and other collaboration tools is that they are very easy to use.
The key, then, is for senior IT managers to walk in the shoes of their peers in the C-suite, sensing what technology systems will make the leadership teams more adaptable and more productive.
Generating and sustaining surplus talent
To maintain strong performance over any extended period, companies need more than just enough talent. Accenture research indicates that they need a surplus of available talent. One reason is to more easily adapt to attrition and demographic shifts—all those Baby Boomers retiring. But the more important reason is to be ready to ride the next S-curve upward.
A surfeit of talent allows them to fully explore new business opportunities and grow and exploit all of their current business opportunities at the same time. Yet all too often, poor performers starve themselves of the talent they need—by regularly cutting their workforces to the bone in tough times, and by being slow to rehire and recruit when things improve. They make the same mistake in periods of rapid growth and strong competition, when margin pressures can lead to efforts to reduce labor costs.
IT executives can help by collaborating with HR chiefs and business-unit leaders to ensure that their companies have the most appropriate and cost-effective tools to benefit all aspects of employment: recruiting, retention, talent management, training, promotion, compensation and more. Specifically, they can help to create “constant learning” environments, sharpen talent acquisition systems and leverage social media to improve recruiting.
Fostering constant learning
To improve the effectiveness of training and development, IT is in an ideal position to identify and evaluate everything from distance learning to e-learning systems. IT can also seek and support education management software that properly integrates training and development functions and ties employees’ development needs and goals directly to the training available to them.
Whole Foods Market’s online “university” is designed to connect team members and team leaders to the retailer’s core values and to deepen their knowledge of the company and the industry. The education website is accessible to all employees; the tools on the site make it relatively quick and easy for Whole Foods’ workers to acquire new skills or update existing ones. Self-paced courses include “Introduction to Organics,” “Dietary Supplements and the Law” and “Introduction to Quality Standards.”
Sharpening talent acquisition systems
These tools transcend HR’s conventional information systems for career development and skills tracking. For instance, household, health and personal care products maker Reckitt Benckiser Group uses virtual screening techniques to sharpen its talent acquisition systems. The company’s website features an application, called Virtual Career, that allows potential candidates to figure out whether they might fit with its culture. The software shows various situations at work and asks prospective hires how they would respond; it then scores the candidate on how well his or her response matches the company’s core values. On that basis, candidates can decide if they want to go ahead with an application for a job at Reckitt Benckiser.
Using social media to attract and screen candidates
Other companies harness social media to effectively go where potential candidates are. Nokia has made social media a linchpin of its recruiting strategy; Facebook, LinkedIn and Twitter all appear prominently on the telecommunications giant’s careers site.
Marriott International, the hospitality chain, is putting a new face on recruiting with a social media game called My Marriott Hotel that enables candidates to envision what real-life jobs are like inside the hotel chain. For gamers who are intrigued enough to apply, a tab labeled “Try it for real” moves them into the actual recruiting process.
Starbucks Corp. is an especially assertive user of social media. To lure passive candidates, the global coffee purveyor uses Facebook, LinkedIn, Twitter and YouTube to build a vigorous employer brand in the virtual places where candidates already spend a lot of time. Starbucks’ own Facebook page has a widget, a small application that identifies job openings and even allows potential recruits to apply. Overall, Starbucks says its use of social media has significantly improved the effectiveness of its recruiting efforts.
Clearly, no one software program and no single initiative from the IT group can, by itself, catapult a company onto the next S-curve. But there is much that IT can and must do, cumulatively and over time, to help the organization jump the three hidden S-curves while the core business is healthy. That’s what is needed to allow the company to achieve lasting greatness. And that’s what IT can do for strategy.
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For further reading
“Jumping the S-curve: How to sustain long-term performance,” Outlook 2011, No. 1
“Strategy at the edge,” Outlook 2011, No. 2
About the authors
Paul F. Nunes is the Boston-based executive director of research at the Accenture Institute for High Performance. His work has appeared regularly in Harvard Business Review and in numerous other publications, including the Wall Street Journal. He is also the coauthor of Jumping the S-Curve: How to Beat the Growth Cycle, Get on Top, And Stay There (Harvard Business School Press, 2011). In addition, Mr. Nunes is the senior contributing editor for Outlook.
Gavin Michael, Accenture’s chief technology innovation officer, leads the company’s work in innovation and technology alliances, as well as Accenture Technology Labs. He has more than 20 years’ experience in technology leadership in the financial services industry, especially in driving major business change. Mr. Michael is based in San Francisco.
The authors want to thank Scott Kurth, senior researcher at Accenture Technology Labs, and Ivy Lee, research analyst at the Accenture Institute for High Performance, for their valuable contributions.