“If strategy had an arch enemy, it would be bad execution.” — Anonymous
The remains of great strategies litter the business world. And, as the business world reshapes itself around readily technologies social, mobile, big data analytics, the cloud, and the Internet of Things (IoT), digital strategies become mere rallying points.
But that’s ok according to Jeanne Ross, a principal research scientist at the MIT Sloan School of Management and director of the MIT Center for Information Systems Research. Ross firmly believes that competitive advantage comes from execution, not strategy — and that superior execution will take companies in different, more profitable directions than less execution-savvy competitors.
Competitive Advantage From Integration
Ross also makes a compelling case that no sustainable competitive advantage rests in a single capability. That’s why Uber has so much competition. But for established companies, advantage comes from a set of integrated capabilities.
Competitors may have some or all the individual capabilities but integrating them can create something extraordinarily powerful that’s hard for others to copy.
As an example, the number one question received at Nordstrom’s call center is: “Can I find the item I’m looking at online at my local Nordstrom store?”
Nordstrom’s department store offers a very good example of Ross’ integrated capabilities premise. Always known as a business that put the customer experience first — not a strategy, an unshakeable value — Nordstrom’s nevertheless struggled initially to get its footing in the world of ecommerce.
But it has. And digitally enabled integrated capabilities set it apart from competitors physical and virtual.
“Customer obsession has been a thread all the way through, but how we deliver against that obsession has changed,” says Geevy Thomas, Nordstrom’s chief innovation officer.
Nordstrom’s puts the customer at the forefront, not the technology. What does the customer want and how can technology help deliver that? The company has created a highly personalized shopping experience that combines a transparent supply chain with precise analytics, so it can predict what a customer needs and offer it across any channel.
This focus on integrated capabilities also informs Nordstrom’s efforts to take advantage of its 350 brick-and-mortar stores in North America — using technology to make retail more relevant, more fun and more connected from a social perspective.
The Architecture of Execution
Preparing for a digital future where execution is the key to competitive advantage requires a company’s activities, people, values and structure to align with organizational goals. Yet company leaders often find themselves distracted by competing priorities, with little time to manage digital initiatives — especially those that demand a laser focus on execution.
That’s why the renowned author, speaker and business advisor Geoffrey Moore suggests executives in established businesses allow one digital initiative at a time into what he calls the transformation zone. In the transformation zone, the goal is to accelerate the growth of an emerging line of business to reach revenue approaching ten percent of total company revenues.
Another set of techno-pundits — Gerald Kane, Doug Palmer, Anh Phillips, David Kiron, and Natasha Buckley — concur that alignment, which they term “digital congruence,” is essential to dealing with the challenges of a constantly changing marketplace disrupted by digital technologies. And, in this context, Ross would certainly say one of these challenges is maintaining a focus on execution.
In addition to a culture of execution — everyone pulling in the same direction — organizations also need an enterprise technology architecture that supports it. What does that mean? In Ross’ estimation, that means integrated channels, frictionless end-to-end processes, including those that are customer facing, and a real understanding of customer data and how systems use it, all nicely wrapped in robust security.
For many companies trying to turn digital disruption into digital transformation, it hasn’t happened yet. And the hard truth is that enterprises will not be successful if they’re not architected to execute their business strategies.
What does an architecture of execution allow companies to do? For Delta Airlines, it helped the company improve the customer experience while achieving operational excellence.
Delta executives realized the airline needed to invest rapidly in new proprietary software applications built on its passenger service and operational platforms.
The strategic importance of an integrated software layer drove Delta’s decision to acquire the data and intellectual property rights associated with the platforms from service provider Travelport, allowing it to control the architecture of these systems.
One such application is Delta’s rebooking system that can process thousands of reservations in seconds when an irregular event occurs, allowing passengers to view alternative itineraries on their smartphones.
Today, Delta has industry-leading operations in metrics such as on-time arrivals, flight cancellations and lost bags.
Software platforms and the architecture that supports them have incredibly attractive economics. They amplify the value embedded in software by making it easier to increase reach and scope. In turn, this supports profitable growth. A business can deliver margins that increase with scale as it adds each new user to the platform at modest incremental cost.
About the author: Myles Suer is Boomi’s product marketing manager for enterprises.