How innovation can enable control over an organisation's external environment

Strategic management theories divide an organization's environment in two big influencing zones, respectively the external and internal areas. Originally, both have been considered as mutually exclusive regarding the control that an organization can exercise upon their components. Nonetheless, a number of factors indicate that in the presence of high technology developments these borders are diminished, and a new critically important intersecting zone is unveiled in the middle. Generally speaking, a business that manages to control most of the factors within its inner controllable environment is able to ensure its presence in the market and generate average returns as compared to its peer companies. On the other hand, the ones that extend their control within the intercepted zone can achieve explicit competitive advantages and shareholder value, eventually becoming market leaders. Studying these relationships in the midst of the critical junctures of COVID19 becomes even more critical, as this situation has increased the number of attributes within the uncontrollable external zone. For the purpose of this article, I would stress out two main concepts on how technology helps to extend control over the outer environment:?challenging competition?and?forecasting customer behaviour.

Traditionally, businesses have managed to extend their impact on the external environment through growing their operations, building competitive advantages, and consolidating economies of scale. In such conditions, companies would indirectly create market barriers that would discourage potential competitors from entering their markets, which is a very important component of impacting the external environment. What technology on the other hand can quickly achieve, is creating such economies of scale since the early periods of a business' maturity stages. Say, a start-up offering professional services or printing 3D models can quickly achieve economies of scales by utilizing software solutions (e.g., RPA) which automate its core processes, therefore increasing production without any significant increase of variable and fixed costs (as it would not increase organization headcount). Originally, the start-up would be a price-taker in the industry (i.e., the competition would influence its product price and therefore its operating model), while rapid economies of scale would unleash new operating margins that can directly challenge the competition and shift the organization in the market-maker stage. Such an influence, without technology solutions, would require a relatively large numbers of years to be achieved. Technology, therefore, as a critical concept of desensitizing economies of scale can help organizations extend their control over the outer environment by controlling competition through imposing product price. Briefly, this would cover the?competition challenging?concept.

Secondly, in the case of a bank or a financial institution, the two biggest external components that affect their operations are economic events & social and demographic developments. Such important are these factors that the financial institutions have historically built dedicated units that monitor and interpret every development in the respective fields. On the other hand, developments such as neural network algorithms can help banks utilize their large historical datasets to identify patterns and relationships that indicate future behaviours of social and demographic factors, and ultimately forecast customer churn. In this perspective, strategic marketing units can utilize such results in a wide range of initiatives, from cross-selling opportunities for existing customer base, to proactively designing new products and services and ultimately creating new social trends that can affect and influence the external environment. Marketing campaigns that have shaped a generation through creating new trends are widely known in the 21st century and have proven their efficiency repeatedly. Facilitating artificial intelligence in such initiatives can be key to an organization.

In conclusion, critical junctures such as the post COVID-19 world are key moments in history that undeniably lead to market reshuffles. Situations like these further increase the weight of the external environment by including several new uncontrollable attributes due to the overall uncertainty. Organizations that will position themselves within the intersecting zone, will be able to successfully overcome such critical junctures, while ensuring key market positionings in the aftermath of the crisis.