Spin Your Business Strategy with Data and AI

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?It’s two years since I created the original 7 Habits of a Highly Effective Data Enabled and AI Powered organisation.? The importance of these 7 Habits and the need to drive strategy is ever more fundamental, as many CEOs are still viewing Artificial Intelligence as a Technology initiative to delegate to a CTO, CDO, or CAIO.? From my research and as published in this blog, technology is just the starting point. Without adapting or fundamentally changing your operating model, you risk missing out on opportunities.

The uncertainty around strategic planning is a common challenge. While we may not know all possibilities in the foreseeable future, it's evident that AI will reshape the rules across industries.? You need a new/updated strategy and operating model to be successful in this brave new world!

Introduction

Increasingly Data and AI need to Drive your strategy.? Why?? ?

1. AI (not just GenAI) is the driver of the next 50-year SuperCycle, the last one being Information and Communication ending around 2010.? We have therefore passed the peak and experienced a 15-year productivity lull with the opportunities just now starting to appear from this new wave.? We paraphrase Satya Nadella 'AI will not replace companies and economies, but companies and economies that lead with AI, will replace those that do not!'?
2. AI applied to micro change is how most people are thinking about it, which is the WRONG ANSWER. For the foreseeable future Change will be the only constant, and Business as Usual will be synonymous with continuous adaptation and transformation.? We are talking macro-change and full leverage means rethinking how things get done, and fundamental operating model change – which is frightening!? A framework that maintains ‘Human in the Loop’ must be a key part of handling that change.
3. The winning model will be ‘Predictive by Design’ and ‘Designed for Change’.?? For the first time we will be able to correlate inputs and outputs many levels away in a way that we have never done before, and continuously adapt in response.? The businesses that survive and thrive will be those who learn from Charles Darwin.? "It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that is able best to adapt and adjust to the changing environment in which it finds itself.".? We call these organisations Intelligent Enterprises!

Intelligent Enterprise Defined

We have a definition for those companies, Intelligent EnterpriseTM.? An organisation that uses insight, analytics and artificial intelligence to dynamically reconfigure itself in response to the expected needs of its customers, and simultaneously anticipate and respond to changes and events in the external environment i.e. an organisation that is truly data enabled and AI Powered and Predictive by Design!

?As my research has evolved, the framework has evolved and adapted.? That is useful, as it’s apparent that for the foreseeable future Change will be the only business ‘constant’.? What that means in practice is the incremental approach to business change, leadership and strategy, which has been the norm for the past decades, is simply put, doomed to failure!? As one of my colleagues, Dr Graham Hill puts it,

?Old Organisation + New Technology = Expensive Old Organisation

?The temptation in most organisation is to try and avoid transformation and implement new technology without substantial change.? For this new AI wave, let’s be clear – that’s just going to lead to epic failure!

To accommodate this, and develop a strategic framework, I have investigated several Strategic Management Theories, as part of my Doctoral research and focused on two.

• 'Resource Based Theory’ (RBT), which focuses on the capabilities that businesses and organisations use to create sustained competitive advantage.? RBT identifies truly differentiating capabilities if they are Valuable, Rare, Inimitable (difficult to copy) and Organisationally embedded (VRIO).
• ‘Dynamic Capabilities’ seem to help explain how organisations can really survive and thrive in the complex and Volatile world we live in where CEOs are not just facing the challenges of AI, but also squaring the circle between Financial Performance and their own and investor needs to deliver ‘sustainable’ (Net Zero) performance.?

?More information on these theories is contained in the Appendix at the end of the Blog.

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Data, Analytics and AI spins the Business Strategy

?The Intelligent Enterprise flywheel is the mechanism to spin your business faster with Data, Analytics and AI.? The ‘Fly Wheel’ comes from Jim Collins ‘From Good to Great’.? The Good to Great approach is synonymous with Resource Theory.? RBT notes that we can’t be great at everything, so identify key capabilities to focus on – Collins called these ‘hedgehogs’?? Jeff Bezos took that concept, with his hedgehog initially being Marketing.? His strategy for Amazon was to use input and output KPIs and associated Data and Analytics and AI to spin the ‘Marketing’ fly wheel at Amazon faster than anyone else!? ?His strategy was so good that Amazon evolved from an eCommerce business to a Technology business that still does eCommerce!

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The key element of this framework is that People are at the top of the decisioning pyramid.? Data, Analytics and AI, enable people and ‘master’, Process and Technology, whereas in most companies, Process begets Technology and People are the business case.

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The famous quote of Gen Omar Bradley is that ‘Strategy is for Amateurs and Professionals discuss logistics!’ The key logistics or tactics here is that for a Business Strategy (powered by Data) is that People make decisions, they need data driven insight to make these decisions.?? Process and Technology are Mastered by the approach that Data is both an Input and an Output.?

• Too many companies only focus on the output metrics associated Revenue, Profit, Free Cash Flow etc.?As a result, most Analytics are created from Data that it is the ‘exhaust’ of business processes.? Whilst, these measures are critical, they only tell you how you have done – they are ‘backward looking’ by Design.?
• The leading businesses (like Amazon), look at Input Metrics as well as Output Metric.? Data is recognised as the fuel (as well as the exhaust) of the business and therefore drives the processes that operate the business.? Input Metrics could include Page Views, Stock Availability, Price, Discounts, Convenience.?

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For those organisations, Data becomes the master of process and technology in your strategy and input (as well as output) metrics are the fuel and instrumentation that drive you forward! ?How your business (or organisation) chooses to differentiate and deliver sustainable competitive performance, data and analytics capabilities will be a Valuable, Rare, Difficult to Imitate and the Organisation therein will be both key to delivering that Competitive Performance as well as Measuring and Managing it.?

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For 25 years, Consulting Firms have focused on People, Process and Technology to design the Operating Models of businesses.? Today, I predicate that is an outmoded concept and Process/Technology are only ‘second order’ capabilities in determining performance.?

• Process is a 19th Century concept developed for mass manufacturing – the future Intelligent Enterprise needs to be able to dynamically reconfigure its key activities to serve its customers and markets.? Customers don’t so much follow processes, as travel along ‘journeys’, which can be periodic, cross locations/channels and times.? This can be articulated as needed to deliver the next best offer or action, any time, any place across a customer journey.
• Technology – whilst of fundamental importance, for the majority is less a source of competitive advantage, as it is not difficult to copy/nor rare.? The reality is that the Technology is the ‘table stakes’ – it is not a source of competitive advantage, but without it your business will be at a material disadvantage.?

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Instead, People, Data and AI (PDA) are now the critical levers in determining the optimum operating models for businesses.?

• People – those people who are data enabled and AI Powered will displace those who are not.
• Data is both the fuel of the business, and the material from which insights are derived to better improve decision making in the business.? Critically that Data can be from inside and external to the business.?Data is what we use to measure those leading and lagging KPIs that we will use to drive the business
• (Analytics and) AI are the means for exploiting that Data to drive value.?

?How do we do this?? We use the best of traditional consulting approaches, turbo charged with AI, for the light speed requirements of the Data Enabled, AI Powered world.

??The outcome of this approach is to create a vision and plan, where a combination of Data and AI becomes the brain of the business.?

• ?The Transformation Journey sees processes obliterated and replaced with AI powered Customer journeys.? In parallel. logic is incrementally removed from legacy enterprise systems (CRM, ERP etc)
• The intellectual property and insight to drive competitive performance sits with your People and their capability to use that ‘corporate brain’.?

?The result is the creation of a capability that is Rare, Difficult to Copy and if you bring the whole organisation with you ‘organisationally embedded’.? ?At that point you will have developed a capability that could lead to a sustained competitive advantage!

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Appendix – Methodology and Frameworks

As part of a multi-year Doctoral Research programme, the author has investigated how organisations can deliver sustained and sustainable competitive performance using Data, and Analytics (including AI).? Three business and academic frameworks have been isolated as constituents:

VRIO Model of Resource-Based Theory (1)

If a business seeks to be competitively differentiated, it cannot realistically expect to be ‘world-class’ at everything.? Resource Based Theory helps firms to identify and focus on internal resources that are best aligned with opportunities and threats from the external environment, to identify key combinations of internal capabilities that uniquely differentiate.?? The VRIO framework is a strategic analysis tool designed to evaluate an organization's resources and capabilities to discover competitive advantages. The acronym VRIO stands for four questions to ask about a resource or capability to determine its potential: Value, Rarity, Imitability, and Organisation. If a resource or capability is valuable, rare, costly to imitate, and the firm is organised to capture its value, it can sustain a competitive advantage.

Sense, Seize, and Transform from Dynamic Capabilities (2)

Dynamic capabilities refer to a company's ability to continuously renew its competitive advantages in response to rapidly changing business environments.? The VUCA world we live within, seems to be here to stay, so being able to drive continual renewal will be critical to maintaining competitive advantage.? The Dynamic capabilities framework is built around three key actions: Sense, Seize, and Transform. 'Sense' involves identifying and assessing opportunities and threats in the external environment. 'Seize' is about mobilizing resources to capture value from those opportunities and mitigate threats. 'Transform' requires the firm to continuously renew and reconfigure its assets and organizational structure to maintain alignment with the changing business landscape. This approach empowers organizations to be proactive and adaptive.

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Kotter’s Accelerate Change Framework (3)

Building an Intelligent Enterprise is a fundamental rearchitecting of the operating model of the business, and as we have noted the 70% Failure rate of most major change programmes is unacceptable when the business is at stake.? As Kotter first highlighted this challenge in 1996, we are happy to leverage his approach and frameworks to support the Design for Change transformation.

Developed by John Kotter, over 25 years, the Accelerate Change framework provides a methodology for leading and managing change in organizations. It outlines eight steps to create a sense of urgency around the need for change, build a guiding coalition, form a strategic vision, and enlist a volunteer army to implement the vision. The process also includes enabling action by removing barriers, generating short-term wins, sustaining acceleration, and instituting change. Unlike traditional change management models, Kotter emphasizes the importance of operating with a dual system—one that operates under traditional hierarchies and another that uses a network-like structure to facilitate rapid change and innovation. This model is particularly effective in today’s fast-paced, complex business environments.

Individually, these models are utilised by organizations globally to inform their strategic decision-making and adapt to internal and external pressures, ensuring sustainability and competitive positioning in the market.? We bring them together to deal with the challenges and embrace the opportunities of the VUCA world and AI.

Kotter’s Accelerate Change Framework

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