Ask business leaders about evolving tech and what it’s doing to their business models, and you’ll likely get several thoughts. Some executives are excited about the opportunities. Others express concerns about risk and failure. Yet others don’t know what to do.
There’s no question there’s a significant risk. Failing to adopt the right technology at the right time can be career-enders. But the payoff for getting it right is big.
Across industries, organisations embracing digital transformation outperform those that are slow to adopt emerging technology. For example, McKinsey analysts exploring the value chain in retail banking between industry leaders in tech adoption and lagging businesses called the results “startling.” Digital leaders improved their return on tangible equity (ROTE), P/E ratios, and total shareholder return by a wide margin, in some cases more than double their competitors.
What Is the Value Chain?
A value chain includes all of the activities that a business undertakes to create a product or service. Value chain analysis that analyses each step to extract additional value, reduce costs or errors, and optimise production can yield significant improvement. Such analysis is at the heart of strategies such as Lean Six Sigma.
Such an analysis can identify potential vulnerabilities and find opportunities to improve at each step of creation. While in the past, businesses often focused on how to streamline processes to maximise output, today’s business leaders are looking at how technology can replace entire processes to mitigate threats and create new opportunities.
Understanding the Value Chain with Technology
Inserting technological solutions into the value chain can create powerful results, and it’s been that way throughout history. In years past, it was the invention of the steam engine, assembly lines, and personal computers. More recently, the internet and cloud computing have changed huge portions of the value chain. We’re just now beginning to see how AI and deep learning are playing an increasing role in business operations.
Organisations must harness technology to identify threats and opportunities within the value chain to remain competitive and grow their business.
Identifying Threats and Technological Solutions
It takes a measured and detailed analysis of the value chain to find the threats and opportunities. Analysing each step can help in the development of a technology roadmap for transition to meet organisational objectives.
The information gained during the analysis helps companies proactively anticipate and mitigate potential threats while identifying opportunities where tech can prove advantageous. A great example is how Amazon evolved its business model. Even after becoming an industry leader in eCommerce, Amazon continued to innovate and apply tech to various steps of the value chain, implementing automated warehousing systems, advanced data analytics, and robotics to improve processes.
Turning Threats into Opportunities
The value chain analysis can yield insights to help turn threats into opportunities. For example, companies needing to reduce production costs may find deploying tech solutions at key stages of the value chain can find the cost savings they need to mitigate competitive threats.
Businesses that need to reduce time to market to leverage evolving customer demands may employ tech to streamline production.
Legacy industries are at risk for disruption from new startups that are not encumbered by older tech. A continuing examination of the value chain is, therefore, crucial in today’s evolving business environment. As tech continues to evolve, it creates new threats to existing business models and new opportunities for all.
Get in touch with the Mondo Ventures team today to help unlock your success.