In the new digital world, barriers to entry no longer exist

Until very recently, most leaders of established businesses believed that the key to creating sustainable competitive advantage was erecting large barriers to entry through scaling the size and market reach of their companies. The reason this approach was successful was the high costs incurred to:

• Build product development and manufacturing capabilities
• Create sales, marketing and customer services networks
• Fund technology hardware and software expenses to manage Data Centers, ERP, CRM, Finance and HR
• Allocate significant resources & investments in R&D

While Clayton Christian’s Innovator’s Dilemma showed us the early vulnerabilities established companies had to smaller competitors, the emergence of an unprecedented number of waves of digital technology disruption has now made what was scarce and expensive ubiquitous and cheap as the chart below developed by my brother, Geoffrey Moore, illustrates.

While one is tempted to look at that chart through a theoretical lens, let me show you an example of the practical realities this shift is having on one of the most successful transportation and logistics company in the world – FedEx.

As of the end of last year, there were at least 34 different companies that were disrupting some part of FedEx’s value chain. The point here is not that FedEx is no longer competing against giants like UPS and Amazon but rather that their value proposition is being fragmented and diluted by a series of companies who are rounding errors on their balance sheet. Taken alone, none of them pose a real threat to FedEx today but taken together they demonstrate how digital technologies can start to level the playing field in any industry.

A new competitive paradigm means a new role for IT

To combat this new competitive paradigm, companies have to rethink the role IT must play to fend off the dilution of the company’s value proposition and thereby its margins and profits. Not only does IT need to match the speed of the product releases and applications from these new competitors but it also has to identify those business domains and activities within their organizations that would most benefit from these emerging technologies.

Traditional approaches like Plan, Build, Run must give way to new approaches like Co-develop, Assemble & Consume while Waterfall Development must give way to Agile, Lean or DevOps. Speed to market and throughput will become the critical performance metrics and senior IT leaders will have to develop or recruit people with the relevant skills and capabilities necessary to operate in a digitally mediated world.

CIOs can’t let their management agendas hold their leadership agendas hostage

Those CIOs who see this as a leadership opportunity not a management challenge will be best positioned to help develop and deploy the digitally driven competitive strategy it will take to compete in this new environment.

That doesn’t mean that IT teams can ignore their responsibility to make sure that their company’s systems infrastructure and data are stable, secure and in compliance with industry standards. It does mean that they need to perform those management functions in less time and with less resources so they can take a leadership role in driving the new digital agenda for their organizations.

A number of CIOs I’ve talked with over the past two years say they have to get their management tasks done before they can take on these new leadership tasks. Unfortunately, as the FedEx example illustrates, the market is not going to give you that kind of time. To take on this new leadership responsibility, CIOs must find a way to not allow their management agendas to hold their leadership agendas hostage.

As one CIO I am working with said to me recently, “succeeding at management and failing at leadership is not an option.”

As always, I am interested in your comments, feedback and perspectives on the ideas put forth in this blog. Please e-mail them to me at pdmoore@woellc.com.