A combination of intensified globalization brought on by recent turbulence in the global economy and the acceleration of new information technologies is driving companies and governments to look for new business models to meet increased demands for efficiency, competitiveness, short-term agility and long-term growth. This is one of the key findings of a study released today by Accenture at the World Economic Forum.
According to the study (download here), based on a survey of more than 400 business leaders globally as well as a year-long field analysis of business and technology developments, such maturing technologies as cloud computing, mobile communications and collaborative computing will offer companies the “hidden wiring” required to compete in a multi-polar world, one in which emerging markets are challenging the traditional strengths of more mature economies.
Throughout the global economic crisis, emerging markets have demonstrated resiliency and weathered the storm as well as — if not better than — more mature markets due to strong local growth, highly competitive cost structures and an ability to serve customers at low price points. This challenge has not been lost on the executives polled by Accenture: 88 percent conceded that their companies have not done enough to develop effective strategic responses to the new disruptive business environment.
When asked which factors will have the most significant impact on their business over the next five years, 41 percent of the executives surveyed said it would be the growth in size and reach of new players in emerging markets, followed by an increase in IT capabilities (35 percent) and slower economic growth in developed markets (27 percent). Respondents also said that the most significant challenges raised by future developments in information technology would be managing complex networks of suppliers, business partners and customers (37 percent), followed by protecting proprietary information and data (28 percent) and competition for technologically and analytically skilled employees (27 percent).
The study, “From Global Connection to Global Orchestration: Future Business Models For High Performance Where Technology and the Multi-polar World Meet,” finds that in the aftermath of recession, new economic value will be created through a combination of the effective use of new technologies and strategies to address the dynamics of globalization. Business leaders surveyed by Accenture highlighted the growth in size and reach of new market players from emerging markets and the increased capabilities that new information technologies provide as the two developments that will have the most significant impact on their business over the next five years.
“Together, these forces are accelerating the need for companies to master five competitive and interdependent dimensions of business: new consumers, talent, innovation, capital, and resources,” said Mark Foster, Accenture’s group chief executive, Global Markets and Management Consulting. “Our research shows that high performers in both developed and emerging markets are looking to leverage information technology with a certainty and pace that will give them the flexibility to adapt their business models and stay ahead of the competition as new economic circumstances arise.”
According to the study, economic power shifts between companies and individuals and between national economies are becoming more common, creating greater business complexity with more people to buy from and sell to, as well as more competitors. At the same time, this complexity is fostering more ways to create economic value. Accenture has identified six market-shaping interactions that have the ability to create new economic value:
— Co-production with customers. Companies are finding more opportunities to engage with customers and suppliers in such areas as co-producing products and sourcing ideas as a part of the innovation process.
— New bridges between producers and consumers. Intermediaries are using technology to build new bridges between producers and consumers, helping companies extend the markets they serve, particularly in emerging-market economies. Nearly sixty percent of business leaders surveyed for the study said that greater consumer connectivity would have a significant or very significant impact on competition in their industries over the next five years, with the proportion even higher among business leaders from emerging markets compared with those from developed markets (68 percent compared with 56 percent)
— New forms of business-to-business (B2B) commerce. New forms of B2B activity are becoming technologically possible, advancing the promise of “e-markets” first discussed a decade ago. Hong Kong-based Li & Fung, for example, has used information technology to transform itself into a global, horizontal provider of services traditionally performed internally by retailers and wholesalers — services such as supply chain management, production and operations. This is an especially powerful trend that is helping make cost structures more variable in a volatile world.
— Consumer-to-consumer content. Technology is enabling like-minded consumers to form clusters of cooperative structures that span multiple countries and regions in order to share information, evaluate products and services and conduct purchases. Accenture’s research reveals that 57 percent of executives believe the growing bargaining power of knowledgeable consumers will significantly affect competition in their industries over the next five years. Business leaders in emerging markets are especially alert to this trend, with 67 percent expressing this view, compared with 52 percent of executives in developed markets.
— Peer-to-peer production. Individuals can form groups that provide products and services to reduce the market power of existing suppliers or to exert greater control over the way a product or service is produced or consumed. International peer-to-peer microfinance platforms are making possible new forms of lending to small entrepreneurs in high-growth economies.
— Cooperative consumption. The growth of social networking and digitization enables consumers to form clusters that boost their bargaining power. Shanghai-based Liba.com, founded in 2003, which sells everything from paint to ceiling lamps, now has 1.6 million members. Liba.com has 300,000 unique visitors a day on its website and produces approximately 30,000 transactions a month during group buying events in Beijing, Shanghai, Guangzhou and elsewhere.
According to Foster, in order to create new forms of economic value and growth, companies can take advantage of any or all of these new combinations of production, collaboration and consumption to reshape their business models ahead of the competition.
“Responding to the newly complex and competitive ecosystem will require businesses to re-evaluate the roles they have played and the sources of value that they have followed traditionally,” Foster said. “However, organizations also have a great opportunity to harness these new market forces to their advantage to optimize, extend and transform their business models.”