CR Series – Increasing Competition & the focus on Customer Centricity

Introduction

Competition is a good thing; you’ll struggle to find a valid argument against that statement. Despite this, “Evidence suggests that competition has weakened on average in OECD countries in the past two decades. Markets have become more concentrated and less dynamic…” (Source: OECD). However, I don’t think it’s all doom and gloom. Despite market concentration increasing and the total market share of the top four firms in each key industry increasing over this period, more is at stake for these firms fighting for market share, they have more to lose and need greater market share to survive, let alone thrive. This drive for greater market share is competitive in nature. I therefore feel somewhat optimistic about the future when it comes to competition, especially when paired with a focus on customer centricity, which is, after all, a model for competitive advantage. Both of these things will see fundamental shifts in organisational structures and the pace at which organisations adapt and innovate to drive a continuous state of improvement when it comes to customer experience and capturing market share. I believe this will bode well for those in the field of Change Management…

Relax, it’s not a competition…or is it?

Whilst cost pressures are increasing barriers to entry in many industries, the rapid advancement and adoption of AI is challenging this increase. There’s a strong chance this will lead to a decrease in market concentration in a number of industries, at least in the short-term, as things like low-code and no-code platforms, cloud-based services and open models enable firms to access resources more quickly and cheaply, develop faster and ultimately enter markets at a faster, more cost-efficient rate. An increase in M&A activity (talked about here:Restructuring, M&A uptick and the importance of Change Management ),along with a strong focus on customer centricity, will see organisations looking to provide more holistic solutions for customers, moving into new markets, thus increasing competition by nature. If larger firms with bigger R&D budgets are entering new markets through acquisition, then innovation will continue to rise, driving competition. I do also foresee a situation in which the biggest operators with huge purses focus on hoovering up the start-up and scale-up market to counteract the reduced barriers to entry driven by AI (as we’ve seen over the past two decades), but it remains to be seen if such an approach is sustainable in today’s market and the longer term. This also relies on universal willingness to sell and sufficient capital to buy. Then there’s the topic of deregulation in the UK and US. If it comes, which looks fairly likely, then history suggests lower barriers to entry, increased innovation, productivity and competition, but only if the appropriate protections are put in place to stop market consolidation and protect consumers from poor service quality (we’ve tried life without those protections and it hasn’t gone particularly well…).

Strive not to be a success, but rather to be of value

“Legacy automotive companies are having to find ways to compete with electric-vehicle disruptors, banks are competing with fintech companies, and consumer goods companies are reinventing themselves through direct-to-consumer models as opposed to brick-and-mortar retail.” (Source: McKinsey).

We’re currently experiencing a potential watershed moment in the consulting industry. Large dominant players are being forced to rethink their structures and the way they deliver value for customers. Brand power is shrinking and the number of SMEs entering the market and delivering great value at a fraction of the price is on the rise. This results in a need to bring the focus back to the customer. Of course, you’d argue this should always be the case but in many industries this focus can weaken with dominance and the associated pressure for revenue growth. This process is already driving activity in the M&A market as organisations refocus on the customer need and acquire capabilities that are missing to fulfil that need in its entirety.

“Companies that adopt a customer-centric approach tend to outperform their competitors in terms of revenue generation and market share.” (Source: Aimee Meester, in Forbes).

This refocusing is not just happening in the private sector, it can be seen here in the UK with the governments ‘Plan for Change’ and the five ‘national missions’. In these missions, the public replace the ‘customer’ and everything is organised and centred around the governments ability to deliver on these missions, delivering better services for the public. All of this requires a change in how value is defined and delivered, this is an exercise that covers changing everything from structures to mindset, culture and capabilities, and therefore provides a leading role for Change Management.

A core competency of managers

“Everyone agrees that change management is important. Making it happen effectively, however, needs to be a core competence of managers and not something that they can pass off to others” (Source: Ron Ashkenas, in Forbes).

A long-held view here at Change Right is that effective change doesn’t come from constant outsourcing or viewing change as a mystical practice done in the margins by organisational psychologists that are here to manipulate hearts and minds through witchcraft. Change Management must be a core competency of anyone in a management or leadership position, regardless of whether you work in finance, HR, transformation, IT, estates or anywhere else. This is more pertinent now than ever as the pace of change continues to increase and shows no signs of slowing down. (Shameless plug – If you’re interested in elevating the change capability of your teams, then speak to us about our Change Right Coaching and Change Right Academy offerings.)

With increased competition and a growing focus on customer-centric models comes a need to innovate, re-organise, refresh and rethink. Change Management plays a vital role in ensuring success here, especially when it comes to the cultural shift that is required to successfully deliver a customer-centric business model. It is Change Management that helps to lay the foundations, securing leadership buy-in, designing, driving and aiding adoption of the target culture, engaging employees, breaking silos, translating the vision through effective storytelling and driving adoption of leveraged technologies to enable this organisational transformation.

Conclusion

Whilst the current data would suggest competition is decreasing, I do believe this is changing and will continue to change, in most industries. A shift in focus with customer-centric business models, backed by the power of AI (which we haven’t really talked about but that could be a whole other article) will lead to fundamental shifts in how organisations structure themselves and deliver value, paving the way for Change Management to act as the catalyst in this process.

“Companies don’t need to build a new business model all at once, but they do need a clear vision for where they want to be distinctive and an understanding of the sequence of steps to get there”. (Source: McKinsey).

Next in the CR series we’ll be looking at IDE, CSR and Sustainability.

Author:
Harry Rawson