Would you make a wager that your business will outperform the competition over time?
If no, why? If yes, why?
Looking at long-term as well as short-term ”survivors” there are some distinguishing traits that seem to be a common factor in the way they work, the way their culture engages employees and fosters behaviors. We see capabilities like being able to change business model, to pivot, to change with the times, with the markets and maybe first and foremost – to put the Customer first, whilst maintaining a healthy, constructive and creative working environment for the people inside the organization.
Regardless of the trend of your thoughts on the matter, it’s quite important to take a moment to ponder the specific circumstances pertaining to your business and if the critical success factors required to flourish in the future are developing in the direction you would prefer them to.
Adding to this line of thought there are a couple of philosophical, statistical/mathematical and game theory influenced perspectives that may provide some further inspiration as how to apply the conclusions practically; introducing ”Pascals wager” and the ”St Petersburg paradox”.
Pascals Wager
In short, the philosopher Blaise Pascal suggested that when one cannot prove the existence of God, it’s a better ”bet” to believe in God, as the reward is infinite, the ”cost” is finite, and the potential loss is infinite (eternity in hell). (1)
St Petersburg Paradox
Summarising, this game theory scenario proposes that in a game with an infinite reward, the cost of playing is always worthwhile regardless of our intuitive impulse to abstain if the cost is high, and/or chance to win seems low. (2)
The common denominator of contemporary success
What has this got to do with your business, and how does it apply to leveraging technology to realize business value? I would like to argue that if we look at the growth drivers over the past couple of decades for businesses that have either emerged as industry leaders over time through innovation and application of successful business models, or disrupted established markets as new ”types” of companies (Skype, Spotify, Netflix, Airbnb, Uber, eBay, PayPal) the common denominator is technology and information.
McKinsey (3) point out a fascinating but at the same time scary trend between corporate performance during the year of the pandemic between the top- and bottom quintile of companies – extrapolated, my interpretation is that we’re moving towards a market type where ever fewer companies dominate a growing set of industries, with oligopoly-like margins, to the detriment of a large group of businesses who just can’t adjust, keep up with the pace of change, or endure the technology driven price competition (where economies of scale can be applied). Just look at Amazon or Alphabet/Google and their fluid approach to what their core offering, business model and who their customer is.
Place your bets
What can be derived from these inputs – how can it be applied? It would be too simplistic to say that all investments in technology are successful and bring better margins to your business. It would also not be true. The more realistic approach would be that the key to success for your business probably relies on the clever, well architected and designed application of technology. That the superior Customer experience we’re all trying to deliver, is dependent on leveraging all pieces of information and data you have at your disposal. That the market and competition will only become more fierce and move faster, requiring all the agility, speed and flexibility you can muster from your organization.
Be the Amazon, not Sears, of your industry. Bet with intelligence on a solid technological IT landscape that will support your business regardless of the direction of the market – because the rewards are infinite, and the potential losses are negligeable if done correctly.
Making the right bet
Easier said than done. All gamblers would tell you that. And the house always wins in the long run. But that’s as far as the analogy goes and this post isn’t really about gambling – it’s about making informed, sensible and calculated decisions based on best possible available information in an uncertain and fast-moving world.
Investing in your IT landscape, information management, technology and applications that generate resource availability (automation) and customer value (time, margin, information, experience) is a sure winning bet when coupled with improvements to your business model, organization, processes and ways of working. Technology may change and take a different direction, but the insights and knowledge developed throughout design and implementation is immutable. Rather than free climbing, there are ways to get to the top with proper security - taking a step by step approach with a Proof of Concept or Minimum Viable Product goal, and realizing tangible ROI through incremental rollouts and applying an agile framework are a couple of examples.
1. https://en.wikipedia.org/wiki/Pascal%27s_wager
2. https://en.wikipedia.org/wiki/St._Petersburg_paradox
