By Charles Cao, EMEA operations and strategy at Conga
Every year, the PWC Annual CEO survey gathers opinion and economic outlook from thousands of CEOs (1,581 CEOs across 83 countries). In 2018, this PWC Annual CEO survey published record levels of optimism. However, only two years later, it has published record levels of pessimism. In those past two years, the percentage of CEOs who believe global GDP growth will decline has increased tenfold from five per cent to 53 per cent. That report was published prior to the pandemic. This goes to show how unpredictable the business and economic environment is, but looking at macroeconomics forces in play, it’s not that surprising. It is clear that the last few years have been unpredictable to say the least, but these times of uncertainty are a reminder that change is the only constant.
Global changes affecting businesses
A growing challenge for businesses is globalisation. Many organisations have built a global supply chain over the last few years to benefit from tariffs, cheap labour, tax benefits, cheap raw materials and so on. There is a lot of rationale to support this approach in a stable and predictable environment, but the moment the environment changes, points of fragility in those supply chains start becoming more obvious. That is what has been happening to global supply chains and service networks in the light of COVID-19. The once prevalent global-sourcing model in product-driven value chains has steadily declined as new technologies and consumer demand patterns tend to encourage regionalisation of supply chains.
Society itself is also changing in terms of its approach to health, environment and to people, and this is impacting society’s consumption. What can be seen as a result is the fracture of long-held social contracts. The new generation doesn’t think and act in the same way as previous ones, and employees, leaders, consumers, the entire society is evolving dramatically.
Technology is everywhere and it is almost impossible not to rely on it. The pace of technological progress is accelerating with communication, transaction technologies, artificial intelligence and machine learning predicted to play a major role in businesses in the near future.
On top of these major changes, COVID-19 has completely transformed the way we live, the way we interact, the way we consume and, little by little, the way organisations sell.
The impact of global change
Constant change has a deep impact on business environments, whether they are global or regional issues, whether it’s a rise in regulations, trading relationships, upskilling challenges, or even climate change imperatives. But do these changes actually impact the way leaders run their businesses? Yes and no. Many organisations know that change is needed but, in many cases, businesses are too set in their ways and don’t implement the day-to-day operational changes that are required to tackle these macro-economic issues. Some of the largest companies in the world are still running their businesses on Microsoft Excel and Word with antiquated ERP-driven operations. Companies continue to do what they have always done: sell their products or services in the same way as usual, to the same old customers, using the same platforms.
The supply chain is a big legacy around which companies must build to develop strategies – they can’t change everything overnight; having a strategy is vital. And when it comes to strategies, business management books will have a myriad of strategies with fancy names, but ultimately all those strategies will anchor around three main pillars: product, price, market.
We have seen a common trend towards the ‘as a service’ and to ‘on demand’ models, and more and more companies leverage those models to transfer CAPEX to OPEX. Because the demand for flexible consumption models is increasing, more and more companies must learn to sell that way.
Companies’ offerings must change, the way they present them to their customers, their contracts, terms and conditions, and finally the way they execute revenue against those conditions must all change. Unless businesses can execute those changes and bring them to market, they won’t impact their bottom line and capture that evolving demand.
Whether organisations want to change or adapt their offerings, change their price or penetrate new markets, they will always ultimately need that commercial agility. This idea of commercial agility is really the ability to adapt the way businesses generate revenue in a more flexible way: from product, to price, to quote, to contract and to revenue. Without agility, companies are, more than ever before, at a greater risk of eventually failing. And when they fail, people suffer. Agility is no longer a ‘nice to have’, it is a matter of survival.
We have seen many examples of this recently. If you compare the Top 10 Fortune 500 companies between 2010 and 2020, only three companies are still there. Leaders from yesterday have no guarantee to be the leaders of tomorrow: if they don’t challenge the organisation, they’re more likely to fail.
In today’s world, convention has been challenged and, in this environment, it has been striking how fast many companies have adapted, creating radical new levels of agility, productivity, and end-customer connectivity. In the heat of the coronavirus crisis, organisations have been forced to work in new ways and much of this progress comes from shifts in operating models.
The most successful companies in the world demonstrate high levels of creativity and agility
Netflix started by mailing DVDs to customers in 1997. The CEO Reed Hastings had the vision to stream movies over the internet direct to customers’ screens at home. He had a plan and managed to leverage the environment to gradually get customers used to the idea of streaming rather than playing physical DVDs. Now, with over 183 million subscribers worldwide, it’s hard to imagine not watching video on demand.
Amazon started in 1994 as an online bookstore in Jeff Bezos’ garage in Seattle. Today they are one of the largest internet retailers in the world. They are definitively changing the way we consume, offering home services, fresh food online, one-hour delivery and they even produce video content. How could an online bookstore grow into the second largest company in the world with $280bn in revenue and 800,000 employees?
Dyson showed incredible agility during the pandemic. To support the UK National Health Service with medical equipment during the COVID-19 crisis, the company created the Dyson ventilator that addresses the explicit clinical needs for COVID-19 patients. It is bed-mounted, portable, efficient in conserving oxygen and doesn’t need a fixed air supply. The UK government placed an order for 10,000 ventilators from the company.
Were these companies the first to have these ideas? No, but they were able to effectively bring them to market.
To become commercially agile, businesses need HEART: Hunger, Eyesight, Attitude, Rationale and Technology.
As seen throughout the COVID-19 pandemic, when it is a matter of survival, companies unlock those self-inflicted limitations to go beyond what convention defines as possible to achieve the impossible without letting convention get in the way.
In 2019 PWC’s Strategy& conducted a survey of 6,000 executives from companies of various sizes and industries in which only 43 per cent of leaders said their company is “very clear” about how they add value to customers. Successful organisations such as Netflix, Amazon, Dyson have a clear vision. They know what makes them unique and their commercial agility is only a component of their uniqueness.
People need to believe. Still referring to PWC’s Strategy& survey, only 35 per cent of executives think their company’s strategy will lead them to success. It is important to spend time with business leaders, commit to the strategy and get them to buy in.
Organisations need a process: commercial agility requires a large shift in process, technology and people. To make it successful, businesses need alignment, adoption and method. A transformation team or transformation partner is required to change people’s habits, perceptions and, ultimately, to change their results.
In the Fortune 500 CEO report, the percentage of CEOs who believe that technology transformation will be accelerated by current context was 75 per cent. McKinsey Global Institute points out that companies that are digital leaders in their sectors have faster revenue growth and higher productivity than their less-digitised peers do. For many, it is an imperative to reduce IT costs and make them variable. Technologies such as CPQ (Configure Price Quote) or contract management are the cornerstones of commercial transformation and the same applies for managing documents: document transformation can be overlooked as a strategic area of improvement with fast time to value.
Responding to a continuously evolving market
With the continuous obstacles that businesses will face in the years to come, it is the organisations that demonstrate a high level of commercial agility that will be the ones to navigate the demands of an ever-evolving marketplace. For this, they must have the right hunger, vision, attitude and rationale to achieve their business goals and the right technology to help them along the way. By responding well to change and continuing to implement improvements to the day-to-day operations throughout the organisation, businesses will continue to re-invent themselves and evolve with the world around them.