Our interviews with C-level executives from some of the world's largest companies suggest that successful organizations are acting on SMAC Stack™ (aka social, mobile, analytics and cloud) mandates by addressing a new hierarchy of enterprise needs. These needs are being met via a services-based, highly adaptable operating model that blends emerging technologies and human expertise to anticipate and adapt to competitive influences in real time.
As services-based models grow, companies that were born digital (Google and Amazon.com, for example) are incorporating production and services into an embedded ecosystem consisting of content, intelligence, services, connections and transactions—often embedded in an object or device. To make this transition as quick and painless as possible, these businesses are embracing on-demand skills in vital operational areas—offloading processes to service providers in the cloud, and frequently turning over what were once core competencies to trusted partners. They have redefined core (what is and what is not) — viewing it as a flexible asset.
This transformation will forever change how enterprises envision and cultivate the capabilities they need—replacing the idea of business core and context with what we call "The Fluid Core"—a concept and a model that enables enterprises to continually define and refine what is central to their success in the global arena.
Thinking Beyond the Core Competency
There is no single, linear driver of change; it is constant, multifaceted and, in many cases, overwhelming. At a strategic level, the relentless pace of technology is forcing companies to "think outside the box" of their core competencies and embrace a new platform that signals changing times for the sourcing of services. Yet getting there requires mastery of the following:
The Fluid Core: In place of a rigid "core," the fluid core adapts quickly to new strategic Priorities—primarily the need to discover new markets and opportunities.
Radical adjacency: We call the pursuit of new products and markets radical adjacency. Managing this strategy—now considered a key skill—requires looking beyond the organization's core competency or core markets in order to innovate or grow in adjacent markets where the business has little or no prior experience.
A new service infrastructure: This is made possible by the new hierarchy of need (see Figure 1), where cloud and mobile technologies drive the rapid development of new services and innovations.
Drivers and strategies: Sitting above the service infrastructure in this new hierarchy are human innovation and radical adjacency.
Externalization: A new labor ecosystem—one that is global and transformative—has emerged. While it is capable of providing for most enterprise needs, it obliges companies to strategize around where and how to secure technologies, skills and creativity. (In fact, many aspects of the SMAC Stack pertain to the externalization of processes, including those that are core to the business).
So which operational attributes will C-level executives have to optimize as this new paradigm takes shape? From our interviews, we learned that:
The ability to lead and innovate simultaneously will be critical.
Leaders must commit to making their enterprise openly networked and transparently open.
They will exhibit a peer-centric leadership style—allowing employees to determine desired behaviors, especially in innovative environments, and create an atmosphere that encourages interaction and new ideas.
The focus will be on empowerment, rather than command and control.
Finally, executives must be steadfast in their efforts to externalize the core—reaching outside the boundaries of their business for functions that are absolutely central to the health and success of the brand.
A fluid core will require people who are self-motivated, and dedicated to learning and re-learning; who are able to work in small teams that can generate new business models along with technological and/or service innovations; who can create and execute, and offer new insights for supporting customers' needs. Managers will become more than mere "gatekeepers;" they will play a central role in bringing their company into the emerging global services economy.
As the nature of these objectives becomes clearer, and as global competition intensifies, companies will continue to pursue radical adjacencies to seize opportunities beyond their core business. This introduces the concept of the fluid core, which executives can adapt to suit circumstances and opportunities, and confidently enter the new age of competition.
To learn more about The Fluid Core model, read our white paper: The Fluid Core: How Technology Is Creating a New Hierarchy of Need, and How Smart Companies Are Responding, available on our Future of Work Web site.