Figure 1:  High-performing Organizations in the Digital Era

The rapid changes in technology, customer needs, and market conditions have redefined the ways to gain a competitive advantage. However, some organizations are operating using the old strategy approach. While the outdated practices may have worked in an environment where the pace of changes was slow, with less competition and known rules for competing, they do not work in a rapidly changing environment. Failure to embrace innovation and adapt to a fast-changing environment, have contributed to the downfall of many organizations like Kodak and Blockbuster [13][35].  

In a digital era, stiff competitions increase the risks of failure for imitators who lack innovation capabilities to maximize customer value. The risk of getting disrupted by innovators with the audacity to think differently and explore new markets has increased significantly in the last two and half decades.  Success in a hypercompetitive environment requires an organization to have the innovation capabilities to develop differentiated products, and the ability to swiftly adapt to changes in environments strategically without losing focus on long-term goals.   

High-performing organizations elevate operational excellence and continue to make big bets on long-term investments to drive differentiation and maximize business value.  They have top-notch innovation capabilities for differentiation and the ability to respond strategically to threats and opportunities in their environments. Their dynamic strategies for innovation, performance management, and growth have allowed them to gain a competitive advantage through cost reduction and differentiation. 

Excellence matters. I’ve pushed hard to increase our velocity, improve our execution, and focus on the big bets that will make a difference in the world.

    -- Larry Page

Figure 2: Maximizing Business Value

High-performing organizations have a performance track record. For example, Microsoft has a track record of profitability and growth. Apple, on the other hand, was able to turn things around from near bankruptcy in 1997 to becoming one of the high-performing organizations [28]. Amazon disrupts different industries, achieve higher growth, and generate more value for its shareholders, and customers. Google is also at the forefront of performance excellence with a high innovation rate and return on investment (ROI) [2]. Facebook, Intel, Johnson & Johnson, Toyota,  and Walmart are some of the other high-performing organizations.  

Operational Excellence

High-performing organizations achieve superior performance through operational excellence and continuous exploration of new markets and capabilities to tackle future threats and opportunities. Operational excellence is the pursuit of performance excellence in business operations that enables an organization to gain a competitive advantage. Its success depends on effective dynamic strategy and execution.

Successful business strategy execution is a must for the organization to achieve sustainable growth; and improve performance on speed, customer experience, agility, productivity, cost, processes, quality, and profitability of business operations. The right culture play a vital role in successful strategy execution. This is because, organizational culture sets a tone for the desired mindset and behaviors of employees. Hence, it influences change adoption and organizational success.

High-performing organizations have a culture of innovation and excellence. The culture of innovation and excellence embraces risk-taking, accountability and transparency of performance, as well as continuous performance improvement. It is data-driven, and it takes advantage of objective metrics to measure performance, and insight from data to understand the problem and enhance decision making. 

The culture of innovation and excellence is suitable for individuals who are creative with the willingness to set stretch goals, experiment, and learn from failure. The kind of people who are also passionate about innovation, willing to collaborate, and have the determination to persist and persevere, and tackle hard problems. High-performing organizations understand that and have initiatives to attract and retain talented employees. They hire individuals who are smart, passionate, creative, hardworking, and resilient.

Since leaders lead and followers follow, it makes sense for organizations to have leaders who can influence the desired behaviors and mindset. High-performing organizations require leaders who can drive strategic alignment. They have leaders who are accountable, competent, resilient, and effective communicators with a passion for innovation and excellence. The leaders of high-performing organizations are also trained, mentored, and coached to work together to achieve business goals. 

High-performing organizations have ambitious long-term goals to become market leaders. The mindset of high-performing organizations leaders and talented employees can be best described by the Norman Vincent Peale quote, “Shoot for the moon. Even if you miss you will land among the stars”. Their leaders encourage individuals and teams to set audacious goals. The moonshot mindset drives the leaders and teams of top talented employees to set stretch goals and work collaboratively as a team to achieve greatness.

Apple has a culture of excellence that is, I think, so unique and so special. I'm not going to witness or permit the change of it.

 --Tim Cook 

For example, for the development of the first iPhone, Apple relied on few selected talented employees to accomplish their audacious goal. The engineers at Apple did not have experience in building the phone. Despite the fact they were working hard to have a working phone, three months before the 2007 Macworld conference, the iPhone prototype had a lot of bugs. As the time approaches near the deadline, it became apparent Apple's reputation with its partners was on the line [5][23].

Without a working phone, Apple had a lot at stake. Cingular Wireless (AT&T) had invested money to upgrade its wireless network infrastructure and had created visual voicemail feature for the iPhone. Shareholders would have also lost faith in Apple. However, the great leaders and talented employees persevere and persist until they came up with a working phone by the end of 2006. In the end, Apple's success was made possible by its devoted and hardworking employees and leaders. Even though the first iPhone was not perfect, the completed features were enough for Apple to gain significant market share in North America. 

The teams of dedicated, skilled, and talented employees are crucial for the success of high-performing organizations. High-performing organizations have support systems to reinforce desired behavior for employees. They pay their talented employees well. They also provide them with training, tools, as well as other incentives to innovate and achieve performance excellence. The talented employees of high-performing organizations have a sense of purpose, psychological safety, and intrinsic motivation. They understand the organization’s purpose and their role in accomplishing the mission. The leaders also create an environment that is safe to make a mistake and take the risk to maximize customer value through innovation. 

Additionally, high-performing organizations track and monitor performance. They use performance to motivate, coach, reward, learn from success and failure, and take corrective action. Some organizations like Google use the OKR (Objectives and Key Results) performance management tool to set stretch goals and continuously raise the bar on performance. Hence, the ability to elevate performance excellence and gain competitive advantage. 

Strategic Leadership

The talented employees, leadership team, tools, culture, and processes are the backbone of high-performing organization competitive advantage strategy. The rapid changes in the external business environment necessitate strategic leadership. Strategic leaders assess the business environment as well as formulate strategy, get buy-in, and engage in strategy execution. They also continually reassess the business environment and setting direction to take corrective actions with environmental changes without losing focus on the big picture.

If your actions inspire others to dream more, learn more, do more and become more, you are a leader.                                                                                                                                                                            

 --John Quincy Adams

Strategic leaders with a passion for innovation and excellence, as well as emotional fortitude to make tough decisions, negotiate, gather honest feedback, resolve conflicts, overcome the challenge, and learn from failure, are ideal for high-performing organizations. High-performing organizations prefer leaders who lead by example, communicate effectively, and are competent, responsible, and accountable for the outcome of their decisions and actions. 

High-performing organizations leaders are encouraged to use insight from data and principles to make strategic decisions instead of relying on invalidated assumptions or politics. Amazon leaders, in particular, make high-risk decisions with about 70% of the information [14]. To reduce cognitive bias and improve the quality of making decisions, high-performing organization leaders seek advice from key stakeholders with diverse points of view and subject matter experts (SME) input.

The strategic leaders that are committed to strategy execution are vital for superior organizational performance. They gain buy-in, prioritize goals, negotiate, strategically adapt to changes in the business environment, and make decisions as well as engage and empower teams to solve the business and customer problems. To get strategy buy-in, the strategic leader use the combination of insight from data, stories, group discussion, and other communication channels and tools. They articulate and reiterate the strategy and the rationale behind it. They also take time to explain the benefits of change as well as imminent danger for maintaining status-quo.

A leader also listen to ideas, opinions, and concerns from employees and key stakeholders. They take time to address the concerns and misconceptions as well as to factor new inputs into the execution plan. More importantly, a leader work together with organizational influencers who can help to influence support in the implementation.

Furthermore, the strategic leader select the leadership team. The leadership team set priorities and adjust accordingly with changes in the environment under the direction of a strategic leader. The leaders also make sure they have the right resources to execute the strategy. They help teams and individuals understand their role in accomplishing the goal. It is important to remember that the command and control managing style inhibits creativity, innovation, and agility. Thus, the leaders influence change by inspiring, guiding, and supporting the team and individual to achieve business objectives.

Moreover, leaders break the long-term goal into short-term objectives. They also ensure the top-down alignment of objectives. Leaders need to involve employees in developing an action plan and empower them to take ownership of finding an innovative solution. The action plan should include deliverables with performance metrics and deadlines. Indeed, the team of engaged top talented employees that share a common purpose, and are coached, and motivated to work together collaboratively and do their best can achieve greatness.

Performance management tools like OKR can help to create a top-down or bottom-up alignment of objectives [19]. OKR is data-driven, and it can help the teams to focus on achieving the same goals. Through OKR, the team can track progress and measure performance based on objective scores. The team should monitor, track, and assess performance at the end of each iteration. The performance assessment of the quantitative and qualitative scores will help the team to take corrective action as needed. 

All in all, strategic leaders play a vital role in an organization achieving sustainable success. They propel strategy formulation as well as successful execution through gaining buy-in for the strategy, top-down alignment of objectives, action plans, accountability and transparency, tracking progress, and corrective actions. In other words, strategic leaders that are engaged in strategy formulation and execution are a must for an organization to outperform its competitors. Apple was able to execute its digital hub strategy well and gain significant market share.

Customer-centric

Customer-centric products make sense because the business makes money by selling products to customers. High-performing organizations understand that and are obsessed with creating memorable customer experiences. Maximizing customer value can also cause customers to promote the product through word of mouth.

In contrast, the competitor-centered causes the organization to shift focus from customer needs to what competitors are doing. It also results in an organization concentrating effort on the existing market only instead of taking advantage of exploitation and exploration of markets. The reality is in a rapid change era, without a differentiated product that maximizes customer value, the organization competes by reducing the price of the product or service. Price war and complacency could lead to a competitive disadvantage and the downfall of an organization.

The most important single thing is to focus obsessively on the customer. Our goal is to be earth’s most customer-centric company.

  --Jeff Bezos

There is always a constant need for differentiated products that meet or exceed customer needs. Thus, an organization needs to have innovation capabilities to maximize customer value. The means to collect the right data. Tools to measure performance and extract insight from data to understand customer needs, behaviors, and pain points. Along with the processes and people to maximize the end-to-end flow of value to the customer.

The data-driven customer experiences, agile process, and cross-functional collaboration will help to maximize learning and lead to a product that maximizes customer value. For example, sales, marketing, and other front-lines workers (customer support or service) can help designers and engineers to understand customer pain points and other opportunities. Similarly, the researchers and SME may share insight to solve the problem. The designer and engineers, in turn, can use the iterative process to design and develop an innovative product to solve customer problems with a user-friendly interface that enhances user experience (UX). Involving marketing and sales people from the beginning can also give them a chance to understand the product features. Hence, the ability to communicate the unique product features that maximize customer value well to targeted customers.

The product manager is responsible for leading the product team. The product manager can help the cross-functional team to understand customer problems, create a road map, prioritize features, and set metrics to measure performance. Moreover, the product manager should resolve conflict when they arise, coach, and provide guidance to ensure successful delivery of the product that delight customers.

The product manager should also track and monitor performance as well as extract insight from customer feedback and usage pattern. The customer metrics such as customer satisfaction score, net promoter score, churn rate, and customer lifetime value can measure the customer-centric performance. The team should also measure other business performance metrics, like the cost of customer acquisition, inventory turns, revenue, retention rate, market share, number of units sold, and profits. Assessment of performance metrics and insight from customers can allow the team to take corrective actions to maximize customer and business value.

Big Bets

Big bets are long-term investments to maximize business value. Through big bets, high-performing organizations achieve radical innovation and high growth, and become market leaders. High-performing organizations innovate internally as well as through acquisition and collaboration with partners. Big bets allow high-performing organizations
to broaden and deepen their core competencies.

Innovation distinguishes between a leader and a follower.

 --Steve Jobs

Long-term thinking makes sense because great innovation involves solving complex problems that are difficult to understand. Most of the successful bets take about 3-15 years to pay-off. They require experimentation and collaboration to understand the problem as well as build an innovative solution. High-performing organizations use iterative processes to learn from experiments and adjust accordingly and hence minimize risk. The compound effect of learning from experimentation and collaboration over time enables the organization to solve complex problems. 

For example, Apple's sold the first iPhone after 6+ years since Steve Jobs shared the digital hub strategy on the 2001 Macworld conference. Before the development of the iPhone, Apple collaborated with Motorola to build a phone with iTunes ROKR-E1. However, they were some indication that Apple was not satisfied with the final product before its release [37]. 

Apple’s failed experiment was a valuable learning experience. Despite endorsing ROKR-E1, Apple began the plans to develop the iPhone. Apple capitalized on its innovation capabilities to execute the strategy. They understood that they need an innovative product and to address other issues that would have negatively impact user experience (UX). Apple was able to bundle the right combination of multiple digital product features in one device with a design that delighted their customers. To maximize the value of the customers, Apple collaborated with AT&T and other business partners.

At the time, wireless carriers like AT&T used to influence phone design by detecting which phone could use their network and which features the phone could have. Part of the issue was AT&T business model for the phone was not suitable for the iPhone. Apple wanted the high-end mobile phone with the features that are deemed valuable to the customer and the ability to update the software as well as their customers to have unlimited voice calls, SMS, and data for $50 per month. However, wireless service providers were interested in cheap mobile phones that they could use to charge customers for voice calls, SMS, and data usage.  Thus, Apple's negotiation included how AT&T will make money and a 5 years exclusive deal to carry the iPhone in the USA. AT&T, in turn, created a visual voicemail feature, upgraded its network infrastructure and allow Apple to retain control over design, marketing, and manufacturing [23][39].

The deal made sense because Apple had great marketing and industrial design capabilities. It also marked a change in the dynamics of the relationship between wireless carriers and phone makers that helped to maximize business and customer value. Apple also created business model for the iPhone. Finally, a few months before the release of the first iPhone, Apple executed a marketing campaign designed for customers to create an emotional connection with the iPhone.

Amazon Web Service (AWS), on the other hand, Amazon's big bet became profitable after twelve years from idea formulation in 2003. During the formation of AWS, Amazon adopted microservices architecture and empowered small teams (2-pizza teams) to take ownership in solving problems. They also adopted continuous integration (CI) and continuous delivery (CD) process. These changes enabled Amazon to be able to scale. It also improved the agility and innovation rate [3][12][20].

The benefits of high-performing organizations' big win on bets outweighed losses. It is worth noting returns on AWS and iPhone investments are high. Apple has significant market shares on smartphones, smartwatches, and other devices. On the other hand, Amazon is the market leader in cloud computing and U.S. e-commerce. 

It is also worth mentioning Google created Alphabet (alpha-bet) for the sole purpose of taking advantage of big bets to maximize customer and business value. Google is also among the few companies with top-notch AI and innovation capabilities. The big bets for Google include cloud computing, YouTube, and hardware. In 2019 YouTube had revenue of 15 billion and Google cloud computing 10 billion US dollars [33][40].

With bets, you win some and lose some. High-performing organizations have accepted the odds of success for big bets, and are willing to take a risk to maximize business value. They have big wins with extremely high pay-off. They also take advantage of the lessons of their failures and use them to propel the other big wins. Most importantly, they have talented employees, processes, culture, and tools to increase their odds of success.

Pursuit of Excellence

In the pursuit of excellence, high-performing organizations continue to raise the bar on innovation and excellence. These organizations are always looking for ways to elevate operational excellence and adapt to change strategically. In their quest to become market leaders and maximize business value, they have embraced big bets. Big bets allow high-performing organizations to continue to renew their innovation capabilities. They also maximize the learning and innovation rate through experimentation, iterative processes, and collaboration.

High-performing organizations take advantage of AI, advanced analytics, and cloud computing technology. They are data-driven and have skilled top talent employees to help them create, implement, and improve technology tools based on their unique strengths. The tools enable them to collect the right data, clean, analyze, and extract meaningful insight. The insight from data is used to support decision making, as well as to continue to improve performance, and innovate. Thriving for performance excellence has enabled high-performing organizations to achieve cost reduction and product differentiation. Hence, the ability to gain a competitive advantage in an era of rapid change.

Change is inevitable, embrace it. The rapid changes in the environment require an organization to think differently and strategically adapt to change. Organizations need to take advantage of technology, collaboration, experimentation, innovative management systems, and talented employees to maximize customer and business value. They also need to build a culture that will enable an organization to continue to build innovation capabilities to gain a competitive edge. 

As a final thought, on the rethinking of your competitive advantage strategy in the digital era. During an economic downturn, organizations cut-costs. However, that can backfire if you cut-costs to develop capabilities for competitive advantage. Lacking resources to develop future innovation capabilities is more like starving the goose who lays golden eggs and expect it to lay golden eggs in the future. The organization needs to cut-costs strategically on activities that do not add value and to invest in the exploration of new market and innovation capabilities for the future. Equally important strategic leadership to formulate an effective dynamic strategy and steer the successful execution.

References

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