The folks at Booz & Company published two articles a year apart but they are extremely relevant to each other. One describes six industries needing transformation; the other outlines one that’s already initiated a reboot. From both, we gain valuable insights about the why, what, and how of business transformation.
In Six Industries in Search of Survival, Booz consultants argue that “despite improvements in the global economy, chemicals, retail banking, consumer packaged goods, engineered products and services, oil and gas, and technology still need to transform.”
A year earlier the firm’s journal featured an article, The Library Rebooted, describing how libraries are undertaking changes that include “overhauling operating models that in some cases are decades old and launching new digital initiatives to meet users’ needs.”
From these two pieces I’ve culled 8 ways that threatened industries need to change and examples of some of those steps.
But before I go there, it’s helpful to note the causes that have prompted the need for such transformation are remarkably similar across industries. Booz reports structural changes such as demographics, consumer economics, and globalization “are having a more irrevocable, dislocating effect on virtually every industry than the financial meltdown ever could.”
Libraries and chemical companies alike are facing commoditization, for example. The emerging competitors from new regions threatening engineered products industry businesses like automotive and transportation are in some ways no different from the online resources which now pose stiff competition for libraries. And we’re seeing shifts in the quantity and type of demand for retail banking and library services alike.
To these challenges, a range of strategic responses is required. To the “Seven Imperatives for Library Leadership” outlined by the Booz consultants, I add an 8th prescription based on a sidebar about the New York Public Library. Here they are:
1. Rethink the operating model. The “Survival” article reports “the chemical industry is experiencing a mix of denial and excess optimism that has led to paralysis. As a result, strategies and operating models have been slow to evolve.”
These businesses need to borrow a page out of a library’s book (pun intended!) “Many of the old assumptions about running a library – that the measure of a library’s quality is the size of its book collection… — are outmoded and need to be set aside,” the Library article explains. Libraries are trying many new things, including rethinking services, changing library layouts, and cultivating their collections differently.
2. Understand and respond to user needs. In the new economic environment, the authors explain “the focus of banks will shift from acquiring new customers to building deeper relationships with existing ones…by understanding demographic shifts and focusing on attractive segments for growth.”
Libraries are like banks in that they hold a tremendous amount of transactional data about their “customers” that, if analyzed properly, can reveal rich user profiles and insights about users’ needs. By adapting tools from merchandisers and retailers, libraries and banks are moving in this direction.
3. Embrace the concept of continuous innovation. The Library article describes the entrepreneurial mindset that’s fueled innovations in the library industry like Toronto Library’s use of radio frequency identification to add a measure of self-service to their check-out process and Seattle Public Library’s usage of a conveyor-belt book sorter to reduce handling time.
Commenting on the engineered products industry, the authors explain companies that continue to innovate, among other things, “will be the ones that not only withstand future crises, but prosper.”
4. Forge a new identity. Booz recommends the oil and gas industry “shift to the left” on the supply curve. This isn’t easy because many companies “tend to form attachments to hard assets and find it difficult to make investment and divestment decisions based on forecasts.”
But the current uncertainty due to regulation and oversupply in that sector makes it as necessary for those companies to do some corporate identity soul-searching as content digitization has made it for libraries to redefine the business they’re in. The Bronx Library Center, the Library article explains, considers itself “no longer just in the book-lending business; rather it is in the gaming business or the entertainment business or maybe the information connectivity business.”
5. Connect with stakeholders in ways emerging competition can’t. For oil and gas companies, this means they should “concentrate on and invest in areas where you have, or can build, significant capabilities that give you the ‘right to win.’” Booz points to unconventional gas as an example of a segment that “offers increased opportunities to create competitive advantage based on differentiated execution skills, such as through application of lean manufacturing techniques.”
For community libraries, this means connecting with the community in ways pure Internet companies can’t. Community library leaders can “transform their institution into a fulcrum for many of the issues and concerns that touch local residents” such as students, seniors, and those without Internet access.
And the authors recommend research libraries move beyond collecting and curating and become more adept at connecting with scholars by offering personalized service and building connected communities.
6. Expand the metrics. The library article exhorts libraries to change how they measure success – to move beyond “the strictly countable” (number of books on loan, for example) into “attitudinal areas like level of engagement and customer satisfaction.” In doing so, Booz is speaking to the changes in users’ expectations and standards. It’s no longer enough for libraries simply to provide a lot of books; users want and expect more.
In the same way, public demands are changing the consumer packaged goods industry, Booz reports. Consumers expect companies to engage in environmentally sustainable business practices and so companies will need to rethink their product design and supply chain — and their measures of success — in order to satisfy this additional scrutiny.
7. Pursue M&A, and joint ventures, as needed to create or access advantage. Surprising their counterparts, The New York Public Library signed on as one of the founding partners in the Google Books Library Project. Instead of viewing Google’s content digitization efforts solely as a threat, the venerable institution understands “Google performs a very important function for its library partners, which is that they will store your digital files and spare you the cost. That’s a value.”
In a similar move, “several international oil companies have partnered with unconventional gas specialists to access both their operating model skills (e.g., lean manufacturing) and first-mover positions in prospective shale gas basins.”
8. Be courageous. Above all else, businesses must aggressively formulate and execute bold responses to the forces that are reshaping their industries.
The Library article explains the changes are being undertaken because “the best library executives are feeling a sense of urgency these days, along with a little uneasiness.” And the industry piece closes with the provocative assessment: “a visceral and unsettling sense of urgency that leads to action is a healthy response.”