Strategy at the pace of technology

In brief

• In a volatile, tech-driven, and faster-paced environment, conventional approaches to business strategy no longer suffice.
  
  
• Technology is exponentially increasing the volume of hard choices and simultaneously making it more difficult to separate noise from relevance.
  
  
• What’s needed is an approach to business strategy that’s informed by, delivered through, and able to adjust in real time because of technology.

Welcome back strategy. You’ve changed

Remember when business strategy development was a linear process, conducted annually or maybe bi-annually? When a five-year plan could serve a company well, and business leaders could manage volatility by making minor adaptations in execution? When the main questions facing strategists were why to change, where (and where not) to play, and when to make the next move? No longer.

Today, against a backdrop of volatility, the when is now. And that shifts the imperative of business strategy from a why-where-when focus, to why-where-how. Hard choices have to be made in days not months, so the gap between “where to play“ and “how to win“ has closed. Leaders now need to adjust their business strategy in real-time, which is something that’s only possible when strategy development and decisions are both informed by and delivered through technology.

Companies that don’t take a why-where-how approach today risk falling behind. While strategy is still about making hard choices—that aspect hasn’t changed—Technology is increasing the complexity and speed of business strategy. Separating noise from relevance is hard. A cohort of leaders are outperforming their peers by using tech to both inform and execute on their strategy.

Leveraging technology to shape and inform business strategy

According to Accenture’s recent research, only 21% of companies have advanced their strategy development to integrate technology in a meaningful way. These companies can be described as tech-forward. Those in this small group treat technology as a critical input to shaping business strategy, in real-time, all the time. They use tech to broaden the number and type of strategic options to consider, enabling their companies to institute new business models, enter new markets or create entirely new businesses at speed. For this work, we studied 1,600 global companies across nine countries and 18 industries to examine the role technology plays in their strategy development. As one dimension of this, we also analyzed input directly from more than 600 CEOs.

This means, however, that there’s an almost four in five chance (79%) that your company’s approach to strategy isn’t keeping up.  If your company is in this large group, the stumbling block may be the way you and your leadership team think (or limit your thinking) about technology. Consider: You expect your executive team to demonstrate a comprehensive understanding of your products and customers, your business model, and your balance sheet. There should be a similar expectation that those same executives have an equally fluent understanding of technology and its potential for your business. Yet that’s not the case at many companies.

Tech-forward companies are outperforming their peers

If your company isn’t like most businesses, then it’s part of the 21% that are fully integrating technology into their strategy development.

The tech-forward group also stands out on performance. Before and during the pandemic, these companies were 2.3 times more likely to outperform peers in terms of revenue growth and return on invested capital (ROIC). They also represent a higher proportion (1.3X) of resilient companies—by continually "adapting their ability to adapt" and performed better on ESG metrics (See chart below.)

Interestingly, these companies aren’t necessarily concentrated in tech or tech-producing sectors. They are well represented across a range of industries including insurance, media, entertainment, communication, capital markets, retail and life sciences. In fact, 13 of 16 industries have at least 15% tech-forward companies across their sample. That’s remarkable considering the sources of competition, regulations, and technology potential differ dramatically from industry to industry (see chart below).

A strong digital core is vital

To achieve strategy at the pace of technology, business leaders need to consider the aggregate potential of their tech investments. This means building a strong foundational digital core—integrating cloud, data, AI, and other advanced technologies—to support interoperability among various systems and break down information siloes.

With that core in place, a company’s leaders are better able to move with agility, adapting their strategy and their business to new challenges and opportunities. Without it, companies aren’t well positioned to take advantage of the speed with which technologies, including generative and other forms of AI, are impacting their business.

The good news is that there is plenty of running room for other companies to adapt the tenets of what today’s tech-forward companies are doing and realize the advantages of doing so.

Tech-forward companies differ in two fundamental ways

They stand out from others on the level of tech knowledge in their C-suite, and on their approach to strategy.

Closing the tech-fluency gap and raising the bar for senior tech executives

The first area in which leading companies stand out is that tech-forward businesses have made great advances in closing the “tech-fluency” gap of non-technology senior executives. As a result, their CEOs are highly tech-savvy and they are surrounded by other C-suite executives who are also strong tech-minded champions and supporters. Seventy-five percent of tech-forward companies report having both a tech-fluent CEO and tech-fluent C-suite executives—nearly 20% more than other organizations.

As a result, it means tech-forward companies simply leverage technology differently. They’re laser focused on using tech to grow and innovate and are better at capitalizing ongoing technology efforts to inform strategy development.

The companies that are tech-forward have raised the bar for senior tech leaders, calling on them to distinguish relevance from noise. They can speak with confidence about how nascent technologies, such as generative AI recently, relate to the company’s current strategy and strategic alternatives.

Accelerating strategy cycle times and allocating resources more flexibly

Companies that have adopted a tech-forward mindset also stand out in their approach to strategy development. Driven by the exponential speed of technology change and disruption, tech-forward companies re-evaluate and adjust strategic choices continuously based on changing external forces. They dynamically test opportunities on new pathways for growth in the nascent stages of several potential S-curves, sometimes simultaneously. These could be within their industry, in a new, blurred-boundary market, or in a different industry all together, driven by the technology they can readily leverage.

To support accelerated cycles, tech-forward companies have stepped away from tying their business strategy to a rigid multi-year capital allocation. In fact, 73% said they reallocate resources dynamically and as needed. They have effectively moved from a ‘set-and-forget’ strategy with long execution programs to one that focuses on continually re-evaluating their strategic choices and adjusting execution efforts.

This doesn’t mean changing strategic direction every two minutes. It does mean that companies are simultaneously finding themselves at different stages of S-curves. And their inherent understanding of where innovation is taking them, allows them to sharpen their strategy, pushing against the boundaries of what they once thought was possible.

Key takeaways for CEOs

There are a few practical actions that CEOs and their C-suite can take on their journey to becoming tech-forward:

C-suite dynamics

1. Make technology fluency a foundational skill and a minimum requirement for all C-suite members.
   
   
2. Assess the C-suite members, recruit and/or train consciously for a modern skillset, consider target M&As to bring in senior leaders with the right expertise.
   
   
3. Dedicate time for creativity—time to explore new, tech-inspired ideas untethered from existing strategies that inspire a greater range of bolder, broader, strategic options for growth and competitive positioning.
   
   
4. Assess senior technology leaders’ ability to identify advancing tech that will matter most to the company and collaborate with their peers on emerging technologies that create edge.  Hold them to account for separating relevance from noise.

Strategy development dynamics

1. Introduce and consider technology as an input to strategy that is as major as capital and talent.
   
   
2. Activate far shorter and continuous strategic cycles—not to replace long-term business strategy development but to keep it fit-for-purpose and amplified by new innovation.
   
   
3. Experiment with rapid sprints, and reallocate resources based on their outcomes.

Strategy at the pace of technology

Strategy makes sense of the business landscape, of the choices in front of us, of the changing world. It always has. Adapting a business strategy that’s informed by, delivered through, and able to adjust in real time to changes because of technology, does exactly that for today’s world.