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“Back-to-Basics”: Growing strategically in TMT under the new normal

Growing strategically in TMT under the new normal

KPMG Global Strategy Group's Giuliana Auinger shares her view on how TMT companies can think about strategic growth

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Director, Global Strategy Group

KPMG in China

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KPMG’s 2016 China CEO Outlook report found that CEOs of China-headquartered companies are “overwhelmingly confident in the country’s growth outlook over the short and medium-term”.  However, this is set against the backdrop of a fast changing business environment, which demands companies to respond to change and capture new business opportunities in an increasingly strategic way. Furthermore, survey respondents in China chose “Internet of Things, machine-to-machine technology, Industrial internet or other aspects of technology” as a top focus area for further investments in the next three years. This will have a profound impact on growth across the Technology, Media and Telecommunication (TMT) sector. So how should TMT companies in China think about growth in this new paradigm?

 

Shortfalls of the conventional approach to strategic growth

In the past, when we think about capturing growth opportunities, we often turn to benchmarks and standard sector definitions to predict growth rates, market outlooks, opportunities etc. However, this approach alone no longer works well. First, data on its own may not generate sufficient insight. Figure 1 shows how something as simple as projected growth rates can vary vastly market by market and business by business across the TMT taxonomy.

Figure 1

Secondly, traditional sector categories are no longer able to describe what is happening in the market. For example, Facebook, a technology company, is also the world's fastest growing media owner. Alphabet, the holding company of Google, has media revenues 166% bigger than Walt Disney1. In China, we are also seeing the disappearance of sector, business and market boundaries.

 

Faster change is the new normal

Faster change has become the new normal. Senior executives have more and more strategic questions and issues to address, but the answers or solutions are becoming more complex and bespoke. This is because issues surface under very different market parameters, and these market parameters are driving variations much faster than we have ever seen before. Generic out-of-the-box solutions can no longer be considered as strategies. A strategic growth option that will deliver results, is the only way to get ahead in a fast moving, disruption prone and converging market. A strategy with no results, is not a strategy at all. 

How should TMT companies think about strategic growth that achieve results?

 

Go “back-to-basics

The more complex things get, the more important it is for us to strip back and understand the underlying fundamentals of the business world. Regardless of what business or what industry you are in, when thinking about strategic growth, go back-to-basics. What does that mean?

First, it means having a thorough understanding of the entire business. At KPMG, we have a comprehensive but simplistic approach – we call it the 9 Levers of Value (9LoV)

Figure 2

The 9LoV breaks down financial, business and operating model components of any business in a consistent way. It presents a common framework to help clients understand what they should aim for, where they should play and how to win. This is important because in our experience, for strategies to work, corporate alignment is key. Business units or functions cannot work in silos. And vice versa, business units or functions will not be successful in effecting change unless they are able to trace back what they do to the overall ambition. Strategy impacts everybody.

To go back-to-basic means understanding the fundamental components of a business. Then developing the growth strategies of your business in a complex, fast changing, global and disruptive world by:

 

1. Staying focused

When change is happening fast and disruption is imminent, stay focused. What is the business’ vision, mission and ambition? Does everyone in the organization know this? If not, then set it and stay focused on the agenda as you embark on the growth journey. Focus on your goals, remember your priorities and take a long-term view. Stay nimble, innovate but avoid jumping onto the next “new thing” that comes in, unless you can clearly actuate its value contribution to your goals. 

One of China’s largest information and communications technology solutions provider has presence in over 170 countries. They have successfully internationalized their business by focusing on client-centricity. They dedicate growth decisions to client servicing, and expanded to overseas markets with the sole purpose of serving their clients, contributing to their success.

 

2. Knowing your true Business Model 

Think about the internet conglomerates in China versus those in Silicon Valley. From the surface, they seem like comparable businesses (e.g. platforms that allow private persons and small businesses to sell merchandise directly to customers), but if you examine their business models closely, they are fundamentally different. 

To grow strategically and successfully, a company’s business model must be fully understood. More often than not, when faster change is the new norm, small adjustments or fine-tuning to the business model is sufficient to make a huge impact in driving the next stage of growth. This means “knowing your playing field”, and appreciate that not all grounds are equal. If you cannot clearly articulate why you are doing something, or what your goals are, then reconsider your action plans.

 

3. Making it happen

Strategies are incredibly important but a strategy alone is not enough. Strategies fall short because organizations fail to articulate the changes required and are unable to manage the intended and unintended consequence of change. In our experience, understanding growth implications on the operating model increases chances for success. 

Video sharing sites have disrupted the media industry across the world. They succeeded not only because incumbents were unable to transform their business models in time, but the inability of these traditional businesses to re-align internal operations with new innovations or strategies. 

Growing strategically in TMT under the new normal means going back-to-basics. Ask yourselves: Do you know your goals and what you stand for / are aiming for as a business? Do you really know where your company is playing and why? And finally, make it happen by aligning financial, business and operating model changes, while pulling the levers that will create most value.

Footnote

1“Top Thirty Global Media Owners 2016” report by Zenith

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