Although technology is one of the first steps in digital transformation, technology along will not get you there.
It’s becoming more and more clear that implementing a successful digital transformation means changing or diversifying your business model.
There are three strategic ways to do this: acquisition, new ventures, and alliances. Each one reflects a growth strategy and a type of business model diversification.
Companies often implement corporate-level acquisition strategies to achieve product diversification that can promote a competitive advantage. This strategy contrasts favorably with the time and cost involved in pursuing organic growth opportunities. Acquisition strategy is the most common means of implementing diversification. It brings together a vast array of experience and expertise as well as a wider portfolio of companies and business models.
Traditional strategies for corporate growth have increasingly become less appealing, so many companies have been adopting the New Venture mindset. Although difficult to implement and often slow to repay investment, these strategies do open the doors to new business areas with innovative, usually technology-based products. A couple of New Venture strategies are penetrating new markets and industrialization.
The aim of market penetration is to effectively use your product, enter the market as quick as possible and seize a large market share.
Penetrating new markets leads to direct brand awareness and can create customer referrals. It can lead to direct sales and adoption of your product or service in the market if it’s priced correctly and discourage other competitors from coming into the same market because of increased competition. The customers can reap the biggest benefit from this strategy because it causes the rest of the market to innovate and improve their products in order to maintain their customer base and can also provide lower pricing for consumers.
We constantly see news stories about the infrastructure crisis and the skyrocketing costs associated with rebuilding our cities and developing housing for a growing world population. The demand for new construction is exploding and it’s a long road ahead unless we approach building from a different perspective.
Industrialization in the construction industry is becoming extremely prevalent because these approaches address some of the biggest issues in the industry – like the declining productivity curve and skilled labor shortage, use less construction materials than traditional approaches, and are flexible enough to accommodate the unique building challenges of today.
Although these methods will allow companies to adapt to diverse building projects, the first step is for the industry to adopt approaches like virtual prototypes, building information modeling (BIM), data collection, and digitization throughout the supply chain.
Strategic alliances are defined as “an agreement between two or more organizations to work together and share resources for the benefit of the parties of the alliance.” Companies engage in partnerships with the aim of market seeking, gaining access to new technologies, reaching economies of scale, sharing costs, overcoming legal barriers, or legitimizing their activities.
A company that doesn’t expand at the right time is bound to lose a lot of its customers and market share. The diversification growth strategy helps companies expand in the right direction and manages risk for the company, while at the same time contributing to the bottom line.
Construction companies in today’s fast moving digital economy need to understand the different business models, the fundamental role that network effect plays in the digital economy, and the overarching potential of building on open digital platforms.
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