Focus on Effectiveness to Drive Competitive Value

Vernon Louis "Lefty" Gomez was a Hall of Fame baseball player who coined the phrase “It is better to be good than it is to be lucky.” For high-tech companies, being good means being effective. 

The degree of effectiveness determines different market positions, and knowing which position your organization is in creates the foundation for successful competitive strategies and investments.  

Leaders who know where they stand in terms of effectiveness create their own luck. The high-tech industry fared relatively well in 2020 compared to other industries. Businesses accelerated their move to digital technology. Gartner Q4 Global Vertical forecasts IT spending to return to growth with an increase of 2.8%. This marks a renewal of interest and investment in business and technology. "

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As an organization enters the “Renew” phase, it creates new competitive positions based on new customer values and needs. It is difficult to determine a company’s competitiveness in a changing environment, as traditional indicators like market share, profitability, customer base, etc. reflect past success. These indicators measure organizations in financial terms so they provide less insight in how a company might respond to future change.

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The renewal of IT spending accelerates opportunities for high-tech firms. Renewal does not mean a return to the past. Renewal changes the terms of competition — they are more digital, agile and demanding. These changes, in turn, create different competitive situations — the market positions that help leaders make sense from a changed market. 

Leaders should:

• Know their market position
• Identify opportunities to create competitive differentiation based on that position
• Use the position to inform strategic decisions and investments to improve your effectiveness

So the question remains, how can organizations evaluate the competition?

Think about competitiveness in terms of effectiveness

The key is to change how you think about competition. If competitiveness is thought of as the quality of being as good as or better than others of a comparable nature, then competition is dynamic. That means the ways in which organizations evaluate competitiveness must also be relative and dynamic. Organizations should be reviewing effectiveness in place of more traditional indicators.

Competitiveness stems from 2 types of effectiveness

Effectiveness is the degree to which the organization is successful in producing desired results. There are two forms of effectiveness: External and internal. Externally, a company is effective based on its ability to engage and experience market success. Internal effectiveness reflects the ability to align and collaborate to operate and adapt efficiently.

Gartner has identified four starting positions for high-tech companies based on internal and external effectiveness. The figure below illustrates the relationship between these different starting positions, which describe different priorities, competitive strategies and revenue expectations.

• Resilient companies with above-average levels of both external and internal effectiveness. With this dual effectiveness, resilient firms can extend external success through internal discipline and transformation.
• Fortunate companies were above average in their external effectiveness but have below-average levels of internal effectiveness. These firms are successful today, but they lack the capacity to adapt, which can limit their ability to remain successful tomorrow.
• Hard-working companies had below-average external effectiveness but above-average internal effectiveness. In a changing market, it is possible to be on the wrong side of that change; however, these firms raise their competitiveness through internal agility to meet those markets.
• Challenged companies, like hard-working companies, had below-average external effectiveness. They also had below-average levels of internal effectiveness.

Companies in each position see 2021 as a year of growth; however, that growth comes from following different priorities and competitive positions, according to the Gartner General Manager Survey 2021. For example:

• Resilient firms expect to grow by extending their solutions into new customers with innovative products.
• Fortunate companies seek to extend current product and service success to grow with the market.
• Hard-working firms plan to rebuild their revenue streams from strengthening their base of current products and services.
• Challenged firms recognize the need to grow through focus, as some opportunities are more valuable than others.

Each position represents a particular competitive situation at a point in time. These summary strategies may appear obvious, but beneath this level there are specific investments in customers, their experience and sales capacity, among other factors.

If competition is dynamic, then market position is not destiny. High-tech leaders evolve their position by setting strategies and making investments to change their internal and external effectiveness. Those investments concentrate on strengthening the connections between customers, products, sales, the product organization and other factors. 

Mark McDonald, Ph.D., is a Vice President and Gartner Fellow within the Gartner for General Managers team, where he is responsible for research focused on the application of technology to business and its products and services. He is also the author of the book "The Digital Edge" (October 2012) and the co-author of the books "The Social Organization" (2011) and "The eProcess Edge" (2000).