This article originally appeared on IndustryWeek.com.
As the leadership team at a consumer products company debated its digital strategy, two opposing views emerged. To stay competitive, some argued, the company needed to invest several hundred million dollars to automate its existing network of large regional plants. Others insisted it should hold off given how rapidly digital was changing the business. What if automation, mass customization and increasing customer expectations require a future network of much smaller plants closer to the customer and capable of same-day delivery?
The leadership team was prepared to make a large investment, but it feared betting on the wrong trend. Yet if it waited, it risked falling further behind its competitors.
This catch-22 is playing out in the boardrooms of many companies as executives map out digital operations strategies. Many understand that to be competitive five to 10 years from now, they need to start building their digital capabilities today. They also know that investing in digital operations is no longer just about improving efﬁciency. Big Data, advanced analytics and connected hardware are powerful tools that can change a company’s strategic direction and create new sources of competitive advantage.
Often, companies hesitate to invest because the fast-moving digital universe is difﬁcult to reconcile with the long lead times required to build out new assets in operations. On top of that, operations tends to be large and mission critical, so leadership teams have little room for error. As a result, operations, with its traditional long-term approach to planning, is particularly vulnerable to digital disruption.
Take the example of the retail industry, in which Amazon leveraged its digital operations to pioneer 48-hour, 24-hour and then same-day delivery. Amazon began shrinking its delivery times more than a decade ago, so retailers had plenty of time to recognize what was happening and react. However, few of Amazon’s competitors invested in these capabilities, and as a result, most found themselves far behind the development curve when Amazon’s rapid delivery times became the norm.
Nate Anderson is a partner with Bain & Company in the Chicago office.