Learning content

Why has business acumen become crucial in the 4.0 Industry?

The dynamics between companies and customers have undergone significant changes in recent decades. Previously, companies dictated the standards, and customers were expected to conform to them, whether it involved operating hours or business practices. However, the 21st century and the advent of the Internet have brought about two major shifts that have transformed the role and significance of customers for companies.

Firstly, customers are now more well-informed than ever before. With the accessibility of the Internet, individuals can search for information about products or services, compare prices, evaluate quality, and assess customer service to make informed decisions. Furthermore, they are exposed to a multitude of new offerings on a daily basis, making them more inclined to try novel products and services. Consequently, understanding customer needs and finding ways to fulfill them has become increasingly crucial for businesses to maintain long-term customer relationships.

Secondly, entry barriers in certain sectors have significantly decreased. Previously, establishing a business was arduous, requiring substantial investments, leasing physical spaces, and more. However, the advent of online business has simplified the process, enabling entrepreneurs to create websites, develop logos, and engage in buying and selling products and services with relative ease. As a result, standing out in Industry 4.0 entails not only offering quality products but also providing additional personalized services to customers.

These factors have intensified competition among companies in their quest to attract and retain customers while maintaining economic sustainability. In Industry 4.0, businesses strive to establish enduring, ongoing, and valuable relationships with customers by:

• Offering superior products and supplementary services
• Cultivating a trustworthy relationship that demonstrates credibility and commitment to customer satisfaction

Developing business acumen in two key aspects allows entrepreneurs to capitalize on new opportunities and foster customer relationships:

1. Understanding the industry landscape in which their business operates, including competitors, suppliers, and emerging trends, in order to differentiate themselves effectively.
2. Understanding their customers' needs, including their preferences, desires, and values, in order to provide the highest level of satisfaction possible.

Understanding the industry

Understanding the industry helps identify key areas and new opportunities to differentiate from other businesses and is one way of developing business acumen in Industry 4.0. Understanding the industry means looking at the company’s immediate environment.

Together, your customers, suppliers, intermediaries, and competitors constitute the micro-environment. Customers can be persons or other businesses. You could work in B2C business (“Business to Customer”, your customers are persons) or B2B business (“Business to Business”, your customers are other companies). Suppliers are all the companies you need to function (they provide your raw materials, and everything you need to function), while intermediaries are partners needed to deliver your product (a sales platform, a transport company, etc.). Finally, competitors are all companies by whom you can be replaced because they propose a similar product or service.

In the micro-environment, existing substitutes and the threat of new entry are also two relevant factors to understanding the industry.

• Existing substitutes: are there available products that can replace yours? How easy is it for customers to switch to another product? For example, cars can be replaced by bikes for short distances.
• Threat of new entry: what are the barriers to entry in your industry? Does it need big investments, specific expertise skills, licenses, hard-to-get raw materials, etc.?

The macro-environment of your business is constituted by

• The technological environment: are digital technologies and the Internet available in the geographical area you want to develop your business?
• The international environment: is the economic situation good? Are there any legal constraints?
• The social environment: is the product or service you want to develop accepted by the public?
• The national environment: are there any national specificities (culture, laws, ...) that would be an obstacle?

Specificities of a digital business

There are specificities in the digital business compared to the "physical" business. Understanding these specificities allows you to know where your costs are and where you can gain a comparative advantage.

Your resources and the competences of your business will be addressed in the next subsection.

Understanding your own situation

To complete the analysis of the industry, you will also need to analyse your own situation, i.e., your own resources (what you have) and competences (what you do well). Understanding your own business situation can help you set your future goals.

A SWOT analysis can help you in this process. A SWOT analyses the internal strengths (S) and weaknesses (W) of your business, and the external opportunities (O) and threats (T) that may affect its performance positively or negatively. Do not list too many items, a maximum of 5 items per topic is sufficient, otherwise, it becomes complicated to find out where to act.

There are no definitive rules on the timing of objectives, as this of course depends on your business, but you can consider that

• A short-term goal is one that can be achieved immediately because the resources and skills are available and there are no threats
• A medium-term objective is an identified opportunity, but where you may not have the necessary strengths immediately, or where there is a potential threat that needs to be further analysed
• A long-term objective is a more general objective that starts from an identified opportunity or is intended to protect you from new threats in the long term.

Understanding your competitors

In a competitive industry, measuring your performance is very useful, but it is even more useful to compare your own performance with the standards and best practices in the industry area you work in, to determine what you can improve to gain a competitive advantage.

A benchmark analysis is a tool that helps to perform this comparison. It is a form of research used by businesses who wish to compare their existing performance to the best practices in the industry. Companies can gauge the best performance to be achieved and how to make changes to gain a competitive advantage. Metrics and KPIs are very useful in this process.

Here are 5 steps to follow when doing a benchmark analysis

1. Choosing a practice you want to benchmark it can be the time needed to produce a single product, the time needed to process a customer complaint, customer satisfaction, product quality, ...
2. Choose the companies you are benchmarking against: it is within your organisation or with competitors?
3. Analyse your own practices: in any case, you should first gather data about your own processes
4. Compare your practice with the benchmarked organizations (or teams or departments if it is an internal benchmark)
5. Determine what changes to make: make decisions about what you can improve in your practices to reach the standards and implement the changes.

The use of the resources and competences at your disposal will enable you to build a competitive advantage. A competitive advantage is any characteristic of a business that differentiates it from others, putting it in a relatively advantageous position. For example, to create a website you need a server (resource) and a web developer (skill). You have the same server as your competitors, but you have a better web developer, who will create a better site.

There are four questions to determine whether your resources or competences could become a competitive advantage:

1. Value: is my ability relevant to my industry?
2. Scarcity: is my ability rare or hard to find in my industry?
3. Inimitability: is my ability difficult to imitate competitors?
4. Organization: do I have the sufficient organisation to develop my ability?

Developing a customer-oriented business

With the analysis of your industry, you gained insights into your environment and have the keys to identifying new opportunities. At the same time, you will need to focus on your relationship with customers, who are at the center of attention in Industry 4.0.

It is not just about being “customer-friendly”, i.e., making their experience nice and pleasant, but rather about developing a customer-oriented approach, which means setting up actions, processes, or services that will add value to your business in the eyes of your customers. Nowadays, lots of businesses are customer orientated. In a nutshell, this means that

• The needs of customers are put first: all processes and services are geared to the needs of the customer,
• Your business offers a personalized experience to your customer, according to their needs.

Here are five characteristics of a customer-oriented business

1. Prioritises customer’s needs,
2. Puts customer orientation at all organisational levels, from salespersons to top management,
3. Understand customers’ concerns and be reassuring about them,
4. Have easy and relevant interactions with customers,
5. Make customer experience easy as possible.

Being customer-oriented changes the way your customers perceive the services you provide. It improves it and, in return, they may have positive behaviours towards your business, such as loyalty, or telling others about it.

As mentioned earlier, adopting a customer-oriented approach goes beyond simply providing good customer service. It also involves aligning the entire organizational performance with the goal of customer satisfaction. While customers may not directly observe the internal workings of your business, they can intuitively sense whether your operations are designed to enhance their overall experience.

A study (Brady & Cronin Jr, 2001) showed that customer orientation is positively related to the perceived quality of

• The performance of employees
• The goods provided
• The business’s physical or digital environment.

The service quality perception described above is related to satisfaction and value for customers.

Customer-oriented businesses have many benefits:

• They know their customers better and learn from them, which allows them to better anticipate new needs and outperform competitors,
• They offer goods that match customers' needs, so customers value them more and are more satisfied, which allows to build a long-lasting customer base
• They enable work to be organised more efficiently,
• They encourage creativity,
• They retain customers and differentiate themselves from other businesses, so they are more profitable.

Understanding your customers’ needs

Understanding your customers is key to a customer-oriented business. On the one hand, communication with customers and customer experience can help you understand their needs. On the other hand, communicating with your team about your customers allows you to create products or services in line with their needs and to set precise objectives for customer satisfaction (next sub-module). Also, your perspective as a woman allows you to bring in new needs and relevant ways to satisfy them that other colleagues may not have thought of before.

Communication with customers

As an intermediary with customers, there are several attitudes to adopt when dealing with a customer:

• Listening actively,
• Handling customer data,
• Adapting quickly to new customer needs and acknowledging their problems,
• Clear communication.

Customer experience

Customer experience is about the ease with which your customer can browse your website, purchase your product, or interact with your customer services. There are some things you will not be able to influence, such as the taste of the customers. However, your business can improve in three aspects:

1. The quality of the product or service itself, and the range and quality of additional services
2. The price
3. The customer's experience when they are on your website

The figure below shows different aspects your business can work on to improve the customer experience:

To understand customers' needs, diversity within a business team is an important element. Not all customers have the same concerns if they are male, female, young or older, intensive internet users or not, etc. From a gender perspective, the development by women of products or services that directly address women's needs is a form of empowerment. Being a woman in Industry 4.0 is a way of bringing women's needs into the business and developing products or services that meet needs or women-specific uses that other men do not think about (Morley & Kuntz, 2019).

This women's Industry 4.0 entrepreneurship movement for women is called "Femtech". Femtech is “technology including products, services, diagnostics, and software addressing health and wellness concerns that solely, disproportionately or differently affect women, girls, non-binary folks, trans people, and those assigned females at birth” (femtech.ca)

Communicate with your team about customer’s needs

To improve your customer’s experience and to better meet their needs, it is important to understand them and to be able to discuss the solutions to their needs with your teams. Collaboration and cooperation in diverse teams can sharpen your knowledge and incorporate elements that are important to your users that you might not have thought of on your own. Brainstorming with your team can help you communicate your customers' needs with your team while fostering everyone's creativity.

Brainstorming is a crucial step of a design method called “Design Thinking”. Design Thinking is a method of product and service design that encourages organizations to focus on the people they are creating for, which leads to better products, services, and internal processes.

The three principles of Design Thinking are

1. Be customer-oriented: customer/user is at the centre of the design process. You work from their realities.
2. Collaborate with a team: a team with diverse backgrounds that reflects society and understands each other's jobs.
3. Be in a continuous improvement process: a “trial and error” approach.

As a leader, brainstorming is important because it is a time when you will be able to communicate with your team about solutions to users' needs. To carry out a brainstorming session successfully, you can set a few rules that will encourage communication without losing focus on your objective: the customers.

Some brainstorming rules (IDEO, 2020, you can download the poster here)

• Defer judgment,
• Encourage wild ideas,
• Build on the ideas of others,
• Stay focused on the topic,
• One conversation at a time,
• Be visual,
• Go for quantity.

Case study

Context: A focus on business acumen to find new opportunities in the digital era.

Description: Lara is the executive director of a long-standing pay television channel. Her company has built up an excellent reputation over the decades for providing high-quality programmes to its audience. The channel continues to offer its programs and to regularly introduce new ones. However, audience numbers are gradually falling, and Lara and her team understand the digital transition is playing a role, as the channel's customers are increasingly using digital streaming platforms. They are thinking about developing their own digital service, but they need to define what and how.

With her business acumen, she will work with her team to redevelop their offering. The first thing to do is to define their objective: do they want to retain their existing customers or attract new ones?

Then she proceeds methodically and looks at what their environment looks like if they want to start a digital service. She identifies their main competitors (streaming platforms), the suppliers (IT services), and intermediaries (digital equipment providers) they need to set up that service.

She also looks at who their customers are and what their needs are. Together with her colleagues, they will look at what their most loyal customers look like, but also at what the customers who have gradually stopped watching the channel and switched to streaming platforms look like. They will develop several personas to keep in mind the needs, expectations, and constraints of their customers at every step.

Finally, they review the results of their work and use a SWOT analysis to summarise it: identifying their strengths and weaknesses (resources and skills required), as well as opportunities and threats (environment).

One of their important insights was that it was the broadcasting schedules that no longer corresponded with their customers' habits. Their conclusion is that they should not replace their TV programmes with online programs, but rather offer a complementary service.

In the short term, they decided to change the broadcast time of some programmes. In the long term, they will develop an online platform that allows the re-broadcasting of programs when and where the customers want.

Lesson Learnt:

• Even older or more “traditional” businesses can go digital. Digital has become inevitable, even for the most established businesses. If you never question what you know and what you do, you can miss opportunities. See here how a major industry leader in the photography business once missed the digital turn.
• Business acumen requires attention to one's environment and customers. It is important to know your customers, but also to understand why some customers leave.

Questions and answers

Q: Why being customer-oriented is profitable?

A: Being customer-oriented is a mindset with many benefits. It positively changes the way your customers see your business, as it improves their satisfaction and value to them. In addition to providing a qualitative product or service that meets customer expectations, customer-orientation includes:

• Communication with customers
• Customer experience
• Organizational performance

These elements develop a positive perception of your business and, in turn, increase loyalty and enlarge the customer base. In addition, knowing your customers better allows you to answer their needs more accurately, enable an efficient work organization and encourage creativity.

Q: Does the industry environment have an impact on my business objectives?

A: You never do business alone, especially in Industry 4.0 where competition is strong. Environmental analysis is relevant to see which parts of it impact your business. By analysing the macro- and micro-environment and conducting a SWOT analysis, you can identify new opportunities. Once you have identified them, you can translate them into short-, medium- or long-term objectives.

Q: How can my experience as a woman contribute to understanding the needs of users?

A: Diversity within a business team is important both to foster a more equal society and to offer diverse points of view about the users’ needs and expectations. Sharing your point of view allows us to better include women’s needs in product and service development. When communicating with your peers and your team, diversity helps to avoid reproducing stereotypes or not thinking about certain needs because one is not directly concerned.

References

• Brady, M. & Cronin Jr, J. (2001). Customer orientation. Effects on Customer Service Perceptions and Outcome Behaviors, Journal of Service Research, 3(3), pp. 241-251.
• Dubois, P-L. (2015). Thème n°1. La relation client, priorité de l’entreprise, @GRH, 4(17), pp. 87-89.
• Chaffey, D. (2014). Online marketplace analysis for digital marketing, SmartInsights.
• Chaffey, D. et al. (2013). Digital marketing: Strategy, Implementation and Practice, 5^th Edition, Pearson Education.
• Economy-pedia, “competitive advantage”.
• Femtech Canada.
• IDEO U. (2020). Brainstorming.
• Lucid. (s.d.). 8 Steps of the Benchmarking Process.
• Morley, C. & Kuntz, P. (2019). Empowerment des femmes par les technologies numériques : pouvoir avec, pouvoir pour et pouvoir intérieur, Terminal, 125-126.
• Mukerjee, K. (2013), "Customer‐oriented organizations: a framework for innovation", Journal of Business Strategy, Vol. 34 No. 3, pp. 49-56.
• Shewan, D. (2022). How to Do a SWOT Analysis, WordStream.
• Spiegel, S. (2020). 6 Types of Benchmarking Your Business Needs to Know About, Crewhu.
• Suresh, A. (2021). Customer Orientation – A Guide to Your Customer, Freshchat Blog.
• Whittington, R. et al. (2020). Stratégique, France:Pearson.

Additional resources

https://www.youtube.com/watch?v=DvV7ZcRVQ4g – a video explaining how to create persona

https://www.usability.gov/sites/default/files/documents/guidelines_book.pdf - a guide to usability in web design

https://eismea.ec.europa.eu/programmes/european-innovation-ecosystems/women-techeu_en - EU portal dedicated to support start-up led by women

https://careerfoundry.com/en/blog/ux-design/design-by-women-examples/ - examples of apps that respond to the needs of women

https://eige.europa.eu/gender-stereotypes - EU portal on gender stereotypes