Fusion Strategy: How Real-Time Data and AI Will Power the Industrial Future
Vijay Govindarajan and Venkat Venkatraman
Harvard Business Review Press (March 2024)
How and why digitizing the industrial world really matters
At the outset of this brilliant book, Vijay Govindarajan and Venkat Venkatraman assert that global business is now at the next inflexion point, given the rapid advances “in hardware, software, applications, cloud, data, algorithms, generative artificial intelligence (Gen AI), mixed reality, and other technologies on the horizon. These technologies — individually and in combination — are poised to reshape the economy. And while these technologies do pose a threat to profitability, they will also be the biggest driver of how value creation and value capture evolve in every industry worldwide. That’s why $75 trillion, 75 percent of the world’s gross domestic product and the addressable market for digitizing the industrial world, matters.”
According to my own research notes (source unknown), in business operations management, “fusion” refers to the integration and alignment of various business functions, technologies, and data to achieve a cohesive and efficient operational environment.
In Fuasion Strategy, Govindarajan and Venkatraman focus on five “strands”:
“1. The interlocking of the physical and business domains, seamlessly blending the functions that were historically separated.
2. The intertwining of humans and machines to work together in creating the next frontier of expertise and insights.
3. The infusion of digital thinking into the analog disciplines of sciences, arts, and engineering.
4. The interlinking of physical and virtual worlds through the cloud, gaining real-time insights with digital twins, mixed reality, and metaverses.
5. The interconnections among companies, with a corporation becoming a portfolio of capabilities through cross-industry ecosystems.'”
The fusion strategy approach aims to break down silos between and among departments, enhance collaboration, and leverage data-driven insights to improve decision-making and overall performance. It can involve integrating different software systems as well as combining data from various sources to provide a holistic view of operations.
These are among the key dimensions of fusion in business operations:
o Integration of systems, cross-functional collaboration
o Data-driven decision making
o Process optimization
o Enhanced visibility
o Autodesk fusion operations
o Fusion risk management
o Fusion teams
Govindarajan and Venkatraman suggest that insofar as strategic objectives are concerned, “innovation is not in industrial machinery. It’s in merging the digital and industrial domains with data and AI — a significant shift for a company such as John Deere that has designed only big industrial machines in the past.”
They focus on four quite different fusion strategy “battlegrounds”:
1. The Battle for Brilliant Machines: Automotive industry (e.g. Tesla)
2. The Race for Remarkable Results: Agriculture (e.g. John Deere)
3. The showdown of smart systems: Optimal environments (e.g. Honeywell)
4. The clash of custom solutions: Vasegments: Variety of industry segments (i.e. solving unique problems)
Because this is just the beginning, the laws of competitive advantage are changing, rewarding those who have the most robust real-time insights rather than the most valuable physical assets. By taking a fusion approach, companies can improve their offerings’ value to customers and develop innovative new products, novel services, and whole new ways of solving problems.”
In Fusion Strategy, Govindarajan and Venkatraman thoroughly explain both the WHAT and the HOW
.
For example, in addition to developing the aforementioned five “strands,” HOW TO:
o Draw on datagraphs for strategy
o Datagraph leaders win
o How datagraphs get fueled by Gen AI
o How industrial leaders should leverage datagraphs and Gen AI
o Commit to fusion products
o Surround fusion products with fusion services
o Integrate products into fusion systems
o Organize to solve fusion problems
o Accelerate progress for stakeholders
o Monetize value for stakeholders
o Unlock new business value across multiple stages
o Design for collaborative intelligence
o Live (and grow) in ecosystems
o Nurture fusion leaders
o Follow your strategy scorecard
These are among Govindarajan and Venkatraman’s concluding thoughts: “Successful companies fade away because they overinvest in what they are good at today and underinvest in what they need to be good at tomorrow. The fusion future brings that challenge front and center and compels you to act. Take inspiration from the words attributed to Leonardo da Vinci: ‘I have been impressed with the urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.'”
More recently, Thomas Edison observed, “Vision without execution is hallucination.”
That is the challenge…and opportunity. Your move.
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I commend Vijay Govindarajan and Venkat Venkatraman on their brilliant, substantial contributions to thought leadership throughout the global marketplace. I highly recommend this material to all C-level executives and those who aspire to become one as well as to others who are now preparing for a business career or have only recently embarked upon one.
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Here are two suggestions while you are reading Fusion Strategy: First, highlight key passages. Also, perhaps in a notebook kept near-at-hand (e.g. Apica Premium C.D. Notebook A5), record your comments, questions, and action steps (preferably with deadlines). Pay special attention to Table 8-1: “Steps in the execution of the four fusion strategies (Page 154) and the Appendix: “A Note on Scholarly Foundations and a Call to Action.”
These two simple tactics — highlighting and documenting — will expedite frequent reviews of key material later.