Some 63% of enterprises globally are now facing high levels of disruption. Here's how to hone your business strategy and remain competitive, according to Accenture.
Building a slide deck, pitch, or presentation? Here are the big takeaways:
- 63% of large companies globally currently face high levels of disruption. — Accenture, 2018
- 44% of large companies globally show severe signs of susceptibility to future disruption. — Accenture, 2018
While many people hear the term "disruption" and immediately think Amazon and Uber, industry-changing companies that tap tech advancements are now a reality across all business sectors, according to a Monday report from Accenture. Of 3,600 companies surveyed across 82 countries, with annual revenues of at least $100 million, 63% said they currently face high levels of disruption, the report found. And 44% show severe signs of susceptibility to future disruption.
However, it's key to understand that disruption is not a random event that business leaders have no control over, the report stated. Instead, it has a pattern that businesses can identify and prepare to combat.
"Disruption is continual and inevitable — but it's also predictable," Omar Abbosh, Accenture's chief strategy officer, said in a press release. "Business leaders need to determine where their company is positioned in this disruption landscape and the likely speed of change. The more clearly they see what's changing around them, the better they can predict and identify opportunities to create value from innovation for their business and rotate to the 'new.'"
SEE: IT leader's guide to achieving digital transformation (Tech Pro Research)
In the report, Accenture broke disruption down and created a "disruptability index" that considers the presence and market penetration of disrupting companies, as well as incumbents' financial performance, operational efficiency, commitment to innovation, and defenses against attack.
This index can help business leaders understand their position in the market, and identify risks and opportunities inherent to new tech and innovation.
The report explains the four periods of disruption, and how companies can respond strategically during each one:
In this stage, disruption is clearly occurring, but not yet threatening incumbent businesses, which still have structural advantages and deliver strong performance, the report stated. Some 19% of companies fall into this period, including those in the automotive retail and supply, alcoholic beverage, and diversified chemicals industries
Industry response: Companies in this stage must start reinventing their legacy business, rather than only preserving it. This could involve taking steps to maintain cost leadership in the core business, and making key offerings more relevant to customers by making them less expensive and higher performing.
In the vulnerability phase, the current level of disruption is moderate, but incumbent companies are susceptible to future issues due to structural productivity challenges, such as high labor costs. Some 19% of companies, including those in the insurance and healthcare industries and the convenience retail sector, are now in this period.
Industry response: Companies now must make their legacy business more productive, to allow themselves to develop future innovations in their business and also tap the innovations of their competitors. This might include reducing dependence on fixed assets, the report noted.
This phase involves violent, sudden disruption—it's when traditional business strengths have become weaknesses. Some 25% of companies are now in this period, including those in the consumer technology, diversified banking, advertising, and transportation services industries.
Industry response: The only way for companies in this phase to survive is by changing their current course, the report stated. This means transforming the core business while also investing in new businesses. However, it's important not to make the change too quickly—risking financial problems—or too slowly, risking becoming obsolete.
In this stage, disruption has become a constant, and new competitors live and die rapidly in the market. Some 37% of companies are in this phase, including software and platform providers, telecommunications, media and high-tech companies, and automotive manufacturers.
Industry response: Companies that reach this stage must embrace constant innovation, the report stated. This means increasing the penetration of new offerings with current customers, and rapidly expanding into new markets.
"To not only survive disruption but thrive when it strikes requires companies to transform and grow their core business while simultaneously innovating to create and scale new businesses," Mike Sutcliff, group chief executive of Accenture Digital, said in the release. "Embracing digital is crucial part of it. We found that the lower an industry's digital performance, the more susceptible it is to future disruption. Digital technologies can help make a company more resilient in times of disruption in a number of ways, whether by driving better outcomes from existing products, developing entirely new digital services, lowering costs, or increasing barriers to entry."
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