June 26, 2019
June 26, 2019
The nature of disruption in your industry should inform, but not constrain, when and how you focus your innovation efforts.
If you’re in Software & Platforms, Communications & Media, or High-Tech (Period of Viability)…
CREATE YOUR NEXT CUTTING EDGE
Embrace new technologies to develop potentially disruptive ideas, in and outside of your current industry.
Financial performance is often strong for incumbents that have captured winner-takes-all markets, but new entrants have their eyes on growing profits. Industries in this period also have rapid product cycles and fleet-footed customers. Staying ahead of the curve is an imperative in this period.
Surprisingly, relatively few Software & Platforms companies are investing in newer technologies such as edge and fog computing, or extended reality technologies. Less than 40% plan to adopt any of those newer technologies in the next five years.
More ambitious companies go beyond today’s proven technologies to innovate at the next frontier, where they can discover potentially disruptive ideas. Ultimately, they understand that the best way to prepare for the future is to create it.
If you’re in Health, Life Science or Chemicals (Period of Durability)…
FUND YOUR FUTURE BETS
Progressively bolster and allocate your innovation investments so you can test and turn new ideas into commercial realities faster.
Industries in this period have benefited from decades-old business models that served them well. Unsurprisingly, they aren’t prepared to let go of proven success formulas. Disruptors are kept at bay by the incumbents—for now. The relative success of companies in these industries doesn’t mean they’re invincible, though. Not if fault lines and inefficiencies are ignored.
Chemicals companies, for example, are performing strongly, with average annual revenue growth rates of 5.7% over the past five years. But investment in the future is showing signs of slowing. This comes at a time of rising threats: Unique VC deals in the industry have more than tripled, from 226 in 2011 to 691 in 2018.
Leaders in these industries focus on building a pipeline of new ideas rather than sweating their core assets. More importantly, they bolster and allocate the capital necessary to ensure they can commercialize new ideas with future potential before their competitors do.
If you’re in Banking, Capital Markets, Industrial Equipment & Machinery, Insurance, Utilities, Automotive or Energy (Period of Vulnerability)…
FIND PARTNERS TO SCALE WITH
Commit to scaling new ideas with ecosystem partners who can provide access to technologies and specialized talent.
Industries in this period have the benefit of being well-established and asset-rich. And, the incumbents in these industries tend to be older than others: Sixty-four years on average, compared with just 42 for those in the Viability period.
The new entrants that do emerge initially attack incumbents at the product and service level rather than competing across the value chain. But for most, the squeeze often isn’t severe enough to inspire substantial action. Incumbents often ponder for too long and lack the risk appetite to invest in new growth ideas early. Opportunities exist for those that can see beyond short-term pressures and set their sights on creating scalable businesses that will matter tomorrow. Large companies have realized that to succeed, they need to commit to scaling new ideas with ecosystem partners who can provide access to technologies and specialized talent.
If you’re in Consumer Goods & Services, Infrastructure & Transportation Services, Natural Resources or Retail (Period of Volatility)…
DISRUPT FROM THE INSIDE
Establish a specialized entity such as an “innovation lab” or a “digital factory” in order to bring meaningful innovation into your established business.
Industries in this period feel the pinch. Financial performance has dropped off as fault lines that developed amongst incumbents have been exploited by disruptors who are eating their market share. And there is little sign of abatement—the future looks equally difficult as inefficiencies and underinvestment in innovation are exposed. They face difficult prospects, requiring them to make radical choices in the core business.
In the Retail sector, ever-growing platform-based competition has forced some hard choices. The historically slow innovation displayed by traditional retail players is changing—$5 billion is expected to be spent on AI technology in 2019. But more than a digital veneer is needed.
A separate study we conducted found that 80% of companies in the Retail and CG&S sectors had altered their strategy as a consequence of disruption. Some of its incumbents show tenacity, while others try to do too much too soon.
Leading companies juggle the twin challenges of prolonging the lifespan of their legacy business while also investing in new areas. The former requires a restructuring that supports continual internal disruption in order to mitigate external threats.
No longer can companies assume that disruption is just a passing storm they need to ride out. As Bob Iger, Chairman and CEO of the Walt Disney Company, once said: “We have to be different when that storm clears. We can’t be the same”.
Responding to persistent disruption requires a radical departure from familiar strategies. Your path to repositioning starts by understanding the disruption trends: How disruptable is your industry today? How has disruption evolved in your industry over time? It takes shape when you put innovation to work in ways that enable you to set the right pace - whether you create your next cutting edge earlier than others, fund your future bets to turn new ideas into commercial reality, scale ideas faster through new partnerships or develop world-class in-house innovation capabilities.
Then your company will not only be different once the storm clears: It’ll be stronger for the next one.
How leading companies invest and innovate to harness the power of disruption.
To learn what it really takes to make a wise pivot in the midst of disruption, listen to our conversations with leaders like Schneider Electric’s Chairman and CEO, Jean-Pascal Tricoire.