Business leaders today often think disruption is beyond their control. While 93 percent of executives say they know their industry will be disrupted at some point in the next five years, only 20 percent feel they’re highly prepared to address it.
But what if you could get under the surface of disruption?
Our research shows that disruption follows a discernible pattern. To better understand the nature of disruption in an industry context we created the Disruptability Index. We analyzed 3,269 companies—across 20 industries and 98 industry segments—and looked at 15 factors to gauge both the current level of disruption and susceptibility to future disruption.
Where your industry stands
To identify the opportunities that disruption brings, business leaders should recognize where in this pattern of disruption their industry is positioned and why. By reaching under the surface of disruption, business leaders can confidently address its risks.
Is your industry being disrupted? Click the infographic below and learn more about disruption’s four periods: viability, durability, volatility and vulnerability:
What's more, the Disruptability Index shows that different industry segments within the same sector may experience varying periods of disruption. Take the automotive segment, where trends like electrification, car sharing and autonomous driving are dramatically changing the business model for carmakers more rapidly than for suppliers. As a result, the current level of disruption for automotive manufacturers is significantly higher than it is for the parts and equipment sector.
Take control: Disruption as an opportunity
In periods of rapid change, a new strategy is required: one that enables companies to act in the face of disruption, confidently. We call this strategy “rotating to the new”—it has four actions:
- Grow the core
- Transform the core
- Scale the new
- Pivot wisely
Each of the four periods of disruption requires a different emphasis on these strategic actions.
- Disruption State: Viability
Focus: Greater Emphasis on “Growing the Core”
- Direct investments to build new capabilities
- Activate demand for innovative offerings with existing customers
- Use core strength to expand into adjacent markets
- Disruption State: Durability
Focus: Transform the Core
- Maintain cost leadership in the core
- Use efficiency-enabling technologies to increase profitability
- Channel freed-up investments toward experimentation, making core offerings cheaper and better
- Disruption State: Vulnerability
Focus: Scale the New
- Reduce dependence on fixed assets, and monetize those that are underutilized
- Respond to decreased demand for core products by spotting and scaling up innovations
- Use technology and data to build enhanced services and offerings that alleviate customer pain points
- Disruption State: Volatility
Focus: Pivot Wisely
- Be bold with corporate and financial restructuring
- Find the right pace and timing to shift to new businesses and opportunities
Three ways to take advantage of the Disruptability Index:
Don’t Wait: Act
Each disruption period brings unique challenges and opportunities. For example, for companies in the Volatility period, it is imperative to change course decisively. Meanwhile, for those in the Durability period, it is imperative to experiment and focus on maintaining existing sources of competitive advantage.
Be Brave, Be Wise
Don’t presume that the best way to respond to disruption is to become the disrupter—that is, focusing solely on scaling new businesses. Companies must balance investments required to reinvigorate the core (e.g., by modernizing existing businesses) while scaling the new businesses (e.g., by creating entirely new digital business models).
Turn Your Vulnerabilities into Advantages
Business leaders can use the index to understand their vulnerabilities and drive their strategic response. Additionally, they can identify opportunities to exploit their own core competencies in adjacent markets that are exposed to disruption today.
Are you prepared to boldly embrace disruptive opportunities—instead of fearing them? It’s time to take advantage of disruption and shape your own future.