Business disruption, with its potential to suddenly destroy the status quo, has become an obligatory headline in the media, and a discussion point in boardrooms. And with good reason: Our assessment of more than 3,600 companies in 82 countries highlighted that 63 percent currently face high levels of disruption in their respective industries.
The commonly held belief is that disruption is an unpredictable force, one that emerges almost overnight, and takes place on an industry-wide scale. This belief fuels fear; and fear, whether we like it or not, creates a fertile ground for self-doubt and perturbed reactions.
Let’s pause for a moment and ask: Is disruption really to be feared?
We think not. Rather than being a random event beyond business leaders’ control, disruption has a pattern that can be identified, understood and prepared for. By measuring the current level of, and susceptibility to, disruption in over 90 industry segments, we identified four periods of disruption: Durability, Vulnerability, Volatility and Viability. Where incumbents fall within these periods should inform how they respond, with confidence:
For those in Durability, where disruption is evident but not life-threatening, companies must continue to squeeze value from the core, maintaining cost leadership, while making offerings more relevant to customers. For example, the IntelligentX Brewing Company uses AI in gathering customer feedback—each bottle’s label lists a website where consumers can go to provide input on the flavour. That feedback feeds the brewery’s algorithm, which produces new recipes each month.
Companies in Vulnerability must make their legacy business more productive to position themselves to leverage future innovations, both their own and their competitors’. Homebuilding, for example, has been one of the least influenced by digital-related productivity improvements. That has led to a wave of ConstrucTech companies using technology to streamline operations. Katerra, for example, is trying to take over all aspects of the homebuilding value chain, from architectural design, to manufacturing standardised parts, and then assembling them onsite.
Those facing massive disruption in Volatility must be bold. Incumbents need to radically transform the core business while scaling new businesses. But pivot too quickly, and companies will stretch themselves too thin financially; pivot too slowly, and companies risk becoming obsolete. International oil companies are trying to strike that balance. Many of them are simultaneously reshaping their core portfolio to re-focus on integrated gas, while preparing for further expansion into the electricity supply chain, as an oil dominated global energy market begins to give way to a lower-carbon system.
In the Viability state, companies need to embrace a constant state of innovation. This involves increasing the penetration of innovative offerings with existing customers and expanding into uncharted markets. One of the world’s largest film studios, for example, recently announced the formation of a studio dedicated to reimagining and prototyping the entertainment experiences of the future. Accenture Interactive has been appointed as the Innovation Partner to the initiative.
As Marie Curie once said: “Nothing in life is to be feared. It is only to be understood.”
We agree—for tomorrow’s winners in business, there is only one way to face disruption: with confidence.