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July 20, 2019
Good things come to those who don’t wait
By: Dr. Vedrana Savic and Babak Moussavi

What is the nature of industry disruption: a transient event? A sudden shock? The reality is that disruption in most industries is a persistent condition, not a short-lived one. We learned this in our ground-breaking study based on the Accenture Disruptability Index 2.0. This index measures the current levels of disruption and the susceptibility to future disruption across 18 industries, from 2011 to 2018. (Figure 1)

Figure 1: Disruptability Index 2.0 Framework

We found that disruptive threats are measurably on the rise. Ambitious start-ups show up in a swathe of areas, with roughly 100 new unicorns "born" in 2018. Venture capital is burgeoning—having grown almost five-fold in dollar terms since 2011—and it is fuelling new innovations. And, increasingly, tech giants are setting their sights across industry boundaries.

The challenges for incumbent firms are intensifying. Industries that were experiencing high levels of disruption in 2011, tended to still be feeling it in 2018. Of the eight industries that had above average levels of disruption in 2011, five of them saw this status persist in 2018.

When breaking out the scores on the two axes into quadrants (based on high or low susceptibility and current disruption) we see relatively small movement. Indeed, most industries remain in the same place for a long time: 83 percent spend five years or more in the same period of disruption.

Figure 2: Industry movements on current disruption and susceptibility to future disruption, 2011-2018

Incumbents are anything but oblivious to the danger. They have responded with traditional, defensive strategies to reduce their susceptibility to disruption. Notably, 83 percent of industries saw declines in their average transaction costs between 2011 and 2018. And in this period, the value of total assets grew by 30 percent on average for the 10,000 companies that we examined. Greater efficiency and stronger defences.

And it’s true that big incumbents have a strong market presence. The top 3 percent of companies we studied represented 44 percent of the total revenues in the sample on 10,000. Leaning on proven strategies has allowed big incumbent firms to thrive in the past and dominate their existing terrain. Some may be inclined to lean on them again, as a means of waiting out the disruptive challenge.

But these strategies aren’t going to allow them to overcome disruption. If disruption is the persistent status quo, you need to move now to break past it or it will continuously chisel away. You need to use more than just efficiency gains and stronger defences—mere obstacles that disruptors will eventually circumvent.

You need to use innovation to pivot your company in a different, more promising direction. It is a direction that captures new ground and puts the onus back on the challengers to remain relevant.

To do this, start by looking at the level of disruption in your industry. From there, consider four key actions:

  1. Create your next cutting edge. Successful companies go beyond today’s proven technologies to innovating at the next frontier, where they seek to discover potentially disruptive ideas. Ultimately, they understand that the best way to prepare for the future is to create it.

  2. Fund your future bets. Successful companies focus on experimenting with new, truly breakthrough ideas. They understand that times of stability are not just to promote “experimentation as usual” in their organizations, but to invest with future commercial potential in mind.

  3. Scale fast, but not alone. Successful companies understand that they can’t win on their own. They need to establish symbiotic relationships with carefully selected ecosystem partners who can provide access to the technology and specialized talent required to scale new products, services or entire businesses faster.

  4. Disrupt from the inside. Prolonging the lifespan of their legacy business needs commitment to continuous innovation. This means investing in setting up a specialized entity such as an innovation lab or a digital factory to bring meaningful innovation into established businesses from the inside.

Responding to persistent disruption requires a radical departure from familiar strategies. Now is the time to take charge of your destiny, by making what we call an “innovation pivot” to truly change your position, with long-term impact in mind.

Read more on the Disruptability Index 2.0.

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