Enterprises Aren’t Taking Digital Disruption Lying Down, Study Shows
2 March, 2018 / Articles
While digital disruption looms across just about every sector, it isn’t just techie startups having all the fun. Now, data shows that incumbent, existing companies have been getting ahead in the disruption game — to the point they don’t fear it anymore.
That’s one of the key takeaways from a new study of 12,800 C-suite executives across 20 industries in more than 112 countries, released by IBM, which found these incumbents are refusing to be disrupted. Instead, as it turns out, they’re not taking it lying down. Only 26 percent of C-level executives interviewed now think competitors outside their industry pose a significant source of disruption, compared to 54 percent two years ago.
The enterprise strikes back?
There are several ways larger or established organizations are embracing the digital disruption challenge. First, they are marshaling a resource they have in more abundance than startups: data, and lots of it. Second, they are leveraging that data into artificial intelligence and customer experience. Third, they’ve learned to adopt platform approaches to open up to innovation across the board.
At least 43 percent of incumbents are likely to invest in AI and cognitive technologies, and two-thirds expect their organizations to boost CX, prioritizing customer experience over products.
“What changed? One wave of disruption may be abating,” write Rita Gunther McGrath of Columbia Business School and Philip Dalzell-Payne of IBM Services. “Ubiquitous mobility and digital media have already shaken up the most susceptible industries. The Uber and Airbnb phenomena rolled through markets with excess capacity and eroded profits for many. Some would-be disruptors never got past the gate. The digital giants’ dominance daunted entrepreneurial startups and the venture capital firms that fund them.”
“The digital giants marched to dominance by adopting the platform business model,” McGrath and Dalzell-Payne continue. “Now, the disruptors are swarming to them. Chasing the zero marginal cost advantage, 57 percent of the organizations with a strategy to disrupt are builders or owners of a platform business model. By orchestrating assets instead of owning them, they expect to take advantage of network effects to scale quickly. Organizations of every kind and in every industry are investing in platforms.”
The study finds these fast movers — adopting platform approaches — are seeing greater market success. “On average, platform orchestrators grow revenues faster and generate higher profits than other business models, earning market valuations as high as eight times revenue,” according to Yoram (Jerry) Wind of The Wharton School and Shanker Ramamurthy of IBM. “In every industry, an intrepid few are venturing onto platforms and, as they do, pulling others fast in the same direction.”
In addition, 28 percent of the C-suite executives surveyed report “their enterprise is reallocating some portion of its capital to build out platforms,” they add. “Past and future reallocation could approach an estimated $1.2 trillion in the next few years. Today, just under half, 46 percent of organizations, are either investing in or considering the new platform business model.”
“Innovation is no longer the province of the hungry upstart,” McGrath and Dalzell-Payne state. “The most financially successful segment in this study also includes the leading innovators. Their leaders have a strong understanding of where their industries are heading. But they stand apart from others in their willingness to experiment and move fast.”
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