The business world has entered a new era, where uncertainty, ambiguity and disruption seem to be the only constants in the equation. Novel technologies, digitalization and innovative business models are affecting incumbents from all industries. A recent study the firm Innosight discovered that the average company lifespan on the Standard & Poors 500 index has been reduced considerably. In 1965 the average company would have a 33 year tenure on the index, by 1990 the average lifespan was reduced to 20 years and the forecast is that it will shrink to 14 years by 2026.
There are three main factors that have increased the speed of change and disruption in today’s business environment: social, economic and geopolitical change, exponential technologies and the rise of game innovating business models.
1. Social, Economic and Geopolitical Change:
Increased globalization, global connectivity, migration, urbanization and changes in the population pyramid are rapidly shifting the business landscape that has dominated the last century. On the book ”No ordinary disruption: The Four Global Forces Breaking All the Trends” the authors estimate that compared to the industrial revolution change is happening faster and at a larger scale, having 3,000 times the impact of the industrial revolution. The message is clear, we are only seeing the starting point and the world's reconfiguration, will continue to affect the degree of uncertainty, unpredictability and turbulence in global markets.
2. Exponential Technologies:
In the book Big Bang Disruption, Larry Downes and Paul Nunes defined exponential technologies as “advances that promise repeated doublings in improvement of both price and performance over a relatively short intervals, possibly as often as every year or two”. The development, adoption and application of exponential technologies is reshaping the way organizations innovate, compete, interact and create value to customers. In the near future a diverse range of industries will be disrupted by several innovative technologies.
The Global Center for Digital Business Transformation ranked industries based on their competitive disruption potential over the next five years. Technology, media, retail, financial services and telecom are in top of the list. Another interesting finding from the study is the different perspectives on who was most likely to disrupt each industry: an incumbents from the same industries, incumbents from other industries, start-ups from the same industry or from other industry. The least disrupted industries like Healthcare, Utilities, Oil & Gas and Pharmaceuticals expect that disruption will come from an incumbent either inside side or outside their industries, while the other industries expect a more balance mix between startups and incumbents.
Despite some industries are already in the process of transformation (The Blockchain Revolution), the potential of emergent innovative technologies is yet to be seen. Industry transformation is expected to happen in the next five years, only then, we will be able to understand the disruption potential of 3D printing, artificial intelligence, cloud computing, blockchain, and robotics.
The Blockchain Revolution
Blockchain or distributed ledger technologies are expected to have a significant impact on the financial services infrastructure. A study performed by the world economic forum demonstrates great interest from incumbents, Fintechs, and Regulators:
Only in 2016 blockchain companies have raised more than a billion dollars in capital.
80% of the banks will initiate blockchain projects by 2017.
90+ central banks are engaged in blockchain discussions worldwide.
2,500+ patents related to blockchain filed in the last 3 years.
The industry will see significant cost reductions from operational simplification, regulatory efficiency improvement, settlement time reduction, liquidity and capital improvement. Traditional industry barriers will decrease, providing a wide range of opportunities to non-traditional companies. In the future years we might see the development of a collaborative ecosystem integrated by incumbents, innovators and regulators.
3. Game Changing Business Models
New business models are challenging the paradigms that ruled the business world. A collaborative perspective has given birth to ecosystems, crowdfunding, and business platforms like Amazon, Uber and Airbnb. New business models enable start ups to penetrate industry barriers and hyperscale in relatively short period of time.
Innovative business models have increased a customer centricity adding value to customers by providing price transparency, consumption based pricing, rebates, rewards, personalized offerings, automation, peer to peer collaboration, crowdsourcing and data monetization.
Business Agility or Organizational Agility is defined as the an organization's ability to constantly adapt to an ever-changing environment in a rapid and profitable way. But what does this actually means? How can it be developed? My partners and I asked this questions a couple of years ago, and started our journey to the development of a framework to make organizational agility discussable and an assessment to provide insights into the development of business practices that improve an organizations agile capability.
In our research we found that in general terms agile organizations have developed four core capabilities:
Dynamic Strategy – The ability to define effective strategy and achieve organizational alignment in dynamic environments.
Organizational Flexibility – The ability to rapidly relocate and reconfigure resources in support of strategy.
Efficient Learning – The ability to sense the environment and rapidly test ideas that could become a competitive advantage.
Adaptable Mindset – The ability to remain generative and generate innovative solutions in volatile, uncertain, complex, and ambiguous environments.
1) Innosight: Corporate Longevity: Turbulence Ahead for Large Organizations. 2016.
2) No Ordinary Disruption: The Four Global Forces Breaking All the Trends. Dobbs, Manyika & Woetzel, 2016
3) Big-Bang Disruption: Strategy in the Age of Devastating Innovation. Downes & Nunes, 2014.
4) Digital Vortex: How Digital Disruption Is Redefining Industries. Global Center for Digital Business Transformation, 2015.