How Numerous Incumbent Firms Are Refusing to Be Disrupted

There’s no question that many big companies have been shaken by startups coming from Silicon Valley and elsewhere. However, a new study of 12,800 C-suite executives across 20 industries in more than 112 countries found these incumbents are refusing to be disrupted.

ITdisruption

IT is nothing if not about disruption of formerly comfortable businesses. Look at how Netflix, Hulu and others have blown up the cable industry, what Airbnb has done to challenge the hospitality business and how Uber and Lyft have basically disassembled the cab cartel.

Of course, not every company in every vertical has been knocked back on its heels. Many have learned to not only fight back but to make strategic changes and stay in the race against the inevitable newcomers who want to steal market share.

There’s no question that many big companies have been shaken by startups coming from Silicon Valley and beyond. However, an impressive new study by IBM of 12,800 C-suite executives across 20 industries in more than 112 countries found these incumbents are refusing to be disrupted. Instead, they’re taking lessons learned from agile start-ups and disrupting first from within themselves.

Fighting Back by Putting Data, and Treatment of Data, First

The ones that are pushing back challenges are rechanneling their IT to put the curation of their corporate and customer data front and center; they’re installing artificial intelligence and machine learning to gain insights from that data; and they are adopting new-gen platform approaches to open up to innovation across the board.

Those are certainly not the only things they’re doing differently, but they are the main ones.

In fact, only 26 percent of CxOs interviewed now think competitors outside their industry pose a worrisome source of disruption; this compares with 54 percent only two years ago. This market information may come as quite a surprise to many new-gen entrepreneurs who have set their caps on making lots of money at the expense of veteran organizations.

Some key findings include:

  • Data is helping incumbent companies win the battle against the Amazons, Ubers, Lyfts and Airbnbs: Since only 20 percent of the world’s data is public, data has become the established companies’ most powerful asset with incumbent enterprises owning 80 percent of the world’s data, which is a huge competitive advantage.
  • Customer experience is shaping business more than technology: Technology is no longer the top factor that will impact business in the next 2-3 years. Instead, two-thirds of CxO’s expect organizations to prioritize customer experience over products.
  • Big companies are putting their money into AI: A substantial43 percent of incumbents are likely to invest in AI/cognitive technologies to enable their strategic goals, compared to only 25 percent of other companies.

According to the report, released Feb. 26:

  • More than one-third, or 36 percent, of C-suite executives report little or no impact from disruption in their industries. Even more, 44 percent, say they don’t see any urgency to transform their enterprises in response to disruption. In all, only 27 percent say they’re experiencing significant disruption, an unexpected finding given the deluge many predicted. What happened to the threats evoked by the “uberization of everything,” the triumph of the sharing economy and industry boundaries blurred beyond recognition?

“The surge of competition from other industries didn’t happen at the anticipated scale,” wrote co-authors Rita Gunther McGrath, Professor, Strategy of Innovation and Growth, Columbia Business School, and Philip Dalzell-Payne, Partner at IBM Digital Strategy and Services.

“Just 23 percent of C-suite executives say that competitors from outside their industry are a significant source of disruption. Digital giants continue to concentrate their power in some industries, but according to the C-suite executives surveyed, they aren’t leading disruption.”

  • The C-suite is evenly divided on whether the focus in the future will shift from established markets to new ones. After years of predicting a move to open innovation – sourced externally – a growing number of C-suite executives are now predicting a retreat to proprietary innovation. And yet, a significant number also cite new capabilities – and intentions – for collaborative innovation.
  • In two areas, however, C-suite executives stand in close agreement: how they will change their value propositions and scale their value chains. Two-thirds, 68 percent, of C-suite executives expect organizations to emphasize customer experience over products. Sixty-three percent believe that most organizations will continue to expand their networks of business partners.

This article can only touch the surface of the report; there is much more good industry information here. Go here to download a copy of the 42-page PDFdocument. No registration is necessary.

Chris Preimesberger

Chris J. Preimesberger

Chris J. Preimesberger is Editor-in-Chief of eWEEK and responsible for all the publication's coverage. In his 13 years and more than 4,000 articles at eWEEK, he has distinguished himself in reporting...