CXOs believe incumbent organisations – rather than new entrants – are leading the disruption in their industry, according to a new global c-suite study by IBM.
“Incumbents have become smarter about leveraging valuable data, honing their employees’ skills, and in some cases, acquired possible disruptors to compete in today’s digital age,” the study finds.
The report, ‘Incumbents Strike Back’ reveals 72 percent of surveyed CXOs claimed the next wave of disruptive innovation will be led by the incumbents, which poses a significant competitive threat to new entrants and digital players.
By comparison, only 22 per cent say smaller companies and start-ups are leading disruptive change.
“It’s not the fearsome digital giants they’re most worried about, but the once lumbering, now innovative, industry incumbents. As innovative incumbents have become smarter about competing in a disruptive digital age, executives now say they represent more of a competitive threat than new entrants.”
The c-suite study - which draws on input from 12,854 respondents across six c-suite roles, from 112 countries - is the work of business school academics, in collaboration with global leaders from IBM.
“In the 14 years IBM has surveyed C-suite executives, we’ve asked them which external forces will impact them most in the next two to three years. This year, market factors, which includes things like increased competition and changing customer preferences, returned to the top position, while technology slipped to second place. People skills rose sharply to third place, recognition perhaps of the rise in value of intangible assets like talent and ideas.”
Specifically, seventy-two per cent of c-suite executives said innovative industry incumbents will lead the disruption in their industry. Even in industries with higher than average turmoil, like financial services, where startups have a relatively larger presence, innovative incumbents are credited with the lion’s share of change.
“In most sectors, disruption isn’t coming from start-ups or digital giants. Instead, it’s industry incumbents that are dominating. These incumbents are equipped with strategies for developing digital skills, innovator talent and platform-based business models. They’re also partnering with organisations in their value chain to share physical assets and people skills,” the study says.
“Incumbents turn their expertise in managing infrastructure and assets into significant disruptive advantage, especially by investing in technologies like blockchain and Internet of Things (IoT) that facilitate data sharing. Incumbents that outperform their peers will continue to rapidly prototype and will reward both fast failure and successful innovation.”
The study also reveals data has become the established companies’ most powerful asset with incumbent enterprises owning 80 per cent of the world’s data, which along with their employees they are using it to create new competitive advantages.
Core expertise is more important and more relevant than ever, the study notes, adding those who use it wisely, with the help of AI, will win.
Meanwhile, findings also reveal 57 per cent of disruptive organisations are builders or owners of a platform business model.
Improving customer experience is also high on the agenda. “Organisations of all kinds have scrambled to take up the art of the personalised customer experience – in fact, 68 percent of surveyed CxOs expect organisations to emphasise customer experience over products,” the study finds.
This year, people skills rose sharply from fifth to third place as an area that would most impact organisations. In the past, a focus on people skills often centred on skills gaps, especially technology skills.
“C-suite executives are responding to the changing nature of disruption – dominated by incumbents – by acquiring new skills.”
Meanwhile, companies that outperform their peers and lead in innovation, have become adept at ecosystem advantage, partnering with organisations in their value chain and even
sharing physical assets and people skills with them.
Additionally, innovation is no longer the province of the hungry upstart, the study notes.
“The most financially successful segment in this study, the Reinventors, 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.
“Rapid prototyping to develop and execute on strategy is one of seven distinguishing characteristics of Reinventors. Three-quarters of Reinventors report that their culture rewards both fast failure and successful innovation, acknowledging the value they place on experimentation.”
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.