Incumbent businesses are set to lead the next phase of disruption
72% of CXOs globally believe that incumbents are leading the industry disruption, says a study
Digital disruption has lately been the centre of all conversation across industries and organizations, among both disruptors and the disrupted. Many believed that the large internet companies and start-ups were going to be dominant and the world’s incumbent businesses were at risk of being “Amazoned”.
We had a different point of view. We did not believe that large and mature companies lacked the ability to reinvent and were at the risk of being disrupted and supplanted by start-ups and digital challengers. In our opinion, the world’s incumbent businesses and institutions are positioned to lead the next phase of disruption and they are embracing this capability at scale.
Let me explain.
The history of computing is the product of exponential curves that has largely followed three laws. Moore’s Law enabled organizations to leverage the exponentially growing processing capability where the microprocessor’s transistor count and performance doubled every 18 months. This was followed by Metcalfe’s Law, according to which every time a node is added to a network, the value of that network goes up by the square of the number of nodes. This law gave rise to internet giants, as the economy provided a level-playing field. Many well-established businesses were on the brink of extinction as they struggled to cope with this disruption. However, the era shaped by those two laws is about to be transformed by the next phase of computing.
For the first time since the rise of the internet we are witnessing a shift in the epicentre of market disruption. Today, the world is progressing ahead on the digital transformation journey with new-age technologies like artificial intelligence (AI), cognitive, machine learning, blockchain, Internet of Things and more, delivered on the cloud. Let me call this phase as one “governed by Watson’s law”, which states that exponential data when combined with exponential AI will result in exponential learning. Armed with data, a built-in advantage that cannot be easily replicated or leapfrogged, combined with innovative use of emerging technologies, incumbents can harness the best possible insights and thereby drive business growth.
According to a study by the IBM Institute of (for) Business Value, 72% of CXOs globally believe that incumbents, rather than new entrants, are leading the industry disruption. What are these incumbents doing to become disruptors?
First, organizations are realizing that remaking the enterprise isn’t a matter of timing but of continuity. What’s required now, more than ever, is the fortitude for perpetual reinvention. As reinventors, the incumbents have redirected their resources to achieve new sources of scale by co-creation and co-innovation with an ecosystem of customers, partners and others. They are also identifying the art of personalized customer experiences by not just plumbing data but by leveraging design thinking. Indeed, they are creating win-win value propositions by cultivating and orchestrating data as their most important asset to drive continuous change.
Legacy organizations that are outperforming their peers are leading the innovation agenda and have become adept at leveraging the ecosystem, and even sharing physical assets and people skills with them to drive innovation on scale. Teams, once locked in place, now assemble quickly and move in a flash to garner new insights for smart experimentation and consequent action.
Finally, in an age of constant reinvention, people and skills are becoming one of the key focus areas of C-suite leaders. Incumbents’ success is also dependent on the creation of a culture of learning across the organization—one that is open and agile.
Karan Bajwa is managing director of IBM India.