In the third edition of the University of the West of England’s (UWE) Bristol Distinguished Address Series, Managing Director of Innovation and Consulting Services at Accenture, Arabel Bailey, delivered a lecture which delved into the ongoing disruption that is happening in every sector of business. She focused on three main points; the increased amount of disruption we are all facing, the need for companies to pivot and be flexible with the changes, and to always be looking to innovate.
Bailey began her lecture by posing the question, “do all good things need to come to an end?”
In today’s disrupted business world, it can certainly feel like it. For example, if you look at the FTSE100, following the news that Marks & Spencer had fallen out of it for the first time – it meant that out of the original 100, only 27 still remain in the listings.
When you consider that the FTSE100 was only launched 35 years ago, 73 companies have dropped out – some of whom have faced serious financial challenges and three of them going out of business.
What does this prove? That in recent decades we have faced continuous disruption, which has gathered pace over the last few years. In the US alone over the last seven years, more than 3,000 businesses have gone bust.
She commented: “The scary part of all this, is that all of these businesses were led by incredibly smart people, who worked hard, understood their industry, recruited well, invested in innovation – but how did they still fail? It is because the rules of business are changing.”
The evolution of disruption
Bailey’s company Accenture produced a survey of 3,500 companies, across 82 different countries and in more than 20 industry sectors to look at the changes in business and the levels of disruption they have all faced. They also analysed those company’s susceptibility to future disruptions – something many of the original FTSE100 did not consider or adapt to on their innovation journey.
They analysed all financial aspects of the business and their growth performance in recent years – and looked at the impact of the main disruptive forces within those industries. They also analysed the number of start-ups, the flow of capital towards them and what the markets were doing at the time.
They then came up with the Disputability Index – which found many useful insights on the past, present and future of disruption within the business community across the world.
The biggest finding of the index wasn’t that there was an increased level of disruption, but that there were patterns to it, and that it was a lot more predictable than first imagined. It is also a lot easier nowadays to prepare for such disruption – so they do not go the way of those 73 FTSE100 companies.
Companies now have the ability to prepare a lot earlier for disruption, and with a lot more confidence that they will get it right.
She commented: “More than anything, it was the conclusion of the report that stuck with me. It stated that disruption is happening in every industry, and that disruption is now both continual and inevitable. Disruption is the new normal – this is how we do business now.”
How has this happened?
Corporate spending on innovation across the world is up, and higher than it has ever been before – yet returns on those investments were not being made.
With corporate bankruptcy on the increase as well, disruption can be “brutal and make you obsolete” – and this has been the case for some of the world’s largest and most financially secure companies, such as Kodak and Blockbuster.
So, how do companies avoid this fate? They need to avoid compressive disruption. Slow-moving, asset-based industries are at highest risk of this. This form of disruption hits large, global institutions the hardest, as the quick and condensed level of disruption can leave many businesses that were once ahead, far behind in the disruption race.
She comments: “This is the idea that competition and disruption are coming towards a business at all sides. There is the traditional competition, that is threatening in almost every industry and then there are the new start-up disruptors. In meetings this is normalised as ‘market conditions’ and they go about their business. So, by the time they know there is a problem, it is probably too late.”
Mothercare is a perfect example of this in modern times.
This type of disruption, however, is typified in the banking sector. The high street banks used to just compete with themselves – now they have challenger and niche banks, FX market disruptors, cryptocurrency, as well as increased competition from giants such as Google and Amazon.
“New entrants can no longer be ignored. They are a force to be reckoned with.”
The need to self-disrupt can be seen in the banking sector now, with many high street banks, launching their own challengers and shaking the foundations of their businesses to force change where it is desperately needed.
Bailey highlighted how a business outside of banking has achieved this – Netflix. Set up in the 1990s as a video tape service, it wasn’t until the 2000s where it offered a streaming service and 2013 when it started to produce its own content. By adapting to the world around them – not just their own industry – they avoided the same fate as Blockbuster.
Are they safe?
Entertainment giants like Disney are waking up to the realities of how we consume media and its impact on our daily life and have now launched their own streaming service to compete with Netflix.
This means Disney content will be pulled from Netflix and a rival service will also be offering original content as well. Apple will be doing the same in the near future.
Netflix shares and users have fallen.
“Disruption is happening in every industry – and it is continual.”
So, what can businesses do?
To avoid this fate, Bailey and her colleagues at Accenture came up with the “Wise Pivot”.
Every business is built up of two entities – the core business and ‘the new’ elements of modern business.
The core business is how the company has got to this point today, and how it has created a structure to succeed (the people, then plan and its assets). Then there are waves of new products and services that have impacted every facet of modern business.
“Every business is under pressure to see where their new growth is coming from. This is where any business will have to ‘pivot’ its investment into the core business, and invest in the new, disruptive forces within that specific industry.”
This is easy to state, but a lot harder to do in practice, especially for large, global companies.
“These are the tough management decisions that are being made every day about where to allocate the correct investment funds.”
This is why it is known as the “Wise Pivot” – as it needs to be done at the correct time, in the correct way and with the right tools at the company’s disposal.
Disruption will always be there, so knowing where within your business needs adapting, can lead to the correct pivot. Constant analysis of the business and the role of new technologies and working practices will be increasingly important. There will always need to be spending on the core business, to keep it ticking over – however preparing and investing in disruption is the key to future-proofing any business.
She concluded: “You need to be ready for whatever this uncertain future may hold.”
To listen to the full lecture here.