Digital Transformation | Open Innovation

Monday, January 7, 2019

How CEOs Apply Digital Reinvention to Fuel Growth

Now more than ever, CEOs and their leadership teams must counter the threat of digital disruption. Within the evolving global economy, debate and analysis about business technology adoption must result in purposeful action. Even the trailing organizations are prepared to learn something actionable from their trailblazer peers.

The following statistics and insights are excerpts from the IBM Institute for Business Value (IBV) Global C-suite Study (19th edition). IBM’s latest worldwide study draws on input from 12,854 respondents across 6 C-suite roles, from 112 countries.

The C-suite is evenly divided on whether the focus in the future will shift from established markets to new ones. In two areas, however, C-suite executives stand in close agreement: how they will change their value propositions and scale their value chains.

Sixty-eight 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 network of business partners.

Digital Reinvention Segmentation

IBM IBV applied cluster analysis to identify distinct segments of organizations among the study participants. Three archetypes emerged: the Reinventors, the Practitioners and the Aspirationals. The organizations clustered within these archetypes are at different stages of their Digital Reinvention.

The Reinventors (27 percent of the total) are the market leaders. They outperformed their peers in both revenue growth and profitability over the past three years, and also led with innovation. Their organizations are exceptionally well aligned. Their IT strategy is in sync with their business strategy and they’ve optimized their business processes to support their strategic initiatives.

Practitioners (37 percent of the total) haven’t yet developed the capabilities to match their ambitions. But they say they’re ambitious. Over half of the Practitioners plan to launch new business models within the next few years.

The Aspirationals (36 percent of the total) have a long way to go in both their digital journey and their ability to move quickly to seize new opportunities. They’re the most exposed to disruption.



Incumbent Companies Strike Back

That being said, thirty-six percent of C-suite executives report little or no impact from disruption in their industries. Forty-four percent say they don’t see any urgency to transform their enterprises in response to disruption. In all, just 27 percent say they’re experiencing significant disruption.

According to the IBM IBV study findings, the surge of competition from other industries didn’t happen at the anticipated scale. Only 23 percent of C-suite executives say that competitors from outside their industry are a significant source of disruption.

Seventy-two percent of C-suite executives say that innovative incumbents lead the disruption in their industry. Even in industries with higher than average turmoil, such as financial services, where startups have a relatively larger presence, innovative incumbents drive the most change.

Recommended Action Plan

Reinvention never ends. As new opportunities emerge, the organizations that remain open to change can orchestrate advantage. These evolutionary changes include new trusted bonds with customers, new ventures to scale on platforms, and more nimble teams.

To uncover your organization’s competitive advantage, consider these actions:

Interrogate your environment

  • Remain on high alert and avoid complacency about past successes. Actively scan the business landscape for disruptive change coming from industry incumbents, including those in adjacent industries. Be vigilant about new entrants attracting VC funding that might foreshadow threats.
  • Design and play a new offense. Boldly evaluate, experiment and engage with new business models, industry-shaping platforms and ecosystem strategies that you could adopt to significant advantage.
  • Get ever closer. Create opportunities for frequent and intense interactions with customers, partners and competitors. Test existing assumptions and drive totally new strategies.

Commit with frequency

  • Divest to invest. Act quickly against the possibility of disruption by adopting a fluid capital reallocation mindset. Frequent capital reallocation from low to high potential opportunities should be an agile exercise.
  • Invest for new growth. Create market-shaping and capability building investments that inject innovation, new talent and technologies into your enterprise. Acquire these if necessary; grow them organically if your enterprise is agile enough.
  • Prioritize advocacy and co-creation over advertising. Maximize investments that build customer trust and brand value. On digital platforms -- which are inherently transparent -- community-generated feedback, if heeded well, can boost brand value in unimaginable ways.

Experiment deliberately

  • Seek innovation over institutionalization. Don’t solidify a competitive advantage; it’s likely fleeting. Expect it to be transitory and start working on the next audacious opportunity.
  • Write new rules. To create a more open and collaborative culture, look for ways to challenge traditional norms. Put a body into orbit around new systems and try it out.
  • Find energy in motion. Create new motion through continuous innovation but don’t dismiss the potential to benefit from others’ ideas. Find opportunities to co-create with customers, partners and even competitors.