4 minute read 29 Mar 2018
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Why disruption readiness must be the CEO’s imperative

By Gil Forer

EY Global Markets Digital and Business Disruption Leader

Leads digital go-to-market strategy and EYQ. Focused on the impact of disruption and what’s after what’s next. Founder and producer of Innovation Realized.

4 minute read 29 Mar 2018

Our 2018 CEO imperative report revealed that institutional investors think disruption readiness will become more important to investment decisions.

Over recent decades, many CEOs have honed a primary focus on short-term earnings. While the resulting unprecedented growth has been received with praise from shareholders, investors and the press, today’s business leaders increasingly understand that this approach would no longer be sustainable in this transformative age, defined by disruption and innovation.

Companies must now become disruption ready — adept at both responding to disruption and initiating it. They must seize the upside of disruption, simultaneously optimizing one’s current business while laying the groundwork to disrupt it.

This shift in mindset was illustrated by the results shared in our 2018 report — The CEO imperative: seize the upside of disruption or be disrupted (pdf). The major highlights from the report included:

  • Contrary to conventional wisdom, 67% of institutional investors wanted companies to undertake potentially disruptive innovation projects even if they were risky and might not deliver short-term returns.
  • Seventy-three percent of institutional investors said that corporate disruption readiness would become more important to their investment decision-making over the next five years.

The new mindset was characterized by the notion of duality — the co-existence of imperatives that were in contrast or in conflict with each other, but together made up two essential parts of the total system or outcome. In the connected and accelerated digital economy, these contrasting imperatives must be addressed, not only simultaneously, but together.

As one of the CEOs in our disruption study remarked, “We look at this as a ‘here and now’ and a ‘tomorrow into the future.’ And the trade-offs for the short-term and the long-term have to live together. It’s not an ‘either-or option.’ It is necessary to be able to do both at the same time.”

The organizations that thrive though disruption will make digital transformation and innovation part of a holistic business perspective.

A strategy that would be fit for today’s digital world should embrace duality by deploying the latest technologies while preparing for the unknown innovations that might emerge in the near future. And this would require making innovation and transformation an integral part of the core business and the understanding that the organization must continuously evolve.

Also, rather than treating digital or innovation as discrete strategies, the organizations that thrive through disruption must make digital transformation and innovation part of a holistic business perspective. They have to recognize that every business process must adapt to be fit for a digital world and adopt “re-strategy”: by frequently revisiting the plan, redesigning the future and re-piloting concepts.

To prepare for this future, organizations should look at the following areas, where duality plays an integral role:

  1. Expand ecosystems: Partnerships can provide much-needed capabilities now and new possibilities later. Corporations should also think about ecosystems, networks and innovative formats for collaboration to enable duality, not only within the organization but also from the outside in.
  2. Embrace the upside of disruption: Government and business leaders should move from a mindset of humans versus machines to that of humans and machines. Instead of looking at disruptive technologies, such as artificial intelligence (AI) and robotics, as the drivers for job loss, we should explore how innovations can augment human capabilities, enhance experiences, increase job satisfaction and make technology more inclusive.
  3. Enable creativity: Good design and core business are not mutually exclusive. User experience is growing in importance as a differentiator for brands, both externally and internally. This calls for design and creativity in every aspect of the core business.
  4. Put digital first: In conversations with chief digital officers, we heard two approaches. One is focused on a separate digital unit with the mandate to develop new business models for an evolving digital world, while the other relies on an organization-wide mandate for digital transformation. Every organization requires both at the same time.
  5. Redefine global and local approaches: With the rise of community-level activity and enablement around the world, companies should develop a strategy that redefines the duality of global and local. Many communities in regions, cities and small towns work together to take advantage of the upside of disruption through local education initiatives, job creation based on new technologies and an effort to increase quality of life.

The transformation of every organization to be fit for a digital world has become an imperative. This requires not only continuous and rapid change in both legacy technologies and organizational culture, but also a shift in the mindset of management to acknowledge that change is here to stay.

Disruption is not risk-free — we have seen the impact of failing to make sure that the upsides of technology innovation and globalized markets is shared by all. By seizing the upside of disruption in a more inclusive and beneficial way, duality can enable businesses to both navigate and ultimately succeed in this digitally accelerated world.

Summary

To attract investment, CEOs and their firms must be disruption ready. They can achieve this by embracing a mindset of duality.

About this article

By Gil Forer

EY Global Markets Digital and Business Disruption Leader

Leads digital go-to-market strategy and EYQ. Focused on the impact of disruption and what’s after what’s next. Founder and producer of Innovation Realized.