3 minute read 28 Mar 2018

Getting ready for disruption: five practical approaches

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EY Global

Multidisciplinary professional services organization

3 minute read 28 Mar 2018

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Amid all the talk of embracing disruption, what should businesses actually do? Get practical advice on thriving in an era of change.

The pace and scale of disruption is increasing. Research by Innosight forecasts that the average tenure of a company on the S&P 500 index will fall to a mere 14 years by 2026, down from 33 years in 1965. As a result, we can expect a 50% turnover in the index over the next 10 years. Market-leading companies face a stark choice: disrupt or be disrupted.

How do you position yourself to recognize the inevitable forces of disruption and seize the upside? That’s one of the questions we’re exploring through our EY think tank, EYQ, which asks “What’s after what’s next?” Through analysis of global megatrends and interactions with the global innovation community at events such as the annual EY Innovation Realized retreat, generated by EYQ, we’ve identified five important ways to respond to disruption. 

1. Ask — and be asked — uncomfortable questions

An organization’s vulnerability to negative disruption stems from a natural institutional tendency to focus on the factors - customers, technologies, business models - that have driven success to date, even as global shifts demand new approaches and open the door to new competitors. As Hal Gregersen of MIT’s Leadership Center points out, the way to attack complacency and status quo thinking is to seek out situations where people will poke at your assumptions and preconceived ideas. Use catalytic questions to identify your knowledge gaps.

If the questions make you feel uncomfortable, you’re doing it right. If you feel comfortable, you’re not there yet. Keep working at the questions until the feeling of comfort goes away. Stefan Heck, CEO of Nauto, puts his finger on perhaps the most uncomfortable question: What part of your business model is already dead that everyone is aware of except you?

2. Plan for alternative futures

While disruption can’t be predicted, it can be anticipated. Look for examples of disruption in other sectors and understand what they could mean as analogies for yours. Formulate alternative scenarios for the future, treating scenario planning as a process of continual revision, not a one-off exercise. Create urgency and educate the rest of the organization about the implications of disruptive scenarios. Once formulated, scenarios can help to structure early innovation and ideation.

3. Let purpose be your guide

Companies face many possible innovation pathways and market options. Purpose helps people to focus on the “big picture” and encourages them to think beyond incremental product or service improvements and aim for more ambitious outcomes. Establish a clear corporate purpose—your “why,” not your “what”—and use it to guide your innovation focus and investments. Remove anything that is not essential to your purpose. It’s more efficient and drives innovation.

Disruption doesn’t announce itself, and once it has arrived, it’s too late.

4. Establish a disruption awareness strategy

“Change doesn’t start as a tsunami but as a whisper,” observes Tina Sharkey of Sherpa Foundry. Disruption doesn’t announce itself, and once it has arrived, it’s too late. That’s why it’s important to establish an awareness strategy to pick up disruption’s earliest signals. Get everyone in the business listening for those warning signals.

For example, gather unfiltered customer feedback and share it throughout the organization, not just with “client facing” teams. Different groups will have different takeaways, all of which are likely to be relevant. Similarly, bring new voices into the conversation about disruption. Ground-level employees usually pick up disruptive signals before senior executives.

In addition to scouting for the new technologies, which can be a leading indicator of disruption, monitor key financial metrics for deterioration. But be careful; financials are a lagging indicator.

5. Pilot and fail quickly

The pace of disruption demands rapid innovation. Taking a piloting approach that embraces failure can help accelerate innovation objectives. Start by initiating pilots at the periphery of your business, focusing on opportunities with a clearly defined business problem and buyer. But make sure that the pilot is connected to the center of the organization and linked to company’s leadership and overarching strategy.

The key to success is creating small teams that are given the autonomy to act and the license to fail and infused with a reiterative “pilot” mentality. In the final assessment, recognize that pilots frequently yield consumer insight or identify market opportunities that are intrinsically valuable, regardless of whether the innovation succeeds.

EY wavespace is a highly connected global network of growth and innovation centers in some of the most well-recognized innovation cities. Join us at EY wavespace to explore innovative ideas that will help you successfully navigate the Transformative Age.

Summary

You can help position your organization to respond to the inevitable forces of disruption.

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By

EY Global

Multidisciplinary professional services organization