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.