Disrupt Or Be Disrupted

The rally cry for innovation is being heeded by organizations around the world, from start-ups to the Fortune 500 — amid a steady drumbeat of ‘disrupt or be disrupted’. An Accenture analysis of more than 3,600 companies with annual revenues of at least $100 million in 82 countries including Canada has found that nearly two-thirds face high levels of disruption — and nearly half show severe signs of susceptibility to future disruption.

In Canada, many organizations are working to modernize and re-set their course to unleash ‘trapped value’. Key examples include financial services companies working within an ecosystem to break new ground on payments technology and supporting the rise of the robo-advisors to serve Canadians in new and useful ways.

Amidst this disruption, the real challenge for organizations is to achieve sustainable growth through well-timed ‘pivots’. Never before has this been more attainable than today. The emergence of new technologies such as artificial intelligence, quantum computing, blockchain and 5G present endless opportunities to unlock trapped value — the value that businesses can discover and release if they are able to fundamentally change at a faster pace.

To remain ahead of their competition, companies need to continuously reinvent themselves by using new management and capital-allocation strategies. While we have a great history of innovation in Canada — from insulin, to modern-day AI and machine learning — our challenge remains: We must adopt innovation throughout our organizations in order to pivot to the new way of doing business in the future.

There are many inspiring stories of these pivots, as indicated in Pivot to the Future: Discovering Value and Creating Growth in a Disrupted World— the book by Accenture executives Omar

Abbosh, Paul Nunes and Larry Downes. In the book, they showcase how some of the world’s most prestigious companies are reinventing themselves, urging leaders to nurture the new opportunities and value they can uncover through investments in innovation—while simultaneously continuing with their legacy business. As they indicate, this approach can help companies truly embrace a start-up mentality of scaling rapidly and adapting to new markets.

Applying this new way of thinking can help organizations better plan for strategies that generate revenue and the freedom to invest, innovate and zone in on our disruptive future. Improving elements of your business and growing it at the same time will mitigate the risk of reinvesting in developing technologies, which have the potential to help you arrive sustainably at the new.

In the global report that preceeded the book, “Discover Where Value’s Hiding: How to Unlock the Value of Your Innovation Investments” (available online), we found that the top 1,000 companies globally spent more than US$ 3.2 trillion on innovation-related activities over the previous five years—and we expect this trend to continue. However, too many are still underperforming their peers and not seeing a sizable return on investment.

Only 14 per cent of the companies we surveyed could be categorized as high-growth companies, and the common link was that they each had very distinctive innovation approaches. These businesses stand out from the pack by following three key principles:

• THEY ARE REINVENTING EXISTING WAYS OF DOING BUSINESS. Fifty three per cent of survey respondents shared that they see innovation as a part of the creative process or imagination that happens by chance. In fact, high-growth companies employ consistent innovation that not only inspires new products and services for consumers, but also fundamentally achieves deep organizational change. In doing so, these companies focus on

the following seven characteristics: hyper-relevancy to customers’ evolving needs; cultivate a network of ecosystem partners; enable leading-edge technologies; nurture talent to create new forms of workforce; become data driven; be inclusive when innovating and governing; and adopt intelligent asset and operations management to reinvest smartly for other innovation plans. We can say with certainty that businesses which are reinventing the wheel and taking charge on applying innovation with greater intensity reap benefits.

• THEY ARE OUTCOME-LED. Three-quarters (76 per cent) of Clevel executives from high-growth companies expect to apply innovation more comprehensively compared to others. They have plans to adopt innovation practices that enable them to master more than one of the seven characteristics mentioned above. As they proceed through this process, their expectations for profit growth also rises. We found that companies focused on mastering one characteristic expect to grow their profits within a range of six to 10 per cent CAGR, while those focusing on all seven characteristics expect to grow their profits over 16 per cent CAGR. Every business, in every industry has some trapped value. High-growth companies recognize that and are willing to further develop their organization on a fundamental level by connecting innovation efforts to financial performance and invest with disruptive innovation in mind.

• THEY ARE DISRUPTION-MINDED. It is no surprise that highgrowth companies invest more aggressively than other companies. We found that nearly half (47 per cent) of these businesses allocated 60 per cent or more of their innovation investment to disruptive innovation. As the world around us is increasingly disrupted, it is critical for organizations to invest in advances that can create entirely new markets to lead the future. With technology advancing at a rapid pace it has widened the gap between high-growth companies and the rest. Too many are focused on incremental innovation but it is simply not enough in the long haul.

Surviving disruption does not ensure success. It requires companies to constantly look ahead and drive transformations and continuous reinventions. It also requires a high degree of self-awareness and self-reflection, even as the pivot is being contemplated and executed. Pivot to the Future and the related podcast with Omar and will.i.am (available online) tells the story of our own pivot at Accenture, in which we nearly doubled our market capitalization over five years to more than US$ 100 billion. Recognizing that professional services and outsourcing were on course to commoditization, we invested in five then up-andcoming digital capabilities in the early 2010s. We saw the potential to deliver major benefits to clients and generate high-growth for the company, and in doing so we released trapped value and ultimately pivoted to our future.

The truth is, nobody has a foolproof map for surviving disruption. But by setting your organization up for success through the use of innovation, you will be able to push the boundaries of the market and produce organizational change — and join the leagues of the disruptors, not the disrupted.

Jeffrey Russell is a Senior Managing Director and President of Accenture in Canada.