A major study by the Global Center for Digital Business Transformation, an IMD and Cisco initiative, has revealed that executives are increasingly recognizing the positive aspects of digital disruption. The research, published in the report ‘Life in the Digital Vortex’, draws on a survey of 636 business leaders in 44 countries across 14 industries on their attitudes and behaviors toward digital disruption.
The survey reveals that disruption is in full swing across sectors and has gathered significant pace, with roughly half of the surveyed executives reporting that digital disruption is already happening in meaningful terms in their industries, compared with only 15 percent in 2015.
While disruption is typically destructive, executives are increasingly recognizing both the positive and negative impacts of mass technological change. More than 30 percent of respondents today believe that digital disruption will have a transformative impact on their industries. By contrast, less than 1 percent felt this way in 2015.
Digitally-driven market change is quickly gaining the attention of C-level executives. In 2015, digital disruption was not deemed worthy of board-level attention in about 45 percent of companies. In 2017, only 17 percent feel this way.
Organizations’ willingness to respond to digital disruption is also improving. In 2015, only 25 percent of executives claimed their organizations were actively responding to digital disruption. This number jumped to 31 percent in 2017.
While the executives’ ability to respond has improved, the report demonstrates that there is a still a large gap between acknowledging the need to transform and achieving digital business transformation. Forty percent of respondents still feel their leaders do not understand the growing digital threat, or are responding inappropriately, only a slight improvement from 2015.
The term “Digital Vortex” describes the force created by digitization across all industries and how companies are being pulled toward the center of the disruption.
The five most vulnerable industries remain the same as in 2015:
- Media and entertainment
- Technology products and services
- Retail
- Financial services
- Telecommunications
The media and entertainment industry has seen massive disruption across print and social media, TV, music, and movies. The level of competition among the industry’s incumbents, such as video content producers, music and print publishers and content distributors, has intensified significantly. New market entrants such as Amazon and Facebook, along with emerging giants like Netflix, have created further pressure within the industry.
However, the pace of disruption is accelerating across industries because of faster digital technology innovation cycles, an explosion of well-funded start-ups, and the emergence of Chinese giants such as Alibaba and Tencent.
The consumer packaged goods industry has moved closer to the center of the Digital Vortex due to lower barriers to entry, sophisticated digital marketing tools, and the increasing power of online retailers such as Amazon and Alibaba, which are vertically integrating.
The report reveals that the professional services industry, a new entrant in the ranking at No. 8, is under pressure from multiple sources, including advanced analytics, artificially-intelligent recommendation bots, and gig-economy worksites such as UpWork, Freelancer and Fiverr.
The transportation and logistics industry is also under enormous pressure from technologies such as self-driving cars, electric vehicles, and disruptors such as Amazon Logistics and Uber. The healthcare and energy industries also face competitive pressures from non-traditional sources.
The Digital Vortex ranking was based on a composite of four measures:
- Investment: where venture capitalists and others are putting their money, by industry
- Timing: when, and at what rate, digital disruption is likely to occur, by industry
- Means: the strength of barriers to entry for digital disruptors, by industry
- Impact: the potential magnitude of disruption, by industry
About the Global Center for Digital Business Transformation
A joint initiative of IMD and Cisco, the Global Center for Digital Business Transformation (DBT Center), is a global hub for leading research and analysis on digital disruption. https://www.imd.org/centers/global-center-digital-business-transformation/
