CEOs see disruption as opportunity for business success

11 October 2017 Consultancy.uk

UK CEOs are using technology to their advantage, with around 40% seeing technology as a risk to their business, as companies attempt to utilise innovation to negate global uncertainty regarding key changes such as Brexit. Cybersecurity risk, one of the risks associated with digitalisation, has decreased in severity in the eyes of businesses, as management of the issue has increased.

Technological advances and rapid consumer adoption are creating a landscape in which start-ups, and cross-border competitors, are able to quickly leverage new ideas to enter new markets. Disruptors have launched businesses, product lines and business models, which threaten the market share of traditional and incumbents across multiple industries. The effect of the changes is forcing businesses to quickly adapt to changing market conditions, or face declining revenues.

In a new report from KPMG, titled ‘Disrupt and Grow: 2017 Global CEO Outlook’, the professional services firm considers how CEOs are reacting to current trends around disruption, as well as various side effects of the domain in which much of the disruption is taking place – digitalisation.

CEO's view on disruption

While disruption creates various risks for businesses that are not able to adapt to rapid and significant changes within their respective market segment, the potential for disrupting their own market, or leveraging disruption to diversify, is seemingly noted as an opportunity for a vast number of CEO respondents to the survey.

74% responded that their organisation is actively disrupting the sector in which they operate, rather than being disrupted by competitors. Meanwhile a further majority of respondents, 65%, said that they see technological disruption as more of an opportunity than a threat.

CEOs disrupting sector in which they operate

Indian CEOs were the most active when it comes to disrupting their own sectors. 83% of Indian respondents claimed that they were actively engaging in disruption. French respondents followed, with 79% saying that potential disruption is the way forward for their market position.

The UK followed closely behind, with the country’s responding CEOs apparently actively engaged with the various forms of innovation needed to disrupt their respective markets. Tudor Aw, UK head of technology sector at KPMG, commented about the situation on the ground for UK CEOs, “With technology increasingly core to every kind of business, from retailers to healthcare providers, it is disrupting everyone. It is encouraging to see that UK CEOs view this disruption as more of an opportunity than a threat. It is essential that UK companies continue to be quick to adopt and exploit the power of disruptive technologies, in products, marketing, manufacturing and operations.”

Views on technologal disruption

The CEOs were also asked to rank in how far they perceive technology driven disruption to be an opportunity, rather than a threat, in their respective country. India took the number one spot again, with 80% of respondents stating that they see is as an opportunity. Mirroring a recent survey from KPMG, meanwhile, China followed at 75%, while Germany took third spot on 74%. 69% of the UK’s 150 CEOs said that they see technological disruption as an opportunity, with around 40% of the country’s CEOs saying that they believe technology will disrupt their industry in the mid-term.

Leveraging technology to drive disruption is no easy task, however, as explained by Aw, who said, “New, disruptive technological innovations are emerging at a rapid pace. Today’s hot tech breakthrough could soon be yesterday’s news. With so many options to choose from, it’s extremely hard to methodically scan, assess, pilot, and deploy new technologies – but it’s essential that UK Boards ensure the effect of emerging technology on business models is a regular Board room topic. This may also require new roles or personnel at Board levels.”

Risk landscape 2017, 2016

The perceived risk landscape of disruption has changed slightly since last year. Cybersecurity, then on the number one spot, has shifted to fifth, while operational risk has jumped onto the top five radar in number one place. This is partly the result of the increased need to manage risks, with companies increasingly investing in governance and risk management in light of market uncertainties. Reputational / brand risks is a new comer to the top five as well, largely driven by social media risks and changes in consumer and employee sentiment to value.

The reason for fall of cybersecurity as a concern is potentially that many CEOs are increasingly confident that they have the respective risk under management. However, in Autumn 2017, the world’s largest cybersecurity consultants, Deloitte, were rocked by a cyberattack. Bearing such incidents in mind, cybersecurity may well return to the head of this list.

Industries prepared for a cyber event

With respect to the confidence CEOs have around cybersecurity preparedness in case of an event, almost half (49%) of infrastructure CEOs say that they are fully prepared. In the automotive industry, 47% of those who responded felt the same. Consumer and retail, which has created considerable concertation for customers in recent years – with large amounts of personal information, including credit card numbers, ending up on the street – is also relatively confident about their preparedness for a cyberevent, at 45%.

Commenting on the study and the challenge ahead for CEOs, John Veihmeyer Chairman of KPMG International, said, “They say they are taking the necessary steps for their business to be a disruptor, rather than the disrupted. They recognise the impact of increased geopolitical and economic uncertainties on their business, and are working hard to be prepared. Moreover, they understand that speed to market and innovation are strategic priorities for growth in these uncertain conditions.”

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