IBM: Cross industry innovation top concern for CxOs

21 December 2015

Uber-syndrome has grasped the imagination of CxOs across industries, a recent IBM report reveals. Companies fear the rise of a competitor using disruptive means to rapidly capture market share and transform whole industries. Many CxOs at established players remain positive about the potential within technology however, and are developing more and more external innovation relations to become the disruptive element themselves.

Disruptive innovation, and the companies that wield them to rapidly annex market share, are becoming more and more common as digital technologies mature. New business models, often founded on technological innovations initially developed for another purpose, are now becoming relatively common. These new companies are often not merely competing within the same field as more traditional players, but are sometimes reshaping entire industries, sweeping tradition away.

Regional spread

In a recent survey, the IBM Institute for Business Value sought to discover how traditional firms are faring with respect to the latent potential unlocked in meeting the needs and demands of customers, opened up by innovative thinking. The survey involved 5,247 CxOs (corporate executives) from 21 industries in more than 70 countries. Researchers from IBM spoke with many of the respondents face-to-face to collect open ended responses to questions. Statements were fed into IBM’s Watson cognitive computing system, which derived various inferences from qualitative response information – while a survey disclosed quantitative information about where CxOs stand.

Industry risks

Incumbent risk
The report highlights a number of areas in which business leaders see approaching risks. The most concerning among the respondents is industry convergence, with all CxOs placing the risk level between 60-70%. The second most concern trend, highlighted by CxOs, is the ‘anywhere workplace’, at around 50%. Cyber risk ranks highly, especially for CIOs at around 55%, while across all CxOs at just under 50%. Areas of least concern are the challenges posed by alternative finance and the sharing economy. 

The report highlights a number of different risks to incumbents from industry convergence. This includes the expansion of internet giants like Google and Apple into a range of industries by leveraging their dominance in technology and their powerful brands, as well as small start-ups developing solutions to problems using cross industry technologies that come to disrupt traditional ways of doing business.

Digital disturbance

Outside innovation
In terms of the areas from which they expect competitors to stem, the respondents are becoming more and more concerned about competitors from outside their industries. In 2013 39% of incumbents expected more competitions from within the industry, while 43% expected the competition to come from outside. Today, following the continued success of players such as Uber and Airbnb, 29% are concerned about competition within their industry, while 54% expect it to come from outside – representing an 11% increase in two years.

Twin Forces

Techno standpoint
According to the research, the biggest shift in the competitive arena comes from technology factors. Although technology has been on top of the list for the past four years, the rapid development of a range of solutions – including FinTech – means that CxOs now consider it a game changer. Other factors include changes to the wider market space (71%), regulatory concerns (55%), macro-economic factors (51%) and people skills (48%).

The CxOs provided a wide range of open ended responses to questions related to how technology is changing the business environment. The majority of responses used positive language related to technology, suggesting that many CxOs see it as an opportunity, as well as a potentially disruptive challenge.

Joint ventures

Innovative externals
The CxOs’ interest in leveraging the potential contained in innovation, which is often technology-based, has seen an increase in their sentiments regarding laying partnerships with external innovation means. Now, more than half (54%) are scouting for external innovation opportunities, while 24% continue to focus on internal efforts. This is up from 47% seeking external collaboration for innovation on 2013, and 38% engaging in internal means.

As part of the research, the consulting firm identified a small group of respondents (5%) whose operations are known to be innovative, and whose performance surpass their industry peers in terms of revenue growth and profitability. These respondents are dubbed ‘torchbearers’. The firm also identified poorly scoring organisations, whose efforts lag that of the rest of the field, with much lower market profile in the opinion of the CxOs who head them, and almost all much less successful financially. This group, called the ‘market followers’, made up 34% of the total respondents.

Gearing up

A number of factors differentiate the torchbearers from the market followers trailing behind. The firm notes that torchbearers tend to be more aware of the dangers of unexpected competition, at 59% for torchbearers vs. 52% for market followers. They also tend to have a greater focus on new markets, at 69% compared to 57%, and a more streamlined and agile decision-making process, at 62% compared to 45%.

“Companies see themselves confronted with a new kind of threat – one that often remains invisible until it is too late,” comments Bridget van Kralingen, Senior Vice-President at IBM Global Business Services. “At the same time we see that successful companies respond to disruptive developments in their sector through cognitive systems, which can think and learn. Thus guarantee the future managers for their companies.”


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Two thirds of UK employees not empowered enough to innovate

18 March 2019

A culture of equality can drive innovation at work, but only a third of UK employees feel empowered to innovate at present. This demonstrates a significant disconnect between workers and their bosses in the UK, with 76% of business leaders also claiming they empower employees to be innovative.

Despite innovation increasingly being seen as integral to the survival of businesses, innovation remains relatively difficult to achieve. A lagging disconnect between management and staff remains the driving force behind this. One study by PA Consulting previously confirmed that while 66% of companies believe they will not survive without innovation, only 24% said they had the skills needed for that, and only half thought they had the right leadership in place to change that in time.

In order to find a way around this problem, global consultancy Accenture has completed its own study into innovation, polling around 700 bosses and workers across the UK to do so. The key finding of the research is that companies with a culture of equality can see an individual’s willingness and ability to innovate improved by seven times that of the least equitable workplace cultures. At the same time, an innovation mindset is almost twice as high in the most-equal companies as in typical ones.

91% of employees want to innovate but just 34% in typical United Kingdom companies feel empowered to

What remains clear, however, is that most companies are failing to adequately create an equal culture, where staff of all ranks feel comfortable contributing new ideas. 91% of employees want to innovate but just 34% in typical UK companies feel empowered to. That is higher in the most equal companies, where 75% of staff feel confident making suggestions, compared to just 5% of the least equal, and 34% of typical companies. Since those equal companies are comparatively fewer, when averaged out, only a third of UK staff feel they are empowered to innovate.

That figure stands in stark contrast to the perceptions of UK executives, however.  76% of business leaders in Britain believe that they do indeed regularly empower their employees to innovate. As a result, it seems that leaders mistakenly believe that some circumstances encourage innovation more than they actually do. For instance, they overestimate financial rewards and underestimate purpose.

The opportunity which is presented by addressing this divorce is enormous. Accenture calculates that global gross domestic product would increase by up to £6 trillion over 10 years if the innovation mindset in all countries were raised by 10%.Top 10 workplace culture factors - by strength of impact on innovation mindsetAccording to Accenture, the best way to impact positively on a company’s innovation mindset is through the provision of relevant training – associated with a 10.5% uplift to staff’s confidence innovating. Allowing the freedom for employees to be creative followed, contributing an 8.1% boost, while ensuring that training times are flexible and the firm allows a healthy work-life balance both see a more than 7% improvement. Similarly, remote working being available and being common practice will buoy creativity by 6.9% – further demonstrating the importance of flexible working to improve innovation culture at a firm.

Commenting on the report, Rebecca Tully, executive sponsor for Human Capital and Diversity for Accenture in the UK and Ireland, said, “Our research reveals that a workplace culture of equality is an overlooked driver of innovation within companies. By understanding what motivates their employees and fostering an environment where people feel empowered, business leaders have the opportunity to unleash the innovation required to compete effectively in an era of disruption.”

The research came as part of a global survey by Accenture, which queried more than 18,000 professionals in 27 countries and 150 C-suite executives in eight countries. The overall research determined that an empowering environment is by far the most important of the three culture-of-equality categories in increasing an innovation mindset, which consists of six elements: purpose, autonomy, resources, inspiration, collaboration and experimentation. The more empowering the workplace environment, the higher the innovation mindset score.