Disruption as an opportunity | KPMG | IE

Disruption as an opportunity

Disruption as an opportunity

More than ever, leading a business is about challenging convention and driving radical change

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Three in four (74 percent) of CEOs surveyed worldwide say their company is striving to be a disruptor in their market.

Support for this approach is effectively unanimous in both the Republic of Ireland (97 percent) and Northern Ireland (100 percent). There are many reasons why CEOs are embracing disruption but the key reason is the technology-driven change which is sweeping through industries and economies on a global scale.

Adena Friedman, CEO of Nasdaq, Inc., the US stock exchange, believes disruption creates a clear advantage for businesses today. “Those who are really leading the market are those who are getting down to the business of change and embracing technological innovation,” she says.

While these developments are welcome for some, they have created an even greater level of uncertainty. CEOs are championing new ways of creating value to ensure their businesses are not left behind. Our respondents tell us they are making innovation a top strategic priority, as well as a key initiative to achieve growth. 

While driving disruption in their own business may be a relatively new priority, it’s welcomed by CEOs globally – with more than six in ten (65 percent) of CEOs considering technological disruption to be an opportunity, not a threat, for their organisation again with near unanimity closer to home (Republic of Ireland – 90 percent and Northern Ireland 100 percent).

“CEOs clearly see the opportunity presented by disruption.” says Shaun Murphy of KPMG. “I don’t know a CEO who isn’t thinking about how to drive their business in a digital world. Unless they’re continually focussed they’re at risk of missing out and ultimately being left behind.”

The balancing act

CEOs understand that leading an organisation in “interesting times” takes more than talk about new business models and innovation – it requires courage and leadership, an ability to protect as well as provoke, and close involvement in all corners of the organisation. 

For this reason, we find CEOs performing a difficult balancing act. Innovation is a clear focus, but respondents are also pragmatic about managing the uncertainty on the horizon. As a result, they are strengthening their business in established markets so they can protect their bottom line while preparing to seize new opportunities.

Shaun Murphy reflects on how it can be a challenge judging both the value and impact of technology saying; “The impact of technology tends to be overestimated in the short term and underestimated in the long term. There are lessons in this for CEOs working to get the balance right between protecting their core business whilst pursuing the opportunities technology presents.”

CEOs are also wary of disrupting for disruption’s sake. Aware that new entrants want to take their share of the market, they are maintaining a laser-focus on the customer, understanding their needs and articulating how the business is creating value for them.

The hit that wipes you out is the one that comes from the side,” says Safra Catz, CEO of multinational computer technology company Oracle. “So you need to keep an eye on all directions. If I were to give anybody advice, I would say: do your job and look around, talk to your customer and stay on mission. Don’t get distracted by success.”

Redrawing the horizon

In this report, we explore the many challenges that CEOs face as they disrupt and grow in a changing landscape. It is also worth noting that, in the context of this year’s research, success is not defined purely by the ability to displace rivals and claim market share. CEOs tell us they want to improve public trust in business, build cultures based on clear ethical values and create a more sustainable future for the organisation. For them, disruption is an entirely positive goal.

In an uncertain global environment, companies around the world are displaying a lesser appetite for major transformation projects. Companies in both the Republic of Ireland and Northern Ireland, however, are more likely than the global average to undergo a transformation by 2020.

“Every business needs to be constantly alert and vigilant of the need to stay current and competitive,” says Paul Toner, Partner and Head of Management Consulting with KPMG in Ireland. “Technology is a key enabler, and chief executives should be constantly on the alert for technology that allows them to achieve change.” Toner also believes that technology has become a fundamental of doing business. “Now it is more front and centre, more of a disruptor - technology is increasing the need to consider and implement change. If you stay on top of the agenda, you will be better equipped to manage that change.”

Companies need to transform for a number of reasons, such as not getting overtaken by a new market entrant or someone coming up with a new model. “In the same way that they look at other parts of the business, CEOs need to think about how they can leverage technology too,” says Toner. “Companies need to assess where they are relative to their peers. Consumer-oriented sectors tend to do that more frequently, as technology has reshaped their relationship with consumers.”

According to Toner, three key themes are driving companies to transform: efficiency, connectivity and data insights. CEOs are now much better prepared for the challenges presented by major transformation projects, driven by new technologies. “There’s been a shift in competence, capability and mindset,” says Toner.

He also points to a growing focus on the role of chief information officer (CIO) as a strategic-lead on transformation projects. Having the correct expertise to drive forward transformation projects is key. “You can’t manage that sort of project based on being a good executive. You need the relevant capabilities. Otherwise you are ill-equipped.” However not having the right expertise in place can cause a transformation project to flounder. “We are frequently asked to review transformations that are underway and not going as planned,” says Toner. “It is critical to have the right experience in your team.”

A failed transformation project can represent a “double negative”, according to Toner. Not only has the project failed, but it has also demoralised staff and lessened the organisation’s confidence in its ability to complete big projects. “It’s really important to get the right level of momentum, and show early successes. This breeds enthusiasm and creates buy-in for the project.” 

Paul Toner also believes that another key factor in the success of a strategic transformation is having a clear plan. Having a vision is important, but he believes companies should avoid trying to transform everything at once. “Consider whether the upfront investment is warranted, and think about how relevant it is for the business,” he says. “Companies need to fully commit to a transformation project, and understand what they will get out of it.” He also cautions that CEOs should not wait for a crisis before transforming their business. “You don’t want it to take a crisis to transform, because then you are forced to transform at a pace that introduces more risk,” he said. When it comes to sectors that have undergone successful transformations, examples such as food science stands out for Toner. “Local companies have taken on global competitors and replaced them and become leaders,” he said, adding this innovation and transformation had been driven by technology.

In the context of other sectors, Toner also believes that organisations such as banks have also transformed significantly and he predicts further change ahead. “They are doing a good job but they could be doing more. Banks face a competitive threat from both FinTech players and emerging banking models.”

 

© 2017 KPMG, an Ireland partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International, a Swiss cooperative. All rights reserved.

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