Disruption is the new economic driver
The COVID-19 crisis has laid bare the central economic reality of our times: disruption is the new economic driver.
Based on a survey of 3,000 senior executives around the globe, the 2021 AlixPartners Disruption Index confirms that cycles of disruption, which displace existing businesses, markets, and value networks in favor of newer ecosystems and relationships, have emerged as the central strategic challenge for business leaders today.
New technologies accelerate the pace of change at a rate not previously experienced in history. New business models and entrants, unburdened by the past, upend the status quo. Empowered consumers, inhabiting their own self-curated digital worlds, demand what they want, when and how they want it. Those very forces that are driving greater disparities between the top and bottom performers in industry are also widening inequalities within society. And the cumulative impact of all of these disparate but converging forces is destabilizing and driving uncertainty in c-suites everywhere.
CEOs are confronted by disruption more than ever, and the pandemic isn’t one of their top concerns
Disruption is what keeps executives awake at night. From technological advances to shifts in consumer behaviors to changing regulatory landscape, business leaders are grappling with multiple, concurrent forces that are upending how they do business. These forces are the new economic drivers, and their magnitude and frequency are increasing.
But surprisingly, COVID-19 wasn’t the top concern for most businesses. Despite the pandemic’s immediate and pervasive dislocations, numerous disruptors (such as new and evolving competition, technology-impacted processes, AI, and regulation) are viewed by executives globally as having higher magnitude and longer-term impact . This underscores how far-ranging and dynamic the forces of disruption are in today’s business climate.
The reality is that it’s not any one disruptive force confronting business. A multitude of interconnected and self-reinforcing factors are combining to challenge executives. This constant bombardment by disruptive forces leads to concerns over losing control. Business models and strategies which have proven themselves successful over the time are fast becoming obsolete.
No single disruptive force is predominant; instead companies face multiple, concurrent forces
Executives say that changes from COVID-19 are permanent
In every industry, COVID-19 has changed the way business is done. From internal office policies to customer interactions to supply chain logistics, executives say they are permanently altering their strategies to succeed in this new normal. The businesses that have performed well amid the pandemic are those that have been able to anticipate long term changes.
One of the most important areas, and hardest to predict over the past year, has been consumer behavior. Our Consumer Priorities Study suggests that new dimensions to consumer segmentations are emerging as a result of the pandemic, and behaviors learned during this period will have long-term implications across demographic categories and geographies.
The pandemic will permanently alter how businesses interact with people (and vice versa)
But executives aren’t sure they have what it takes
Executives lack confidence in their company’s ability to withstand disruption, and the more junior you go, the lower that confidence falls. This misalignment in perceptions between the c-suite and their next levels of managers may create conditions in which leaders “talk past” the rest of their organization or fail to grasp the potential disruptive impact of new trends. Almost half of all executives worry that their company is not taking the necessary steps today to ensure that they are well-positioned to navigate disruption.
"The largest disruptions my industry will face will be keeping up with the current work force and ensuring that we can keep hiring competent candidates."
A talent gap presents a stubborn challenge
At the center of these concerns is a perceived talent gap. Over half of all executives think that this talent gap makes their organization vulnerable to disruption, rising to almost 60% in the c-suite. A skills gap may explain some of this concern: a lack of trained software engineers, digital marketers, or cybersecurity experts. In our view, ways of thinking and approaching disruption may be a more prevalent issue. A lack of urgency, agility, and innovation in the face of disruption weigh on the minds of many in the c-suite. Changing corporate culture to become more forward-looking and agile, therefore, becomes a critical leadership task.
Vulnerablility to disruption heightened by a perceived talent gap
Executives do not have a common degree of confidence in their organizations' ability to withstand disruptive forces.
Technology can’t solve everything
The leading strategy in confronting disruption is the investment in new technology. Unsurprisingly, given their stronger balance sheets, this trend is even more pronounced for larger companies (those with $5 billion or more in revenues) and those companies that view themselves as better off today than a year ago. Amongst these technology investments, bringing data and analytics to the center of all activities has become an urgent task across all industries. For consumer-facing businesses, using these technologies to recalibrate in the face of rapidly shifting and unpredictable behaviors is essential.
But the scale of the leadership and cultural challenges are equally formidable. Simply pouring money into technology will not resolve the human obstacles to transformation which frequently prove the most stubborn and daunting.
Organizations utilize multiple strategies and tactics to respond to disruption – predominantly tech investment
Average number of actions taken
At the heart of disruption is a central paradox: mitigating the effects of disruption require different investments, skills, and priorities than capitalizing on its opportunities. The answer for too many businesses, as a result, has been to do nothing or too little. However, in an environment in which disruption is accelerating and its impacts are growing, the risks of complacency or inertia have never been higher. Executives increasingly acknowledge the need to be their own disruptors, but successful transformation is easier said than done.
Vigilance is essential, and it starts with leadership. It’s less about what you do, and more about how you do it. It starts with you as a leader taking control over your organization’s future.
- Prioritize what’s important. Maintain focus, measure progress, and ensure accountability.
- Execute, execute, execute. A solid plan implemented at pace and with rigor will always outperform a
perfect plan executed poorly.
- Communicate clearly, regularly, and consistently. A compelling vision of the future can inspire and guide
the organization through difficult transitions.
The stakes are getting higher. In a volatile environment, clarity, control, and pace are a necessity. The macro environment may not be in anyone’s control, but how you respond and the speed at which you do so are.
Define your own future. Be bold.
History shows that if you do not, someone will step in to do it for you.