The AlixPartners Disruption Index
When the global pandemic disordered all of our lives, it demanded new approaches to productivity, supply, consumption, and leisure, which dramatically accelerated the adoption curve for many new technologies. At the same time, the tensions caused by the pandemic also revealed a conglomeration of disruptive forces, which had been growing for years. In our third annual study of disruption, we surveyed 3,000 business executives around the globe and found that, surprisingly, despite its universal effects and immense toll in human life and suffering, the biggest challenge for CEOs going into 2022 is not COVID-19. What does concern them are the disruptive technological, societal, and economic challenges that their businesses must confront in the years ahead.
With the AlixPartners Disruption Index, we hope to provide more perspective on these challenges and, most importantly, greater insight into what best-in-class leaders are doing to meet them.
A measure of the magnitude and complexity of disruption experienced in the past year.
DISRUPTION IS THE NEW ECONOMIC DRIVER
Despite what has arguably been the biggest disruption to the global economy in the past 80 years—5.5 million deaths by official measures (upwards of 2 to 3 times that when the rise of unaccounted for deaths is included)1, mandated shutdowns of industries, disrupted supply chains, massive outlays of public spending, and ongoing uncertainty of what will be next—just 3% of executives list COVID-19 as their top worry in the coming year.
Rather, in our annual Disruption Index, a survey of more than 3,000 executives globally, it is not the acute but (hopefully) short-term wave of COVID-driven disruptions that are worrying business leaders most. But instead, the massive tidal wave of change coming at them from other forces: a combination of technological innovation, demographic change, climate-driven disruptions, and growing trade barriers, a retrenchment after nearly thirty years of rapid globalization.
Fully 64% of executive concern is around disruptions stemming from new technologies, and the emerging business models and implications that come from them. They see the huge opportunity technology presents—as the recent frothy capital markets over the past year will attest—but also worry that if they don’t pick up pace, their companies will be left behind.
COVID-19 is the least of their concerns in 2022
In the face of these pressures, executives know that they cannot change fast enough. Fifty-nine percent of executives are either in the midst of transforming their business model or planning to do so in the coming year. Nearly all—a staggering 94% of executives—believe that their business models will need to change in the next three. As we come to the end of a year that has seen the announced break-up of such icons as General Electric and Johnson & Johnson, it is clear that even much-revered stalwarts are not immune.
In this topsy-turvy environment, no one feels safe. Fully 72% of CEOs believe these disruptions are so great that their personal jobs are at risk, up from 52% just a year ago. (To put further emphasis on that number, that first statistic was taken in the midst of the 2020 lockdowns, making the rapid jump in this year’s statistic more startling yet.)
It is no longer traditional economic forces at work that are reshaping the economy, but rather the ever-accelerating pace of change. Like molecules in a chemical reaction when exposed to heat, moving faster and colliding with more energy, economic forces are interacting at an ever-increasing pace—and in doing so, upending existing business models, markets, and value networks at an historically unprecedented rate.
The very idea of “business as usual” is obsolete—there is no usual. Rather, executives will increasingly need to lean into an economy of constant change. And the key skills will be agility, responsiveness, and adaptability.
Disruption is the displacement of businesses, markets, and value networks as the result of economic, societal, environmental, political, regulatory, or technological changes. Technological innovation and adoption, in particular, act as catalysts to accelerate other disruptive forces.
THE BUSINESS CHALLENGE
For business leaders, responding to the forces of disruption is their greatest challenge. They must confront an environment that is shaped not just by the magnitude and sheer number of disruptive forces, but also by the complexity of their interconnected impact.
Consider COVID-19. It has not just been the disease itself that has been devastating, but also the myriad second- and third-order effects. Maintaining the physical and emotional health of employees, customers, and suppliers quickly emerged as a paramount concern. Consumer demand became unpredictable—and was rapidly directed through new and emergent channels.
Establishing capabilities to remain productive in the face of stay-at-home orders, factory closures, and supply chain dislocations proved an ongoing challenge. Coordinating vaccinations and bringing people back to work presented another set of dilemmas, which have had to be reworked with the advent of each new variant.
In a matter of weeks, executives had to completely retool ways of working, how they produced and distributed goods and services, and how they ensured the continuity of their businesses. Fields like telemedicine that had struggled to gain traction for years became the norm overnight as traditional healthcare was turned on its head. COVID brought not only a public health challenge, but also a plethora of business, operational, and societal challenges. And COVID is just one example.
An increasing number of technological innovations are driving truly disruptive change across society and around the globe.
Many of these are step-change advances. Ubiquitous connectivity is empowering consumers to demand what they want, when and how they want it, constructing and inhabiting self-curated digital ecosystems (creating what we call “me-centric consumers”)2. And the resulting explosion of data enables ever more sophisticated and real-time AI-driven tools. The rapid success of mRNA vaccines has opened the way for a new generation of potential drugs to treat intractable diseases such as cancer, heart disease, and HIV.
Falling costs for renewable energy and more effective energy storage technologies are reducing the world’s reliance on fossil fuels. The expansion of electric vehicles is rapidly changing not just the automotive market, but all of the supporting infrastructure for combustion engine car culture. Additive manufacturing (or 3D printing) is enabling companies to produce goods in a more distributed fashion with fewer raw materials and increasingly lower costs, bypassing supply chain bottlenecks.
Of course, not all of the effects of disruption are positive. Globalization and technological change have contributed to the widening gulf between the wealthiest and poorest members of society. Social media has deepened polarization—connected individuals are overwhelmed with information and conflicting views, making it difficult to know who to trust. Cybercrime is on the rise. An increasingly digitized world is putting pressure on already strained electric grids, with the share of global energy consumed by data centers, consumer devices, and networks expected to almost double to 21% of all energy consumption by 2030—even before factoring in the impact of electric vehicles3.
The irony is that the institutions and individuals with the most power to help society respond—including business leaders and policymakers—are not moving fast enough. To meet the challenges presented by disruption and build a sustainable future for ourselves and generations to come, we must accelerate the pace of change.
THE CONSUMER ECONOMY'S GREAT POWER INVERSION
The tables have turned. Empowered by technology and each other, today’s consumers have declared, “It’s not you,
It’s becoming clearer than ever that power has permanently transferred from brands to consumers—but equally clear that many companies have not fully realized the extent of this shift. Consumers now have almost unlimited access to information and products, which makes loyalty hard to earn and easy to lose. They can easily find a different product they prefer or a similar product at a price they prefer at a different brand or retailer—or even from the manufacturer directly.
More importantly, social platforms have given consumers megaphones, enabling them to discover new products, read and write peer reviews, identify with communities of shared interests, and buy only what aligns with their personal brand. They make choices about what they want to buy based on information from sources that transcend and upend traditional company marketing efforts. The simplest way to think about this is the absolute democratization of consumerism. Consumers always had agency, but never power. Now they have both.
We see this shift in our annual holiday survey where consumers say they are ever less forgiving of missteps. Three in four consumers would be less loyal or less likely to buy again from a retailer if they experienced product unavailability. They also value convenience. Accelerated by the pandemic, 40% of U.S. consumers have tried a new shopping method—such as curbside pickup, buy-online-pickup-in-store, and delivery—over the past year, and nearly three-quarters of them want to keep using these services.
The point is this: Consumers now operate outside of the carefully controlled customer experience zones where companies have felt most comfortable for essentially all of time.
At the same time, consumers are also spending more, which means that for any retailer missing this power shift and not determining how to alter strategy accordingly, these dollars are theirs to lose.
It’s up to the companies to meet the me-centric consumers where they are, not the other way around. Otherwise, consumers will take their dollars elsewhere. To be successful, companies must restructure their entire business model around serving their particular me-centric consumer.
But this also offers up an opportunity to build a lasting relationship with your consumers. Businesses must never again think of consumers or their tastes and needs in terms of static demographic groups. Instead, they should focus their resources on establishing an intimate and personal understanding of their brand’s unique assortment of consumers and building new relationships with them. You need to ask not only, “Would a customer like this?” but “Would our customer like this?”
This power inversion is perhaps the greatest change to our consumer economy in centuries. Companies that do not understand this shift and refocus their investment, resources, and energies to maximize their customer relationships will struggle in the new world. There is no safe haven from the powerful, new consumer no matter what business you operate in.
These highly empowered and individualized me-centric consumers are explained in rich detail in The Metail Economy, a book by Joel Bines, co-head of the AlixPartners global retail practice.
In this year’s report, we identify four major forces that we believe will transform the world economy in the years ahead. These represent challenges—but also huge opportunities.
For large parts of the world, the decade of the 2020s marks a stark transition: It is the first decade in which all of the leading economies across the globe—Europe, the US., Japan, and China—will see labor force growth markedly slow and, in many cases, shrink. Retirements will outpace new workforce entrants in almost every major economy. (Indeed, only India, Africa, and parts of the Middle East will see meaningful labor force growth in this decade.) This will present a major economic headwind: Fully a third of GDP gains over the last six decades have come directly from labor force growth. To sustain economic growth levels in line with those we have been accustomed to, technological innovation will have to accelerate even faster.
The explosion in new technologies is both a boon and a bane—technological innovation will become the principal driver of economic growth and promises to improve our lives and our world, but it is also the primary source of disruption and dislocation. This is the tsunami wave that has executives most worried. The 2020s are seeing the emergence of the so-called bionic enterprise: the merging of human capital with artificial intelligence (AI), big data, robotics, and an array of digital technologies to drive next-order business outcomes. The mission for companies is clear: Be digital or die.
After nearly three decades of expansion, the forces of globalization—which have helped fuel economic growth through greater trade, exchange, and openness—are in retreat. Barriers are going up, and global trade declining. Protectionism is on the rise. The world’s two largest economies, the U.S. and China, appear to be on a path of continued confrontation. Actions like Brexit and punitive trade wars are making economies more isolated than not. A long-term realignment of supply chains is underway. The biggest near-term implication will be increased economic friction, reversing more than two decades of falling prices and access to cheap goods. We should expect continued rising prices and inflation, as well as the distinct possibility of increased global conflict.
The effects and urgency of climate change have become increasingly apparent and accepted. And it is not just the long-term effects, but also the growing climate volatility as we see a marked increase in extreme weather events, both devastating and costly. As important as climate change itself is our response to it. Roughly $2 trillion annually is now being invested in new renewable energy technologies, and fully 50% of investment dollars are now tied to Net Zero emissions requirements4. Moreover, ESG demands from a broad range of stakeholders—including customers, employees, investors, and regulators—are driving companies to set more ambitious goals. We should expect to see a plethora of new technologies and operating models aimed to drive a more sustainable set of environmental outcomes.
The pace at which disruptive forces impact businesses today means leaders can no longer “wait and see.” The best-performing companies disrupt and reinvent themselves on a continual and ongoing basis.
General Electric’s decision to split itself into three pieces in 2021 was a bold one. The decision was the natural endpoint of an extensive transformation project, led by CEO Larry Culp, which included selling businesses, improving manufacturing processes, and cutting debt. GE had to be broken down before it could be broken up. But the final decision was clear—the three-company solution was a clear win for both customers and shareholders.
For over 40 years, our experience helping companies in turnaround and restructuring situations has taught us how to help companies sail through choppy waters.
BEFORE ANYONE ELSE CAN
Have the courage to break away from tried-and-true but rapidly fraying business models. Even when it feels hard. Taking a wait and- see attitude is too often the beginning of the end. If you do not take control of your future, someone else will.
A clear and compelling vision of the future is the first step. What will be the success factors not today, but a decade into the future? Are you on the path to getting there?
Challenge all assumptions, even those considered inviolable. Make the hard decisions now—they only get more painful with time. And do not carry extra baggage with you—extra costs will only weigh you down.
Finally, keep it simple. The ability of individuals and the organization as a whole to focus on multiple priorities is limited. Paint the vision for disruption—and then disrupt.
ACCELERATE YOUR DIGITAL METABOLISM
Digital is not something you do. It must be who you are. Digital capability will soon underpin every successful company everywhere. Like cell respiration for biological organisms, digital must become part of a company’s metabolism. Not something that exists in a single department or outside of the core organization, but rather the lifeblood of the organization—and everyone’s responsibility.
Importantly, yesterday’s IT is not today’s digital. Cloud technologies and SaaS subscription platforms make digital easier than it’s ever been before.
Focus on the business problem, not the technology. What is it you’re trying to solve? Is it lack of visibility on demand? Is it disruptions to the supply chain? By focusing on the business problem, you can then determine the technological support you need and build a program that is manageable and scalable with measurable ROI.
Use your data well. All too many companies are rich in data but poor in insights. The focus must be on zeroing in on usable insights that prioritize the customer and anticipate future needs. This means investing in predictive modeling, AI, and customer insights.
Finally, most senior executives must increase their digital IQ and ensure that they have leaders who can supplement digital skills and understanding. Bridging the digital divide is a gaping challenge for many leaders, yet critical to address head on.
CREATE THE WORKFORCE OF TOMORROW, TODAY
Don’t let inertia drive your talent strategy. The organization you have today will not likely carry you where you need to go—and you can’t ask it to.
Begin to build the workforce you need versus the one you have. And think broadly across all areas of your workforce—not just senior executives or elite talent, but all talent. Source diverse capability from atypical places and train the skills you need. Many jobs that need to be done aren’t jobs that have ever been done before, so you can’t expect to find experienced workers to fill the roles.
Be creative. OneTen, for example, is a coalition of 50 of the largest US employers working to substantially increase hiring of African American workers. By identifying likely areas of significant labor market demand—such as in advanced manufacturing—but lack of critical skills, OneTen maps gaps in the US labor supply. By investing in skill development with an historically neglected talent pool, OneTen solves two problems at once: providing well-paid job opportunities to an underserved population, and also helping solve major supply constraints in the overall labor market.
Leverage technology as a collaborator with talent, not a replacement to it. Future employees will need to be increasingly digital. Give them the tools and training to make it so.
Your workforce is your biggest asset—and investing in making it thrive will help create the energy you need to press through the disruption.
PRIORITIZE PACE OVER PERFECTION
It’s impossible to overestimate the importance of execution. Take an action mindset. Plan less and do more. Maintain pace over perfection.
A solid plan to respond to disruption that is implemented with speed and rigor will always outperform a perfect plan executed poorly. Iterate and evolve your plans as you gain experience and knowledge. If something’s not working, ask why. Then address the issues and reorient.
Keep focused. Tackle the tasks that will get you to the end goal and minimize distractions. Do not wait to make decisions. Low-hanging fruit can provide momentum—and dollar resources—for or longer-term transformation.
Start small. Experiment. But be prepared to scale fast.
Don’t underestimate the importance of a clearly communicated vision. Repeat it often. Using communication effectively is a crucial step in leadership, cultural change, and confronting disruption. Compelling communication that really connects with employees can be an effective antidote to the confusing forces of disruption and change.
The entire organization needs to believe in the change you’re undertaking and where you’re taking them to. They need to understand that benefits will accrue, collectively and individually, over time.
Be compassionate but candid. Communicate the truth, even if doing so results in difficult discussions. Delaying those hard conversations is human nature but can create significant obstacles to implementing needed reform.
Leadership, by definition, requires followership. If you’re not bringing others along on your journey—inspiring and guiding them—then any transformation is doomed to fail.
The 2020s are a decade filled with promise—but that promise is the disruption. The winners of disruptions will be the disruptors.
BECOME THE TRANSFORMATIVE LEADER YOUR ORGANIZATION NEEDS
Effectively responding to the challenges from disruption requires two things: superb leadership and a nourishing culture.
The latter, of course, derives from the former. But what are the leadership capabilities that are required to transform an organization to successfully confront disruption?
Three skills are essential: resilience, adaptability, and emotional intelligence (EQ). And this must begin with CEOs—how they lead, the types of leaders that they hire and promote, and the processes and results that they reward. It must then cascade to the executive team and through the rest of the organization. Transformative leaders know how to catalyze profound and enduring change in those around them to confront the challenges of disruption.
Mental resilience is essential as is the ability of a person to handle adversity. Leaders must be able to deal constructively and decisively with ambiguity, uncertainty, and failure. They must have the fortitude to focus on a few key priorities, stick to those despite the many distractions that come with running a complex organization, and have the confidence and know-how to pivot when facts or circumstances change. They must bounce back and change course with optimism, knowing that others are watching closely. This requires a mindset of clarity, equanimity, and immovable resolve in a business environment that is constantly in flux.
Two years of the global pandemic has tested our collective resilience. Lockdowns, new ways of working, health and safety concerns, shifting consumer demand and channels, and dislocated supply chains have become the daily reality for business leaders around the world. Our survey this year shows that those companies that tackled these problems head on and embraced the challenges as an opportunity performed better than those that saw disruption only as a threat.
Adaptability in thinking must be demonstrated, promoted, and rewarded from the top of the organization and rewarded in an organization’s culture. Changed or changing situations require changes in behavior. An adaptable leader has a clear understanding of and alignment with organizational goals and possesses the flexibility to adjust the strategy to achieve those goals. A learning mindset and a long-term perspective are essential.
Linear solutions cannot solve complex problems. Businesses need leaders who promote collaboration in fluid and nonhierarchical environments and who demonstrate a growth mindset. Adaptable leaders, who are intent on learning quickly, change to meet the needs of a rapidly-evolving, disruptive environment. Linear thinking, which does not take into account changing dynamics and whole system solutions, can create new problems with unintended consequences.
EQ is a skill increasingly demanded of leaders but is still in short supply. We have long known that the skills that get leaders to the top jobs are not necessarily the ones that make them good leaders. The emotionally intelligent leader is self-aware and has a clear understanding of their own strengths and, more importantly, their weaknesses.
The ability to comprehend and control personal emotions, while understanding and managing others, is perhaps the most important skill in managing an organization. As the variety of stakeholders expands, along with their expectations from leaders, EQ has become an even more essential leadership skill.
Truly transformative leaders are at the center of the Venn diagram of resilience, adaptability, and EQ. Transformative leaders are authentic, meaning they live in alignment with their values, mission and purpose, and inspire others to do the same. Transformative leaders are best suited to deal with disruption because they simultaneously serve as strong role models and culture carriers while creating the inclusive environments employees demand. The best leaders communicate clearly, consistently, and frequently. They are role models and cultural change agents who create organizations that are able to attract and retain the very best talent.
Disruption demands leaders who can display all these skills, lead their organizations in meeting the challenges of disruption, and create the vision for a brighter and more sustainable future.
1. “The pandemic’s true death toll,” The Economist,
Jan. 16, 2022, https://economist.com/graphic-detail/
2. For more information on the me-centric consumer,
read Joel Bines’ The Metail Economy: 6 Strategies for
Transforming Your Business to Thrive in the Me-Centric
Consumer Revolution, McGraw Hill, Feb. 2, 2022.
3. Andrae, A.S.G.; Edler, T. “On Global Electricity Usage of
Communication Technology: Trends to 2030.” Challenges
2015, 6, 117-157. https://doi.org/10.3390/challe6010117
4. International Renewable Energy Agency (IRENA), World
Energy Transitions Outlook, 2021, https://irena.org.