Disruptive Technology: The Key is Business Agility

Disruptive Technology: The Key is Business Agility

Disruptive technology brings both challenges and, depending on business agility, opportunities.“The only thing that’s constant … is change.” If you’ve been in business for any length of time, you know how true this saying is. With change comes disruption — and dealing with disruptive technology is one of the most challenging things middle-market business owners and CEOs must face.

With markets changing at unprecedented rates of speed, disruptive technology is now coming at owners and CEOs faster than ever — especially those in the industrial sector. According to a special report recently published by McKinsey & Company1, the industrial sector will experience more disruption over the next five years than it did over the previous 20 years. In the face of what the report calls a “disruptive onslaught,” industrial businesses will need to transform their business models, competitive approaches and core operations if they want to grow — or even survive.

Disruptive Technology: The Double-Edged Sword

Disruption is a double-edged sword: Whether it’s good news or bad news for a specific business depends on how well the business adapts to it. Disruptive technology always presents opportunity — just think of the opportunities presented two decades ago when the Internet first exploded onto the scene. Companies like Amazon, eBay, Facebook and other online behemoths made the most of these opportunities to become wildly successful.

But not all businesses are able to adapt successfully to disruption. For every Amazon or eBay, there are dozens of other businesses that either were wiped out by the tsunami of the Internet or failed to capitalize on the full potential offered by e-commerce.

The McKinsey & Company report identifies five specific disruptive technology forces that the industrial sector is facing today1:

  1. Connectivity-driven business models like pay-per-use and data monetization.
  2. Artificial intelligence (AI) and autonomous systems that encompass machine learning and robotics.
  3. The Internet of Things (IoT), which could have a worldwide economic impact of $11.1 trillion annually by 2025.
  4. Electrification, which is being driven by technological and regulatory changes as well as growing consumer demand.
  5. Cybersecurity, especially with the growing interconnectedness in our wired and digital world.

The report goes on to state that “disruption is upending the core of industrial companies.” These businesses must understand what the increasing pace of change, evolving competitive landscape and impact on their workforce will mean to them. To be successful, industrial businesses must reassess not only how they do what they do, but also who they really are at their core.

Why Business Agility and Adaption Are Critical

Dealing with disruptive technology requires business agility, or the ability to adapt quickly and boldly to a new competitive landscape. For example, you can partner with other businesses that are able to offset weaknesses that may exist in your operating environment — whether these are startups, digital technology companies or service providers. Or you can acquire expertise in new areas you’re unfamiliar with via a merger, acquisition or joint venture. Other ways to deal with disruptive technology by applying business agility include the following:

  • Hire necessary talent — from within or outside your industry — to help you adapt.
  • Consider adopting new business models, such as a pay-per-use technology model.
  • Create a business model using “data monetization.” This involves offering new services using the data collected from the products you currently provide.

Your business may realize many benefits by increasing your business agility to deal with digital disruption, including the following:

  • Increased market share
  • Improved profit margins
  • Greater productivity
  • Reduced time to market

Other potential benefits include the ability to adapt effectively to more changes in the future and the opportunity to expand your product and service offerings.

Concluding Thoughts

Dealing with disruptive technology is one of the most challenging things business owners and CEOs must face. With technology changing at unprecedented rates of speed, this disruption is now coming at owners faster than ever, especially those in the industrial sector. Whether disruption is good news or bad news depends on how well you apply business agility to it. Disruption always presents opportunity, but not all businesses are able to adapt to disruption successfully. A part-time CFO or a project CFO from a CFO services provider can help your business devise a successful strategy for developing the business agility needed to capitalize on the opportunities presented by disruptive technology.

1 How industrial companies can respond to disruptive forces; Rajat Dhawan, Bernd Heid, Paul Küderli & Kevin Laczkowski; McKinsey; April 2018

John W. Braine, Partner, CFO Edge, LLC

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