Disruption is a well-known threat, but some organizations are still unprepared

Yet some organizations appear to be doing little to prepare for a more dynamic, uncertain future. And they may be paying for it in lost opportunities and lower revenue.

The IBM Institute for Business Value is exploring how organizations respond to the threat of disruption as part of our 19th Global C-suite Study. We will publish the full study in early 2018, but our early findings are telling. Some companies clearly are better prepared than others, and their bottom lines show it. They are investing more time, money and energy into building a set of capabilities (integrating people skills, systems and processes) that are tightly aligned with their competitive strategies.

We asked executives to rate their enterprise’s effectiveness at managing organizational change in response to emerging business trends. The question is subjective but executives’ candor is pleasantly surprising. More executives rate their enterprise above average (33 percent) than below (14 percent). However, we saw strong correlations when we compared those positions against other characteristics.

For example, those who say they are highly effective at organizational change are overwhelmingly more likely to come from companies that outperformed the market over the last few years. By contrast, below-average change managers are more likely to be underperformers. Similarly, businesses are more likely to be strong on innovation if they also manage internal change effectively. Those who view their organizations as market followers seem to struggle to adapt to new ways — despite obvious potential threats.

Delving a little deeper, we can identify specific areas of business capability that are key to supporting an effective strategic response. The differences between high-performing companies and their less successful industry peers are startling. Businesses that outperformed the market in both revenue and profit are much more likely to:

• Have a well-defined strategy for dealing with disruption;
• Have the people skills and resources required to execute their strategy;
• Ensure that their IT strategy is closely aligned with their business strategy;
• Be adept at using a more agile, rapid-prototyping approach to testing and refining each element of their strategy;
• Optimize their business processes to support the enterprise strategy;
• Thoroughly test each element of the strategy – with extensive input from their business units – before moving to implementation; and
• Leverage data and analytics to help inform and adapt their strategy.

Putting the right foundations in place to respond to new challenges and opportunities — specifically around new business models and operating models — is a key indicator of past and future success. These early indicators sharply contrast what the best companies do to prepare and what might hurt those that fall behind.

For more early insights from the C-suite Study, read our previous blog, which explores the changing nature of competition and innovation. And watch for our next blog, which will highlight one area where outperformers excel: the adoption of blockchain technologies.

This blog is part of a series of monthly insights that highlight preliminary findings and emerging trends from the 19th Global C-suite Study. The study is based on interviews with more than 10,000 CxOs.