HBR: How Likely Is Your Industry to Be Disrupted? This 2×2 Matrix Will Tell You

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Thought-provoking strategy piece on HBR.org is worth a read. Some highlights:

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Image: HBR.org

To help business leaders better understand industry disruption, we developed an index that measures an industry’s current level of disruption as well as its susceptibility to future disruption. For the former, we examined the presence and market penetration of disruptor companies; we also considered incumbents’ financial performance. For the latter, we measured incumbents’ operational efficiency, commitment to innovation, and defenses against attack.

Ultimately, Accenture’s Disruptability Index positioned 20 industry sectors — and 98 segments within those sectors — against those two axes. We then used the median scores as dividing points to highlight four distinct states of disruption: durability, vulnerability, volatility and viability.

Based on the unique characteristics of the four states, our research suggests the following strategies can help business leaders take control of disruption:

In the durability state, companies must actively reinvent their legacy business rather than focus on preserving it. This means taking steps to both maintain cost leadership in their core business while also running extensive experiments to increase relevance — for example, by making key offerings not only cheaper but also better for their customers. The home retail segment, for example, underperforms the average investment in R&D for all industries by a factor of seven. There are exceptions, however, such as Lowe’s, the home-improvement retailer. In 2014, the company created Lowe’s Innovation Labs, an initiative that has produced the “Holoroom,” an evolving, mixed-reality design experience, and the “LoweBot” autonomous retail-service robot. This venture signals the home-improvement retailer’s commitment to building a customer experience that will appeal to the rising generation of so-called digital natives.

Companies in the viability state must embrace strategies that keep them in a constant state of innovation. This involves increasing the penetration of innovative offerings with existing customers while expanding aggressively into adjacent or entirely unchartered markets by leveraging the strength of their core business. To revisit the newspaper-publishing industry, consider the New York Times, which has close to 2.5 million digital-only subscribers and is continuously adding features and services. The company’s AI-powered chatbox enabled users to access up-to-the-minute polling data and analysis during the 2016 election. And its virtual-reality movies allowed subscribers to immerse themselves in journalists’ journeys. The Times has ambitious targets for international growth and is striving to double its digital revenue to $800 million by 2020.

 

 

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