Will your business still exist in three years? That’s probably the biggest question for top executives worldwide as a new research shows nearly four out of top-ten market leaders today will likely be displaced due to significant technology disruption.
The research was conducted by Digital Vortex, a book published by Digital Business Transformation (DBT) Centre, co-founded by US-based technology firm Cisco and Swiss business school IMD.
According to the publication, a vortex naturally pulls everything into its centre at great speed, resulting in chaos and, subsequently, recombination of businesses and industries.
Raz Mohamad, chief financial officer (CFO) of Cisco Asean, said intelligent business platforms, data and predictive analytics, artificial intelligence, and machine learning tools are among those currently used by enterprises to transform their organisations to survive the tech challenge.
Mohamad, who recently held a CFO roundtable discussion in Bangkok on the topic of financial implications of digital transformation, said cross-business collaboration is now a crucial factor for enterprises to stay relevant.
Banks, for example, can learn from adjacent markets such as e-commerce platforms to better serve their customers while real estate and other businesses can learn from many tech start-ups.
He cited the automobile insurance industry as another example which will face its existential threat due to the advent of autonomous cars and connected vehicles, resulting in less road accidents, especially those caused by human factors.
Vatsun Thirapatarapong, managing director of Cisco System Thailand, said enterprises need to adopt digital and other new technologies to grow new business with agility.
While many new ventures may not be successful, enterprises should fail quickly, move on and turn around, according to Mahamad.
Regarding CFOs, their role and skill sets are shifting due to digital disruption so they need to have additional skills, including those of programmer, statistician, data analyst, and machine learning expert.
According to the Digital Vortex book, 41 per cent of top executives surveyed see disruption as an existential threat, while only 25 per cent of companies are actively responding to the disruption despite the serious concern expressed by those who see disruption as the biggest threat.
In other words, the majority of company executives are still adopting a wait-and-see attitude due to a number of factors.
Based on the publication, financial services, tech products and services, media and entertainment, telecom, and retail are the top-five industries that will face the most disruption over the next five years as they are at the centre of vortex.
Amazon is a good example of this phenomenon in which the lines between industries and businesses have dissolved and then recombined over the past few years.
So far, Amazon, which started out as a retail e-commerce site in 1994, has moved to disrupt many businesses and industries from media and entertainment to the consumer goods industry, among others.
Grab and Uber are among the other examples which have disrupted and recombined businesses and industries, with better values on cost, experience and platform, the last of which is the key driving force of most disruptive companies.
In other words, disruption requires businesses to make money in new ways. Existing enterprises can also disrupt themselves or they can be displaced by a new business model.
This does not mean abandoning the businesses that have made them successful but they need to challenge the assumptions that previously supported their businesses and stress-test the ways in which they deliver value to customers.
Consequentially, this requires organisational, operational, cultural, revenue model and other fundamental changes on a perpetual basis.
Most importantly, the power of platforms is predominant in the digital age.
China’s Tencent is a good example in which the holding company started off with its Wechat platform for free services on mobile devices, including video calls, mobile finance and loans, social networking, among others.
The so-called freemium model drives steady user volume growth while monetisation improves with exponential revenue and profit growth.
In this context, Cisco supports the digital transformation process with agility, which means hyperawareness, informed decision-making, and fast execution.