Weathering the storm of disruptive innovations
OVER RECENT years, many traditional businesses have been challenged by the emergence of disruptive technology. It is widely projected that such innovations will become even more influential in the near future, and therefore, that changes and adaptation by businesses are inevitable.
The attitude of consumers is also changing, since brand loyalty is perceived to be less important nowadays, whereas convenience and efficiency are valued as critical. This is the reason why many disrupters could find opportunities to serve consumers’ needs and eventually steal market share from traditional big players. Uber is a good example of how consumers value convenience and efficiency, and its emergence has created a big threat to traditional taxi businesses.
The reality is that disruptive technology is currently perceived to be a “critical issue” among businesses around the world. The reason could be that there have been so many cases where traditional big players in the market were in denial or too slow to adapt to the changes in consumers’ needs and expectations. As a consequence, those traditional big players have been struggling to retain their positions. Some have almost gone bankrupt.
Nokia is a powerful example to support the case that adapting to consumers’ need is critical to business. Even though it used to be the leading mobile phone manufacturer with the biggest market share, it was slow to adapt to consumer demand.
To gain more insight regarding the issue of disruptive technology among businesses in Thailand, a Deloitte Thailand survey of top executives and managers of some of the country’s biggest companies was carried out in the third quarter of 2017.
This Deloitte survey was aimed at understanding businesses’ awareness, adaptive agility and general perspectives towards disruptive technology. More than 120 local and international respondents were selected from various industries, including consumer and industrial products, financial services, energy and resources, healthcare and telecommunications.
The results indicate that 76 per cent of respondents are aware of disruptive technology; 69 per cent believe that disruptive technology is currently affecting their businesses; and 73 per cent anticipate that it will keep continue in the same vein for the next three to five years. Unsurprisingly, the majority believe that disruptive technology will create both opportunities and threats, with 71 per cent claiming to be agile enough to embrace new technology in their businesses.
Our respondents ranked mobile Internet, cloud technology, the Internet of things, big data and advanced robotics as the top five most disruptive technologies. Nevertheless, the top five looks different among industries and types of business. This seems to be rational since they focus on different areas.
Service-related businesses are more consumer-oriented in the sense that consumer satisfaction is the most important factor, while manufacturing-related businesses put more emphasis on product quality and manufacturing costs. In terms of agility, the results prove that service-related businesses are more agile when it comes to embracing new technology, even though they perceive fewer benefits of disruptive technology than manufacturing-related businesses do. The reason could be that the introduction of disruptive technology by manufacturing-related businesses usually requires high investment along with a long implementation period. In other words, service-related businesses can be easily disrupted by new competitors than manufacturing-related businesses.
In addition, the majority of respondents agree that increased productivity, saved resources in executing routine tasks and reliable data storage are the top three benefits that they can obtain from using disruptive technology. In contrast, intense competition, new unknown competitors and supply-chain restructuring are seen as potential threats.
The results show not only that the type of business has an influence on views, but also the size. Conglomerates are less agile in embracing new technology than multinational and local companies. The reason could be the diversification of unrelated-businesses under their umbrella, which creates difficulties in identifying synergies when it comes to the implementation of new technology.
Surprisingly, small and medium-sized enterprises (SMEs) are less concerned about embracing disruptive technology than large-sized companies, although SMEs are a key player in developing new technology and services to disrupt the existing market. However, even though SMEs are less concerned, they are more agile in adopting new technology. This makes sense, as there are fewer layers in the organisation to negotiate in making a move than in large-sized companies. In this sense, Facebook was a small start-up company that disrupted other social media players by offering user-friendly functionality and new features to engage and attract a huge number of users from other platforms.
In order to have a clear picture, the survey results were categorised by industry based on Deloitte’s criteria. Unsurprisingly, characteristics and norms of each industry did have an influence on the attitude towards disruptive technology. Based on the results, telecommunication, media and technology was the most sensitive industry sector towards disruptive technology. This is not a surprising outcome as telecommunication, media and technology always involves rapid changes and fierce competition.
Overall, the respondents who participated in the survey clearly indicated that disruptive technology now played an important role in their businesses regardless of the industry. Therefore, the ability to embrace innovations and new technologies was crucial in maintaining their competitiveness. In addition, disruptive technology both brings opportunities and threats to businesses depending on the extent to which they are able to embrace the technology.
Cloud technology, the Internet of things and big data are present in all industries, except the public sector, which had only one respondent. These technologies are primarily concerned with data gathering and storage, plus real-time data monitoring and communication that help in the decision-making process. With reliable and real-time information, businesses can exploit huge benefits, as can be seen in many success stories where strategic moves were formulated through big data and effective analysis. In addition, the speed of accessing the data is also important, which is why the mobile Internet and Internet of things have come into play recently.
We believe that the rewards could be higher if businesses clearly identify key issues and understand how disruptive technology can be employed to address such key issues in order to strengthen their competitiveness in an uncertain environment.
Contributed by Dr Sahanon Tungbenchasirikul, clients and markets director, Deloitte Thailand
Dr.Weerachai Wiwatchankit (Risk Advisory Senior Consultant)
Peeranut Brahmavira (Clients and Markets Consultant)
Top five disruptive technologies by sub-industry of Consumer and Industrial Products
(Source: Deloitte Thailand)
