5 min read
Opinions expressed by Entrepreneur contributors are their own.
Once iconic companies, including Nokia, Kodak, Blockbuster and Xerox, disappeared from the market because they failed to survive in the age of disruption. Once they were considered role model operations globally, but technological disruption wiped them out. One lesson learned is that CEOs must not take any organizational achievements for granted. Instead, they should prepare themselves to capitalize on disruption effectively.
Disruption is not a new phenomenon
In the current global business environment, all sectors are disrupted — industries, organizations and individuals. Nothing is immune from it. Digital cameras disrupted analog cameras, quartz watches did the same to mechanical watches, and the iPhone displaced Blackberrys. We can see these market upheavals from the use of desktops to laptops to smartphones. The first Industrial Revolution disrupted traditional methods of living and earning via steam power and mechanized production. The second disrupted the first by changing lifestyles through electric power and international mass production. The third disrupted the second by automating such production. Currently, the fourth such revolution, the digital, is throwing at-once fresh challenges and opportunities to humankind, and is evolving at an exponential rather than linear pace.
Humans evolved from the Stone Age to the Space Age, principally due to disruption, and must continue to embrace change to survive both physically and economically. Similarly, organizations must embrace rapid shifts in circumstances, and innovate constantly by predicting and preparing. Some of the notable industries most recently challenged are education, computer, banking, publishing and print media, as well as insurance, real estate, construction and healthcare. And some of the best-performing companies, along with their workforce, could disappear soon if they don’t innovate; a 2017 report by McKinsey Global Institute estimates that between 400 million and 800 million of today’s jobs will be automated by 2030, for example.
Related: The Changes That Will Forever Transform How Entrepreneurs Operate in 2021
The role of CEOs in the age of disruption
In this digital age, minor technological innovations can upend a major industry or organization. With the advent of artificial intelligence and the fourth Industrial Revolution, it has also become uniquely difficult to predict future disruptions. Therefore, CEOs must prepare mentally for changes in industries and organizations. They must prepare to overcome volatility, uncertainty, complexity and ambiguity (VUCA). They must change their core business models and effectively communicate them to all stakeholders. They must build their competencies and capabilities. They must become champions of change.
CEOs usually emphasize short-term goals such as improving bottom lines rather than the long-term goals of predicting and preparing. They must emphasize both to ensure survival and success. There must be a long-term strategy to embrace change: choose the right technology; emphasize organizational culture; collaborate across different functions; close the gap between strategy and execution; and foster agility to execute organizational goals and objectives.
Disruptions are created by new entrants and game-changing technologies alike, and the rate of change is enormous. At times, there is a scarcity of talent to rise to the occasion. Therefore, CEOs must acquire talent and act quickly to adapt and adopt new technologies and business models. They must focus on long-term benefits of innovation at least as much as on short-term benefits resulting from disruption.
Related: How to Make Better Decisions
The role of CEOs in leading change strategically
Business executives have innumerable organizational challenges. One of them is embracing change effectively. This is easier said than done because there are several tasks involved in the process. One is improving processes and procedures and rebranding without compromising the core brand. Although every CEO understands that change is inevitable, some are uncomfortable with it. They appreciate the status quo and emphasize continuous improvement. That doesn’t help in the long run. They might also make the mistake of focusing on too many things at a time. Instead, the goal is to be selective, and uncompromising. Additional reasons CEOs might fail to embrace change include unwillingness to cope with technology, unclear objectives, unfamiliar scope, ineffective communication and poor project management skills.
There is no “one-size-fits-all” for change management; instead, emphasis needs to be on a flexible template regarding it, and the ability to customize according to each. Companies including Apple, Google, Facebook and YouTube modified business models with changing times and technologies, along with Amazon, Walt Disney, Netflix and Spotify.
Change involves uncertainty, communication challenges and chaos that employees usually don’t appreciate. Therefore, CEOs must communicate with their stakeholders the perils involved in not changing, even as they explain advantages involved in embracing it and showing benefits. They must also involve the stakeholders in the change process — must be transparent and must build trust — and remove institutional roadblocks, if any. Another key need is accepting feedback to improve decision-making, and motivating employees during an evolutionary process. They must be patient and persistent, because change takes time.
Related: Disruption vs. Innovation: Defining Success
Treat disruption as an opportunity, not a threat
The International Data Corporation reports that 60% of global GDP will come from digital organizations by 2022. This startling statistic is also an opportunity in disguise if viewed optimistically and capitalized effectively. Digital platforms can lower prices through new cost structures and offer new experiences to consumers. Therefore, instead of treating technological revolutions as threats, CEOs must treat them as opportunities and build strategies to capitalize on them. Companies from Apple and IBM to Nestle and Hyundai have capitalized on such disruption and thrived. New tech also allows upcoming and/or small-scale companies to take on mighty organizations; several, such as Alibaba, Airbnb and Uber have challenged traditional giants and are thriving.
Disruption solutions lie in thinking out-of-the-box and innovating as per changing times and technologies. And merely sporting knowledge is not always a solution; a more profitable path includes acting swiftly and converting threats into opportunities.