That we’re living in a period of unprecedented change is something that is said so often it runs the risk of becoming a bit cliched — but it’s true.
So it’s not surprising that the National Association of Corporate Directors found that 58% of corporate directors regarded significant industry change as the one thing that will have the biggest impact on their business in 2018.
Open innovation is the best way for enterprises to prepare for significant industry change.
Testing and adopting technology solutions from independent software vendors allows them to meet their innovation needs across verticals, from improving their product to updating internal processes to provide better service.
The NACD survey of nearly 600 directors from more than 500 public companies identified technological disruption, regulatory change and industry consolidation as the main drivers of industry change.
Here’s how your enterprise can meet those challenges head-on with innovation.
We’re in the midst of what the World Economic Forum (WEF) refer to as the 4th industrial revolution, with new technologies emerging across the board.
The WEF’s Klaus Schwab boils the drivers for this change down to three core areas:
- Physical changes, including new materials such as graphene, 3D printing, a new wave of robotics and driverless technology
- Digital changes, including the cheap sensors that underpin the Internet of Things, blockchain, artificial intelligence and pervasive platforms
- Biological changes, including rapid reductions in the cost of gene sequencing and manipulation technologies such as CRISPR
According to McKinsey, enterprise executives are feeling outmatched by the ferocity of changing technology and looking to open innovation to keep up. More and more, large companies are working with independent software vendors in order to create a broad ecosystem of technological partners and innovate more effectively.Open innovation is the best way for enterprises to prepare for significant industry change. Click To Tweet
The regulatory environment has shifted as governments try to keep pace with the technological drivers of change.
The more corporate executives are concerned about being on the wrong end of regulatory decisions, the more they spend on lobbying to try and influence those decisions.
But just as helping to shape regulations is important, so new regulations offer the possibility of gaining a competitive advantage.
One of the most important regulations of 2018 is the General Data Protection Regulation (GDPR), which will govern how private data of EU citizens is collected, managed and stored. The GDPR will require organizations to make changes, but it does offer up the potential for innovation, whether in cybersecurity, data capture or data governance.
The last five years has seen a marked increase in the number of acquisitions, with 2017 seeing 50,600 transactions conducted worldwide at a cost of more than $3.5 trillion.
These acquisitions have been particularly noticeable in industries such as health, entertainment, retail, transportation and technology, with a number of companies reviving a strategy of vertical integration.
Nowhere is this more evident than in Artificial Intelligence, where there have been $21.8 billion spent on mergers and acquisitions in 2017. That is 26 times more than in 2015.2017 spending on artificial intelligence M&As was 26x higher than in 2015. Click To Tweet
Many of these acquisitions happened to allow enterprises to access key talent in data and AI, an issue that remains a concern for the executives spoken to by the NACD.
Perhaps the most interesting trend in industry consolidation is the move toward outsourcing R&D to independent software vendors. 2017 saw a 19% increase in Corporate Venture Capital (CVC) investment, with nearly 1,800 deals made around the world, particularly in artificial intelligence.
Suffice to say, identifying the right startup is far from easy. Being an active part of the startup ecosystem can pay huge dividends in helping a big company stay on top of the numerous changes that are impacting their industry.
It’s an area where brand matters, and startups inevitably talk among themselves as to who the best enterprises to work with are.