Nearly 70 percent of Indian enterprises affected by industry disruption: Accenture

The research analyzed 27 indicators including market penetration of disruptor companies as well as incumbents’ financial performance, operational efficiency, commitment to innovation, and defenses against attack.

A new research from Accenture, a leading global professional services company found that a majority of the enterprises in India are affected by industry disruption. The research surveyed 2,015 companies with revenues greater than USD10 million, listed on an Indian stock exchange and headquartered in India and developed a 'disruptability index' for them which measures the current level of disruption, and susceptibility to future disruption.

The research analyzed 27 indicators including market penetration of disruptor companies as well as incumbents' financial performance, operational efficiency, commitment to innovation, and defenses against attack.

Research findings:

• 44 percent of companies in India are currently experiencing disruption
• 38 percent are highly susceptible to future disruption, and
• USD1.8 trillion of enterprise value is at risk of displacement.
• Nearly 31 percent of companies are currently in a stable, yet uncertain position.

"Disruption is a reality. It can be swift and strong or slow and steady, but it follows a predictable pattern that can be anticipated and managed," said Anindya Basu, geographic unit and country senior managing director, Accenture in India.

Additional research establishes a clear link between the impact of disruption and a company's investments in digital. The right combination of technology investments, aligned with the right strategy is a necessary response to disruption and can help companies transform and grow their core business, and innovate and scale new businesses. Striking the right balance, and knowing when and how to make the pivot, remain key," Basu added.

Accenture applied the index to position 19 industry sectors and 59 sub-segments across four periods of disruption namely:

• Durability: Disruption is evident but not life-threatening; incumbents still enjoy structural advantages and deliver consistent performance. One-third (31 percent) of companies – including those in the automotive, retail, life sciences, natural resources and insurance industries – fall into this period.
• Vulnerability: The current level of disruption is moderate, but incumbents are susceptible to future disruption, due to structural productivity challenges such as high labor costs. One out of four (25 percent) of companies – including those in the utilities, health, capital markets, chemicals and CG&S industries – fall into this period.
• Volatility: Prominence of violent, sudden disruption; traditional strengths have become weaknesses. Companies in this period (13 percent) include those in the banking, travel, infrastructure & transportation services, and energy industries.
• Viability: Disruption is a constant; sources of competitive advantage are often short-lived, as new disruptors consistently emerge. Nearly one-third (31 percent) of companies – including software and platform providers; communications, media & entertainment, high-tech companies; and industrial equipment & machinery – fall into this period.

However, the research also highlighted that disruption can be managed and harnessed for the next phase of growth, to avoid obsolescence. Each period of disruption also requires a distinct strategic response, the report says.

• In the durability state, companies must reinvent their legacy business rather than focus on preserving it. This means taking steps to maintain cost leadership in their core business and make key offerings more relevant to customers. For example, by making them not only cheaper but also better.
• In the vulnerability state, companies must make their legacy businesses more productive to position themselves to develop and leverage future innovations, both their own and their competitors'. For example, they should look to reduce dependence on fixed assets and monetize underused assets.
• In the volatility state, the only way to survive is by decisively but wisely changing the current course. Incumbents need to radically transform the core business while scaling new businesses. Striking the right balance is essential because if they pivot too quickly, they are more likely to stretch themselves too thin financially; and if they pivot too slowly, they risk becoming obsolete.
• In the viability state, companies need to embrace a constant state of innovation. This involves increasing the penetration of innovative offerings with existing customers and aggressively expanding into adjacent or unchartered markets by leveraging the strength of their reinvigorated and innovation-enabled core business.