IBM: ‘Incumbents’ reclaim throne in digital disruption from startups

By Edd K. Usman

Upstart startups would certainly learn a few lessons about digital disruption, that being at the top may sometimes mean a temporary place.

That being at the peak could also mean that it’s at times a there-is-no-way-but-down situation.

And it surely is happening as tech titan IBM has shown in its in-depth study involving over 12,800 C-suite executives (CxOs). The respondent CxOs were representatives across all industries and 110 geographies.

Syed Shahid Hussain, financial services sector leader, IBM Global Business Services, Association of Southeast Asian Nations (Asean), and Anuj Malhotra, president, IBM Solution Delivery Inc. and IBM Business Services Inc., Philippines, discussed part of the American company’s new research titled “Incumbents Strike Back: Insights from Global C-suite Study.”

Challengers

An annual study of IBM, this year’s results showed that 72 percent of the respondents in their industry it is now the incumbent companies rather than the new kids in the digital block that are leading disruption.

It signals the end of startups disrupting the incumbents, or the big mature companies.

IBM recalled that new entrants were leading the disruption in the competition for customer patronage as the incumbents “were on the defensive at risk of being disrupted — and supplanted — by startups and digital challengers.” But that was up until four or five years back.

Now, for the first time since the Internet’s rise (the Internet debuted in 1991) the global market disruption has shifted its epicenter.

While some incumbents may have been driven to near extinction by the new entrants and digital native startups, the former is now turning the table on the latter.

Their day at the top of the disruption chain is coming to an end.

Incumbent disruptors

“We are about to enter a new (period) for business — one defined by ‘incumbent disruptors.’ In this era, companies with a past have a built-in advantage not easily replicated or leapfrogged by newcomers,” IBM’s study revealed.

Hussain gave at least two reasons incumbents gained ground on startups, citing the established companies’ deep pockets and the massive horde of data that they are now learning to take advantage of to offer a better customer experience in their respective industry.

The IBM survey showed the 72 percent of CxOs in the study asserted that incumbent organizations, not the new entrants, are at the leaders in the disruption of their industry. Compared to the 22 percent who said it’s the smaller companies and startups that are leading disruptive change.

Recall that in the 2015 version of the survey only 54 percent of CxOs expected more competition from other industries. Perhaps not surprisingly, that figure was downed by half to only 26 percent after merely two years.

There must be something the incumbents are doing to jump over the startups and other new entrants.

And that is the rise of platform.

Strategy to disrupt

“The study found that 57 percent of the organizations with a strategy to disrupt are builders or owners of a platform business model. By orchestrating direct interactions between consumers and producers and gathering lots of data along the way, they are dominating their market segments and scaling in new ones,” IBM explained.

In building a platform the incumbents are leveraging two key factors: data and technology-driven tools to take advantage of their data.

“Only 20 percent of the world’s data is public. The other 80 percent is enterprise data,” the American firm said, meaning that with all the years the incumbents have existed they have amassed massive data available only to them.

Being new in their industry, the startups can only make use of public data.

While the tools such as artificial intelligence (AI), blockchain, and cloud computing are also available to the new entrants, they have little data to squeeze off any advantage.

Preoccupation

In relation with this, IBM’s latest survey showed that people are coming back as the C-suite leaders’ central preoccupation.

“That preoccupation with people is both on the inside and the outside of companies. Corporate leaders are increasingly focused on their people: finding the right people, and training and retaining them in light of a growing consensus that talent moves companies,” IBM said.

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