Another element of this fast-evolving landscape is the acceleration of regulation, with increasingly pre-emptive rules having the potential to impair the viability of business models.
The results of BDO’s recent survey on global risk underlined how broadly felt these two challenges are. The vast proportion of business leader respondents in the technology & media sector consider that the disruptive impact of regulation (96%) and speed of technological change (84%) make a successful innovation strategy critical to staying relevant.
Leading companies in the sector are responding to the need for constant change by building continuous innovation into all aspects of their operations, constantly reinventing their business models and rethinking how they deliver value to their customers and markets. The extent to which this is happening in technology & media becomes clear when seeing how companies from the sector are at the forefront of Industry 4.0 – the fourth industrial revolution, which combines physical and digital technologies to redefine industries.
Some technology & media organisations are meeting the challenge brought by the increasing rate of technological change by co-operating with businesses that they may have competed with in the past. For example, consumer electronics manufacturer Foxconn has replaced many of its workers in its Chinese plant with artificial intelligence developed in partnership with other companies from its native Taiwan.
Working with others to create customer solutions acknowledges that it can be easier to collaborate than to reinvent the wheel, says BDO Partner Evan Devetzis.
“For this reason, acquisitions will also continue to be part of the technology & media landscape. Buying in know-how and capabilities can improve companies’ competitive positioning, allowing them to respond to market opportunities.”
Collaboration can also help businesses respond to changing customer behaviour, a factor 85% of technology & media sector respondents cite as critical to continued market relevance. “Prices are a key driver for behaviour; consumer loyalty is a thing of the past. Engaging proactively with customers and enhancing customer experience wherever possible is critical to being able to compete,” says Devetzis. Agility is key: 84% of survey respondents consider that being more agile organisations would enable them to respond more effectively to shifting market conditions.
The last 12 months have seen a hardening of attitudes towards technology regulation, driven by situations such as data breaches at Facebook and the closure of blood-testing company Theranos. And while technology & media survey respondents recognise the importance of the impact of regulation on their businesses, 69% of them feel their businesses are unprepared for regulatory risk.
Monitoring regulatory developments is critical as changes can significantly impact viability of business models, says Devetzis. “If a business is not on top of regulatory change and unable to anticipate and adapt, some of the assumptions about the direction and competitive edge of the business can evaporate.
The risks from failing to embrace innovation are potentially more immediate for companies in the fast-paced technology & media sector than for many others. Is there anything holding technology & media companies back? Perhaps surprisingly for such a cutting-edge sector, 94% of survey respondents feel that their organisations need to be more agile in order to encourage a more successful innovation strategy (with 80% of respondents recognising an appetite for greater agility). They also accept a greater need for process innovation: 63% say there is limited or no ability for real-time experience and continuous, incremental development in software innovation in their organisations.
Meanwhile even the nimblest companies face certain ongoing risks. While 43% of survey respondents say they are unprepared for the risks associated with cyber crime, the spoils available means this risk will remain pervasive, with the level of sophistication of attacks increasing. Devetzis has heard many organisations say they have reduced cyber risk by adopting cloud solutions. “But using the cloud solutions could increase risk if the platforms are not carefully managed,” he points out. “Users need to be aware of the risks and not assume that cloud adoption eliminates them.”
Continuous innovation is shaping companies beyond the technology & media sector, extending to areas ranging from manufacturing to finance and other services – a valuable lesson in cross-sector thinking. Devetzis thinks that technology & media companies should look outside their immediate sector to get a sense of market disruptions.
“You need to monitor your general landscape and understand what’s new and what can potentially be disrupted. Seeing the relevance of developments in other sectors and how they could affect you is critical.” An example of this is Waymo, part of the Google group, which taking on established car makers in the race to bring driverless cars onto the road. Another is Amazon, which has diversified from its consumer-facing business to provide business service supply chains.
Devetzis’ parting advice for technology & media companies is that they need to be agile and be able to respond quickly to changes in the marketplace. “Have a real innovation mindset about how you go about things. And anticipate how what’s happening in the market can have a broad effect and reach your sector,” he concludes.