The rise of the disrupters

The single most disruptive force reshaping today’s marketplace is disruption itself. No sector or market is safe. Changing customer behaviors and expectations, technology, digitalization, and a long list of disrupters are eroding barriers to entry, driving market convergence. New disruptive companies are emerging, driven by an entrepreneurial spirit and fundamentally changing the way many businesses operate, the alliances they forge and the speed at which they grow. Some did not exist 20 years ago, now they are among the world’s largest companies.

It’s the main reason that start-ups and middle-market companies are increasingly putting technology at the heart of their business plan. In our recent Global Capital Confidence Barometer survey nearly half of all middle-market respondents (49%) said that making better use of digital, technology and analytics was their main focus for driving growth – a higher percentage from their larger corporate peers. It is this forward-looking attitude that accelerates the high levels of growth we see with many middle-market companies.

This disruptive and entrepreneurial spirit is attractive to larger industry players looking for both partners and potential acquisition targets. We are seeing an increasing trend towards alliances and corporate venture capital (CVC) investments, as larger, more established players look to leverage the innovation and can-do attitude of these disruptive start-up and middle-market players, especially those offering research and development capabilities.

These more informal, lower-risk relationships allow companies to plan for multiple future paths and to respond more quickly to changes in the market. Asset light models where the largest car and hotel companies own no cars or rooms is transforming industries overnight. The auto sectors, healthcare and education’s convergence with technology firm’s assets are just a start.

For the middle-market companies partnering, whether through mergers and acquisitions, alliances or CVC investment, has many benefits, too. They can leverage the skills and experience built up over many years from the bigger counter-party. These firms will also have access to the greater reach and market power that larger companies alone can have, giving access to experts and infrastructure.

The killer question for disruptive companies choosing the right route for growth: how do you keep alive the innovative and entrepreneurial spirit that made you so successful and attractive in the first place? There is no single answer – the key is to keep looking forward because the next wave of disrupters is rising up behind you and you need to be in the best possible place to partner, ally and invest in them when the time comes.

I will be exploring this theme throughout EY’s World Entrepreneur Of The Year? 2016 Forum in Monaco June 6–11, 2016.

Ryan Burke is EY’s Global Middle Markets Leader, Transaction Advisory Services. He is based in Dallas. To find out more, visit ey.com/weoy.