Is your approach to disruption more theater than investment?

Have you heard the phrase: the theater of innovation? It's what happens when a business knows it needs to “do something” digitally disruptive, so it starts to talk the talk, maybe even throws some money at innovation initiatives. But the investment isn't integrated into the real work of the business so – surprise, surprise – no real change takes place. It's status quo with a dash of digital glitter.

We've all seen it. And now it's been confirmed by new EY research on disruption readiness, which reveals the gap between companies who are taking part in this theater of innovation and those who are rolling up their sleeves and investing in it.

What's needed is real investment in skills and capabilities, to embrace digital and build a workforce for tomorrow.

Why optimizing your business model isn't enough

The majority of CEOs we talked to agree disruption is transforming their business landscape. But many were focused on optimizing their current business model, not investing in transformative change.

So what do CEOs think their companies are doing well when it comes to disruption? Here are some of the top scores:

• Maintaining a strong focus on listening to customers (80% agree they do this well)
• Discussing disruptive change and opportunity frequently at company board meetings (78%)
• Being open to outside ideas (73%)
• Communicating how innovation objectives tie to corporate purpose (68%)

Note the trend: listening, talking, observing. While these are important first steps, what happens when we ask about investing, making capital available or creating new innovation units?

•  Investing in exploratory, long-term ROI projects (only 43% say they are doing this well)
• Making internal risk capital available to fund innovative ideas (39%)
• Investing in start-ups for view on new technology and business models (33%)
• Developing separate and autonomous innovation units (31%)

 It all unravels. So what's the reason for such caution?

 67% of investors want companies to undertake potentially disruptive innovation projects even if they are risky and may not deliver short-term returns.

Caution is not coming from the investors

Conventional wisdom is that investors are risk-averse. I've often heard from execs: “Our hands are tied because of shareholders or investors.” Well that excuse has been stripped away:

• 67% of investors want companies to undertake potentially disruptive innovation projects even if they are risky and may not deliver short-term returns
• 73% of investors say disruption readiness will be more important to their decision-making over next 5 years

Contrary to expectation, investors appear to see more upsides than risks in disruption. They couldn't be clearer about wanting CEOs to push down the pedal on disruption.

Embracing today and tomorrow

So what's needed to move beyond the theater of innovation? Decisive action and investment.

We are at a point when disruptive technology – artificial intelligence, intelligent automation, blockchain and advanced analytics – is connecting businesses and people in new and challenging ways. The speed and scale of change, rising customer expectations and levels of uncertainty are all driving change relentlessly forward.

To ignore these forces is also a risk. A risk that your business won't be around in five years.

Yes, it's hard to balance the challenges of today and tomorrow, to keep the existing business profitable while laying the foundations for the future. But it's never been more important.

What's needed is real investment in skills and capabilities, to embrace digital and build a workforce for tomorrow. People matter and we need to equip them with the skills for the future.

What sort of skills? I believe the future workforce is likely to be a mix of robots/automation and humans. People will remain critical, valued for their technical, creative and relationship skills.

Intelligent automation and advanced analytics are improving rapidly; we're seeing this in our business at EY. If you'd asked me 18 months ago if EY would be incorporating robots into our workforce, I wouldn't have believed it. But that's where we are at. We're looking at how some of the tasks we routinely do can be automated. And we need people with strong technical skills to map and transition us to these new ways of working.

Creative and relationship skills are important because current business models are being shattered and reshaped. The new way to compete is to collaborate quickly, easily and meaningfully. This doesn't come naturally to industries with a “kill the competition” mentality. So people who can envision the future, who can work fluidly and with agility, who adopt a mindset of continuous learning, those are the people needed to take a business forward. 

Incremental change and optimizing just won't cut it. It's time to start experimenting with collaboration, to develop the relationship and digital skills you need to be successful in the new ecosystems, to identify hot spots of value where industries are converging.

One of the CEOs we spoke with said: “People think they have 2-3 years to prepare for this but disruption is here and now.”

I couldn't agree more. Yes, it's risky. But there are huge opportunities for those willing to seize the upside of digital disruption.