Disruptive innovation has the potential to impact every business in every industry, unfortunately, a vast majority of Canadian companies are ill-prepared to weather the new digital storm, according to a recent report from Deloitte Canada.
The professional services firm surveyed 700 businesses across various industries throughout the country. In its report, titled, The Age of Disruption: Are Canadian Firms Prepared? the accounting firm said nine out of ten, or 87 per cent of organizations are not fully prepared to handle the impact of technological disruptions.
“We have been studying Canadian companies’ performance and preparedness for the last five years,” according to Terry Stuart, chief innovation officer at Deloitte Canada. “We know Canadian firms are laggards but it’s very disturbing to learn that only 13 per cent are prepared.”
Deloitte identified five key areas of technological disruptions against which it assessed the companies’ ability to respond to the changes the new advances are expected to bring:
- Advanced robotics
- Artificial intelligence
- Networks
- Advanced manufacturing
- Connected platforms and social media
The study used the following gauges of preparedness to categorize Canadian firms:
- Highly prepared – firms that are excelling in all four key areas of preparedness
- Single-minded – firms that are taking action in one area but aren’t prepared overall
- Tentative – firms that aren’t wholly unprepared but are struggling with their preparedness efforts
- Unprepared – firms that are struggling across all four areas of preparedness
The study found that 23 per cent are prepared in one key area, but not others. Another 29 per cent are struggling with their preparedness efforts and 35 per cent of Canadian firms are very poorly prepared.
In each category, Deloitte found firms of every size, from every sector and from every region of the country. This runs counter to conventional wisdom, which holds that a company’s size or sector dictates its ability to deal with the disruption, said Stuart.
Deloitte said as many as 43 per cent of companies think there are better prepared to handle the impacts of technology disruptions than they actually are.
“In addition to the core readiness problem, Canadian businesses are suffering from a preparedness perception gap,” said Stuart. “What business leaders need to know is that disruption is not going to happen a few years from now – it’s already happening.”
Advancements in 3D printing, robotics, use of connected platforms and AI have the potential of exposing Canadian firms that are slow to adapt to risks of being overrun by their existing competitors or new entrants into their industries.
The report pointed that out technological develops have resulted in the exponential growth of computing power and a decline in the cost products such as computer chips. However, advances in technology have also resulted in an increase of rate in business failures.
For example, since 2003 a new company has reached a $1 billion valuation every three months in the United States. Yet, the time it takes for firms to reach that valuation shrunk. Canadian e-commerce firm Shopify took nine year, but Slack took only one.
Businesses are growing faster, but they are also exiting more rapidly. In 1960, the average lifespan of a Standard & Poors 500 company was 56 years, by 2014 that number dropped to 15 years.
“Some even suggest that in just 10 years, 40 per cent of today’s Fortune 400 companies will no longer exist,” the report said.
There are four key areas organizations should assess to determine their preparedness for disruption:
- Awareness of the forces that have the potential to disrupt the firm’s business or industry
- A culture that promotes, encourages and provides incentives for innovative behaviours and practices
- Organizational agility to embrace new ways of working and making decisions that make it easier to rapidly redeploy systems, assets and people to address external opportunities or threats
- Effective resources, like advanced technologies, human capital and financial assets, that can be used to enable change often through the crowd
“This is a call to business leaders, the government, and the academe,” said Stuart. “Organizations need to build awareness, develop a strategy and act now based on that strategy.”
