Disruption can be a force for good when companies wield it for competitive advantage by reinventing themselves. To get a sense of how well today’s executives are abiding by that principle, PwC analysed findings from its 26th Annual Global CEO Survey, focusing on the relationship between resource allocation and the expected long-term impact of two formidable sources of disruption: new technology and the energy transition.
As the chart above shows, the overall picture is encouraging. CEOs expect remaking their business for the future—as opposed to improving current operations—to be the focus of more than half of their investments in alternative energy and new technology in the next 12 months. The data also shows that this is true even of companies whose CEOs expect no disruption to current operations from technology or alternative energy, suggesting that these reinvention-focused investments may be more than just defensive moves. These companies may be looking to take strategic advantage of the disruption, even amplify it.
Three actions can help determine the right level of reinvention-focused investment for your organisation:
- Consider the pace and scale of disruption. Gartner estimates that companies will invest US$4.7 trillion in IT in 2023 alone, and the International Energy Agency forecasts that companies will invest US$2.8 trillion in alternative energy solutions. With that much cash flowing, the pace and scale of innovation may change the competitive landscape faster than you expect. Test your assumptions on your own investment allocations to make sure they aren’t short-changing reinvention in the interest of operational improvements that may prove short-lived.
- Scan the M&A market. M&A can be an effective reinvention accelerator. First, executives and their boards should assess what their organisation brings to the table, whether as an acquirer or as a target, and then hunt accordingly. Acquirers should keep in mind that companies that have been investing in technology for short-term operational improvements will have a different value than those that have invested in long-term innovation. For their part, CEOs who determine that their organisation is better off as a target for acquisition may be able to command a premium if they can articulate how their investments complement those of acquiring companies.
- Innovate for the present. For CEOs who are concerned about their short-term viability, cost-cutting is a logical focus. After all, you won’t have a long term if you don’t survive the year. But the across-the-board cuts can damage your most productive activities. Cutting R&D, for example, can wipe out innovations that may be your lifeblood in a world redefined by technology or new energy sources. And targeted innovation can save money and improve current operations even as it reinvents a company for the future.