BrazilAccenture: Middle East companies risk losing $400 billion to disruption
More than half of the Middle East’s leading executives expect their industries to be disrupted in the next three years according to a new survey from Accenture, with over $400 billion of enterprise value at risk.
In a new cross-sector analysis of 200 of the largest companies in the Middle East conducted by professional services firm Accenture, together with a survey of 150 C-suite executives from Saudi Arabia and the United Arab Emirates, the firm has concluded that nearly half of the leading regional enterprises are highly susceptible to future disruption – with an estimated $442 billion at risk due to limited innovation capacities.
The survey further found that 45 percent of Middle Eastern companies are already feeling the impact of disruption today, while 60 percent were expecting their industries to be disrupted in the coming three years – the most currently susceptible being those in the high-tech, infrastructure, chemicals, industrial, and retail sectors, with companies in the travel, auto and healthcare sectors also facing heavy potential disruption in the coming years.
The wide susceptibility to disruption is according to the firm due to the small fraction of Middle Eastern companies which are taking full advantage of opportunities available, just 11 percent, amounting to more than $400 billion in trapped value. Delving deeper, the Accenture analysis determined that 63 percent of the companies assessed were ‘omni-trapped,’ – neither using innovation effectively to improve current operational performance nor expected to build future growth.
“The digital revolution has exposed abundant value opportunities for companies to raise efficiency and develop new kinds of products and services. Companies that can leverage innovation to drive deep organisational change are more likely to unlock trapped value. If the average Middle Eastern company does not find a way to release trapped value, somebody else will. Those failing to embrace innovation’s transformative power risk falling by the wayside.” said Accenture research director Yusof Seedat.
The omni-trapped companies included those in the high-tech, communications and retail sectors among others, while the next bracket, the 14 percent which are ‘present trapped’, such that they are creating future expectations, but not delivering strong performance at present, features companies operating in the healthcare, natural resources and energy sectors. Meanwhile 12 percent (travel, media, insurance) were considered ‘future trapped’ – delivering solid current performance, but lacking future potential.
As part of the study, Accenture also examined the remaining 11 percent of local companies which fall into the ‘value releasers’ category, identifying seven traits the firm reveals as common among the six percent of companies termed as Innovation Champions; being hyper relevant, network-powered, technology-propelled, asset-smart, inclusive, talent rich, and data-driven. Such companies, even large incumbents, use emerging tools and innovation to routinely capture new market opportunities – reporting 12 percent higher revenues and 10 percent higher profits than their peers.
But Accenture cautions that innovation isn’t just some ad-hoc ‘creative’ process, stating that Innovation Champions share other common traits; “First, they have done all the right things to create a smooth, reliable, and repeatable innovation process – defining a strategy, creating a culture that rewards innovation, and building a formal innovation architecture. Second, and perhaps more importantly, these companies have undertaken a fundamental organisational change that embeds innovation across the enterprise and makes innovation part of everyday business.”
Here, the firm notes that at returns on innovation investment among 840 globally surveyed companies have declined by 27 per cent over the past five years. “With more than $400 billion of enterprise value at risk and with unrealised market opportunities in the Middle East, industry leaders must change their approach to innovation,” concludes Dubai-based managing director of Accenture Digital in the Middle East and Turkey, Xavier Anglada “By preparing a comprehensive digital strategy, they will be able to pivot to new growth opportunities without abandoning their core business.”
The seven common traits of Innovation Champions, as stated by Accenture:
Data-driven. They generate, share and deploy data to support innovation – using advanced analytics to discover insights, make recommendations, guide customer interactions and customise offerings.
Hyper-relevant. They strive to always be relevant by sensing and addressing customers’ changing needs – collaborating with customers to identify the most high-potential ideas and using design thinking to create products and services that create great customer experiences.
Talent-Rich. They create a workforce that is flexible, augmented and adaptive – using a combination of permanent and temporary resources; adopting tools such as artificial intelligence (AI) to offload routine tasks; and investing in developing leadership capabilities to manage innovation.
Asset-smart. They adopt intelligent asset- and operations-management approaches to run businesses as efficiently as possible and free up capacity for innovation – using advanced tools to optimise asset utilisation and intelligent process automation, combining basic process redesign with AI and robotic process automation.
Inclusive. They take an inclusive approach to innovation and governance, involving a broad range of stakeholders – such as working with ecosystem partners to develop a responsible supply chain or adopting blockchain to increase transparency.
Network-powered. They strive to harness the power of a carefully managed ecosystem of partners – whether by investing in processes that facilitate the flow of ideas from outside the company or using digital technology to offer products “as a service.”
Technology-propelled. They master leading-edge technologies that enable business innovation, ensuring that top leaders are advocates for adoption of new technologies.
