ME companies could keep $400bn of enterprise value from being lost
Companies in the Middle East are being roiled by disruptive change, which is putting more than US$400 billion of enterprise value at risk from competitors that have learned to innovate and convert economic opportunities into realities, according to a new report by Accenture.
The report, “Accenture Innovation Maturity Index 2018 – Middle East,” is based on an analysis of 200 of the largest companies by revenue across 18 industries and a survey of 150 C-suite executives from 11 industry sectors across the UAE and Saudi Arabia.
Among the key findings: 60% of C-suite executives said they expect their industry to be significantly disrupted in the next three years. In addition, 45% of Middle Eastern companies are feeling the impact of disruption today, and 44% are highly susceptible to future disruption. The most susceptible today are in the high-tech, chemicals, industrial machinery and equipment, infrastructure and retail sectors, with companies in the travel, auto and healthcare industries likely to be heavily affected in the coming years.
Accenture estimates that a total of US$442 billion in value is at risk from disruption for Middle Eastern companies due to their limited innovation capabilities. The report notes although many companies have increased their spending on innovation in recent years, these investments have not necessarily led to above-average growth. At a global level, the return on innovation spend has declined by 27% over the past five years.
Yet a small group of players across industries and economies in the Middle East — 6% of the sample — has shown that even large incumbents can innovate — and even act as disruptors. These companies are executing what Accenture calls a “wise pivot”: reinventing their core businesses while building future business. These “innovation champions” are using digital platforms, big data analytics and other technologies to release trapped value by scaling innovations and routinely seizing new market opportunities.
“With more than US$400 billion of enterprise value at risk and with unrealized market opportunities in the Middle East, industry leaders must change their approach to innovation,” said Xavier Anglada, managing director of Accenture Digital in the Middle East and Turkey and co-author of the report. “By preparing a comprehensive digital strategy, they will be able to pivot to new growth opportunities without abandoning their core business.”
Accenture’s analysis reveals that innovation champions do two critical things: First, they create a reliable and repeatable innovation process — defining a strategy, creating a culture that rewards innovation and building a formal innovation architecture. And second, and perhaps more importantly, they undertake a fundamental organizational change that embeds innovation across the enterprise and makes it part of everyday business. This is reflected in several traits that innovation champions use to build innovation into the fabric of their business, adopting practices that make them:
– Data-driven. They generate, share and deploy data to support innovation — using advanced analytics to discover insights, make recommendations, guide customer interactions and customize 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 optimize asset utilization 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 the adoption of new technologies.
Adopting these seven key traits can create significant economic benefits, the report notes, with innovation champions reporting 12% higher revenues and 10% higher profits than other companies in the study.
“The digital revolution has exposed abundant value opportunities for companies to raise efficiency and develop new kinds of products and services,” said Yusof Seedat, a research director at Accenture and co-author of the report. “Companies that can leverage innovation to drive deep organizational 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.”