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November 4, 2015updated 22 Sep 2016 11:57am

IBM C-suite report: Enterprises must “prepare for digital invaders” as boundaries blur

Research: IBM's 'Redefining Boundaries' global C-suite report says beware 'digital giants' and 'ankle biters'.

By Alexander Sword

In IBM‘s second survey of the global C-suite, disruption looms large on the agenda as both "digital giants" and "ankle-biters" prepare to muscle in on new territory.

The study, entitled "Redefining Boundaries", surveyed 5247 C-suite executives (CxOs), including 818 CEOs, 643 CFOs, 601 CHROs, 723 CMOs and 657 COOs. Most represented are CIOs, with 1805 respondents.

It aims to explore how C-levels are dealing with the threat of competition and how they are positioning themselves to deal with the future.

One of IBM’s three key pieces of advice, as well as to "create a panoramic perspective" and "be first, be best, or be nowhere", was to "prepare for digital invaders" – invaders which fall into two main camps.

"There are two kinds of invader: digital giants and ankle-biters.

"’Titans like Alibaba and Tencent have begun to muscle in on territory traditionally occupied by state banks such as ours," the CIO of a financial services firm based in Hong Kong explained.

"The CMO of a U.S. food retailer can sympathize. ‘Google is getting into the grocery business to protect the profitability of its ad display business, and Amazon is getting into the business because it wants to sell the world to the world," she ruefully remarked."

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While the giants are landing "a few well-placed punches", the report adds that "the ankle-biters are equally dangerous en masse.

"They’re small, smart and agile.

"They’re also unencumbered by legacy infrastructure. In fact, they often don’t have any infrastructure at all because they use others’ assets."

The banking industry is cited as an example of a traditional industry where these ankle-biters are taking "chunks of flesh". Consumers can now use "Nutmeg for savings, Kabbage for loans, Robinhood for stock trading and Currency Cloud for cross-border payments" – functions previously all performed by banks.

The digital invasion could also come from another industry, according to the report. While CxOs used to think rivals were equally likely to come from their own industry, "today, CxOs are more worried about outsiders invading their patch.

"The boundaries between industries are continuing to erode, as companies in one sector apply their expertise to others – bringing previously separate industries together and sometimes redefining the very way in which they’re classified," the report says.

"Agrochemical giant Monsanto is moving into ‘data-driven farming,’ for example, with the
creation of real-time tools to help farmers maximize crop yields.

"And U.S. defense contractor Lockheed Martin recently partnered with DNA-sequencing firm Illumina to develop personalized health and wellness solutions."

In the face of "a ‘technological onslaught,’", the report says that "while CxOs overwhelmingly agree on the importance of technology, they’re more uncertain about its impact.

"If we gamble on the wrong thing, it could have a really negative impact on our business," said one respondent to the survey.

The report splits the adaptive, innovative organisations into Torchbearers and Market Followers, accounting for 5 percent and 34 percent of the total sample respectively.

"Comparing the two groups shows that Torchbearers are more aware of the risk of being disrupted by new entrants from other industries and of the potential of cognitive computing systems. They’re also more likely to be entering new markets and adopting a more decentralized management style.

"In short, Torchbearers are better prepared to recognize and deal with attacks from digital invaders, and they’re deploying some of the same tactics their rivals use."

In terms of specific technologies, 63 percent of CxOs think that cloud computing and services will be particularly important, 61 percent think mobile solutions will be and 57 percent think the Internet of Things will be.

This is ahead of cognitive computing, advanced manufacturing technologies and new energy sources and solutions at 37 percent, 28 percent and 23 percent respectively. Bioengineering and man-machine hybrids saw much lower interest, cited by 12 percent and 10 percent respectively.

Benefits cited for cloud computing and services were higher speed and agility, lower capital expenditure and operating costs, more productive use of IT resources and easier collaboration.

Mobile solutions brought access to real-time data and opportunities to improve customer experience, while the IoT would bring better utilisation of assets and the ability to convert products to services, add wrap-around services and personalise offerings.

In addition, security concerns are high on the agenda as the world becomes more connected, with IT security risks being cited as the top risk by 68 percent of C-suite executives.

In the fact of these various disruptors, the report has several recommendations. One is that enterprises "put more scouts on the front line", or decentralise management structures so that decision-makers have better intelligence and are less reliant on historical data.

Partnerships were also cited as important, so that key resources can be shared with allies to boost experimentation and innovation.

In addition, the report recommended that companies "seize the middle space" in order to become the "linchpin in a virtual network other companies use to reach their customers."

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