By Andrew Shipilov, Professor of Strategy at INSEAD
Despite all the hype, augmented reality, virtual reality, mixed reality, blockchain and 3D printing have had a small impact on businesses in the last few years. Big data analytics has had the biggest impact, according to a recent survey in which respondents were mostly senior executives and around 50 percent of them worked in large companies.
Big data analytics, cloud and machine learning have all had a significant impact on business in the past two years. Big data analytics seems to have changed almost all business areas (creation of new revenues, core business protection, improvements in operational efficiency, new customer acquisition, increased retention and loyalty of existing customers). Cloud computing primarily helped improve operational efficiency.
Artificial intelligence to become more prevalent
Looking ahead to the next two years, however, our respondents expect that the use of artificial intelligence will increase in almost all business areas, except those concerned with the attraction and retention of talent. The use of cloud is likely to decrease, or reliance on cloud technologies may simply become more of a staple in all companies’ business models, much like smartphones today.
Interestingly, the use of the Internet of Things (IoT) and blockchain is likely to increase in the next couple of years. The expectation is that blockchain might primarily help companies improve operational efficiencies while IoT might help them create new revenue.
In the next five years, i.e. over the long term, big data, machine learning and artificial intelligence have the most potential for disruption, while virtual and augmented reality as well as 3D printing are expected to be the least disruptive. IoT and blockchain are in the middle.
Alliances, innovation boards and start-ups
When faced with a new technology, companies have three options. They can either build competencies internally, form alliances and partnerships with others who have mastered them or make acquisitions. Less than a third of our respondents tried to implement a new technology on their own, i.e. approximately 70 percent formed at least one alliance or joint venture involving the new technology.
The picture is totally different with respect to acquisitions: close to 70 percent of the respondents did not buy any company to help digital transformation. Apparently, companies use partnerships as the dominant strategy for dealing with digital technologies.
Unusual innovation ideas
In addition to partnerships, decision makers increasingly turn to an unusual source of innovative ideas – the board of directors. Traditionally, boards exist to ensure compliance, manage risk and supervise the top management team.
However, over a third of our respondents (working for companies with a board of directors) indicated that their board strongly encouraged top management to pursue risky initiatives that could help reinvent the company’s business. This is an interesting finding: it seems that many companies are using directors as “innovation boards”.
(Part II of this leadership op-ed will be published on July 18. The author Andrew Shipilov is a Professor of Strategy and the John H. Loudon Chaired Professor of International Management at INSEAD.)