Truths and consequences

Four drivers of change that threaten business as usual

There are four new 'truths' of the marketplace that are shaping the future of business. Visible all around us yet rarely considered as a group, they are powering waves of innovation coursing through every sector. As their impacts spread, they are lowering barriers to entry, unlocking opportunities, and increasing the likelihood of new competition—and business model disruption—for incumbent firms. Could yours be next?

Four truths in a changing world

In the work we have done with clients across a range of industries, including financial services, we have seen four new features of the world that are game changers for business and innovation. These four truths are making what was once difficult, expensive, or complex now easy, cheap, and simple.

  1. Coordination has never been easier: There are now hundreds of applications that put people in touch with one another, making it easier for people to share and develop products, services, research, ideas, and opinions. As a result, organizations can form without traditional obstacles, creating new business models in the process. Teams can form around a shared purpose, drawing the right talent from a global pool rather than settling on talent that is locally available. And small groups and individuals can achieve coordinated outcomes that used to be possible only for large organizations.
  2. Money has never been easier: Making money is still difficult. But aggregating, organizing, moving, and exchanging money has all gotten much easier. The result is tremendous power and freedom for handling money without dependence on traditional institutions.
  3. Making has never been easier: Making things—from small batch prototypes to mass production of complex objects—has already gone through a step change in ease and sophistication. Going beyond physical products and services, software and networks help entrepreneurs create new financial products and services that not long ago would have been impractical or even impossible to create in-house.
  4. Learning has never been easier: The ability for anyone to learn has been transformed. The capacity to access and discover information from peers, standing bodies of knowledge, and observations of what is happening as it happens is fundamentally new, especially at the scale we see it now. Furthermore, the access to learning is largely free.

From four truths to three Vs

We are already seeing that the number of start-ups around the world is growing, and the rate at which new entrants are coming to market is increasing. Again, the impact of the four truths is that fundamental tasks for organizations that used to be hard are being made easier. So finding the right talent and collaborating over long distances has been simplified. Complex products can be created through collaboration with subject matter experts. And digitized information is ubiquitous and available literally at your fingertips. All of this is compounded by the relative ease of with which we can move and manage money.

As a result, the three V’s—volume, variety, and velocity—of new business formation are growing, and we expect they will grow more. The traditional business models that were defined by limitations in coordination and access to technology, knowledge, and capital are no longer the only viable options. New technology-enabled businesses are free to experiment with structures that are smaller, nimbler, and cheaper to operate.


New organizations emerging

It is no surprise, then, that new types of organizations are emerging—organizations that are established not over multiple generations, but that can emerge and grow to dominance within a decade. As we witness new companies developing at exponential rates, we are also seeing the accelerated pace at which long-established organizations stumble when faced with disruption: top automakers go bankrupt, leading retailers collapse, and the most prestigious names in news struggle against the relentless erosion of their businesses, to take just three recent examples.

In short, a new generation of businesses is forming around these trends. With technology-enabled organizations entering the marketplace with unprecedented velocity, variety, and volume, the traditional notion of ally and competitor is being brought into question. Competing institutions often have similar needs in terms of talent, capital, and IT infrastructure. Also, if the recent cyber-attacks on international financial institutions have taught us anything, it is that many financial services institutions have similar vulnerabilities in cybersecurity and can benefit from collaboration on common strategic risks.


Responding to this new reality

As you consider the four truths, the changes already seen in business and society, and the changes that are yet to come, you may be asking: What now? Or, more specifically, how can you respond to changes and events that are uncertain, have no historical precedent, and leave an organization vulnerable to strategic risks that threaten to disrupt the assumptions at the very core of its business model?

Fortunately, the tools to help companies survive in a changing world do exist. And smart organizations will develop a system to deal with unexpected change that threatens their business models. This system should include people, processes, and capabilities to:

  • Accelerate discovery: Today’s organizations must institute mechanisms that accelerate discovery at a pace that can keep track of surprises and revisit strategies if they are no longer valid.
  • Scan ruthlessly: Identifying sources of risks is the first step to preventing surprises. The next step is to continuously track those risks as they develop.
  • Confront biases: What you have experienced in the past will not likely repeat itself. We have to challenge our understanding of our operating environment in order to embrace necessary change that can initially be disorienting and uncomfortable.
  • Prepare for surprise: After understanding your potential risks, it is important to rehearse readiness. Decisive action in the face of ambiguity is one of the greatest challenges of leadership.

Strategic risks can destroy huge amounts of value very quickly, and they can threaten the existence of the institution or entire lines of business. Identifying these potential risks early can only be to an organization’s advantage.

Download the PDF to read the full article, which first appeared in Issue 9 of Inside magazine, published by Deloitte Luxembourg.

Four drivers of change that threaten business as usual
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