Competing in the age of disruption

Let’s say you were an executive for a large transportation company or a hotel chain back in 2008. You probably expected innovation from your main competitors, but be honest: Would Uber and Airbnb have been on your radar?

Technology- and data-based transformation has arrived in full force. And if you think that your company or industry is immune, think again. Only twelve percent of the Fortune 500 companies who were in business in 1955 are still around. Before stepping down as CEO of Cisco Systems in June of 2015, John Chambers spoke at a conference and bluntly told attendees, “40 percent of businesses ...unfortunately, will not exist in a meaningful way in 10 years. If I’m not making you sweat, I should be.”

For years, society has been adopting new technologies at a faster and faster pace. At the same time, a fundamental shift in capabilities has intensified the disruptive impact of these technologies, accelerating the rate of change. Data storage costs have plummeted by orders of magnitude over the past few decades. Cloud computing has exploded and leveled the competitive playing field, giving startups access to the same computing power as the largest corporations in the world.

At the same time, machine learning and emerging technologies such as augmented and virtual reality are rapidly transforming industries as diverse as healthcare and auto. Disruption is the new normal, and failing to recognize its inevitability and potential impact is a mistake no business or business leader can afford to make.

THE LEADERSHIP OF CHANGE

According to a recent article on change management in the Harvard Business Review, “leaders should view change not as an occasional disruptor but as the very essence of the management job.” Organizations that navigate change effectively tend to be highly transparent and agile with strong leadership driving a shared vision of sustainable growth.

Companies that view change as a threat, rather than an opportunity, tend to lack transparency and propose short-term “fixes” that fail to address real business challenges resulting in a sense of insecurity and confusion across the organization.

“The role leadership plays in driving real, transformational change within any organization is critical,” says Kris Timmermans, Senior Managing Director for Supply Chain and Operations Strategy within Accenture Strategy. Timmermans oversees the company’s ZB or Zero-based initiative, a management technique that helps companies identify and achieve cost reductions in order to strategically redeploy resources to fuel innovation and sustainable growth.

Zero-based thinking is gaining traction among a wide variety of companies, with established brands leading the charge. With Zero-based thinking, businesses are reversing shrinking market share and recapturing organizational and operational agility. But as Timmermans points out, zero-basing an organization isn’t easy. It requires companies to build budgets from scratch (Zero-based budgeting), rationalizing every line item that doesn’t contribute to growth – from marketing expenses to company travel – to maximize human capital based on business opportunity - automating repetitive or redundant processes - and to create a culture of change.

“Going ZB is not a strategy,” says Timmermans, “it’s a means to a bigger end: to drive cultural and behavioral change within the organization. That’s why leaders need to consistently explain why the company is adopting a zero-based approach. They also need to embody ZB principles in how they conduct their own business – preaching cost-consciousness and accountability and then staying in 5- star hotels makes it hard to drive behavioral change in the rest of the organization. “

“Finally, leadership plays a governance role by maintaining a healthy tension with budget owners. They are actively engaged in the ZB process, meaning there’s accountability on top of cost ownership.”

In an era of constant disruption and economic volatility, more and more companies are being forced to confront the reality of diminishing profits, stagnating growth and organizational uncertainty. Regaining the agility to compete comes down to more than simply cutting costs. It’s about embracing new ways to drive cost-consciousness and transparency, identifying mispent resources in order to unlock new sources of revenue and growth, and creating an operating model that can deliver on business strategy while supporting a culture of continuous transformation.

In the end, a Zero-based mindset (ZBx) provides companies with a holistic framework of accountability, allowing them to zero-out waste and zero-in on new growth opportunities.

For Timmermans the benefits of ZB are clear.