Three steps to anticipate market disruption
Three steps to anticipate market disruption

Three steps to anticipate market disruption

To stay ahead of trends, start by envisioning your worst-case competitor.

Disruptions rarely start with a big bang. Most begin quietly as “weak signals,” barely noticed — until they’ve suddenly turned the market upside down.

Weak signals occur every day. The trick is discerning where they intersect to bring about change over time. For example, we’ve all witnessed rising college costs, faster data speeds, and endless improvements in information technology. Yet, how many could foresee that these forces would converge to allow universities to stream online classes around the globe — for a fraction of the cost?

The fact is, recognizing weak signals amid marketplace noise is no easy task, and one that isn’t on the radar of most CEOs. According to KPMG’s U.S. CEO Outlook 2016, 85 percent of chief executives don’t believe they have enough time to strategize about responding to disruption with innovation.

So how can business leaders better discern nascent trends? And how can they use those insights to adapt their organizations to stay ahead of disruptions? What if they could envision their “worst-case competitor,” a hypothetical company uniquely suited to capitalize on emerging trends? Would that help guide them to the best path to take?

Take an outside-In approach.

The pressures of running a profitable enterprise drive many companies to focus inward. Concerned with challenges in their immediate competitive domains, they risk missing the small but important signals of change.

KPMG has found that an “outside-in” sensory approach — that is, studying political, economic, social and technology (PEST) trends at their earliest stages — can help uncover weak signals that could turn into market disruption for our firm and our clients.

We study trend indexes to monitor venture capital flow, start-up launches and technology investments — as well as insights from clients, academia, social media and industry analysts. Taken together, we are able to generate a holistic picture of emerging forces with the potential to disrupt tomorrow’s markets.

Instead of beginning with changes stemming from the latest technology, we prefer to start with the human element, putting an emphasis on customer needs and experiences. We find that ethnographic research into areas such as demographic shifts, evolving buyer behaviors and changing communication preferences helps illuminate where the greatest opportunities for innovation lie.

Translate signals Into action.

Recognizing signals is only the beginning. Leadership must wrestle with how these forces might affect their company’s future. Here are some steps that can help:

  • Determine the extent of the disruption. Executives need to drill down to understand the nature of the potential disruption (is it technology, for example, or customer preference?), the velocity of the change (will it happen tomorrow or five years from now?), how customers would view the change, and the potential impact on the top and bottom lines.
  • Figure out what the disruption will mean to your business. Business leaders need to determine how potential disruptions will affect their company’s business and operating models. For example, if you’re a retailer, do you follow the lead of successful online retail giants by offering a membership program with premium services? Or is uncovering another model that fulfills a different customer need the key to your success, or even survival?
  • Dig deep into design thinking to satisfy customer preferences. When weighing changes to processes and business models, the customer experience must be paramount. Design thinking identifies customer needs first, then builds a business model and the supporting technology around them. For example, telemedicine services offer lower-cost doctors’ visits via video feed, a development that was conceived to meet patients’ needs for more economical and efficient access to medical care. Ask yourself, what’s the corollary in my industry?

Pressure test your dcisions.

Finally, leaders need to “pressure test” scenarios that exploit various disruptive forces and create a roadmap to achieve the most promising outcomes. Envisioning your worst-case competitor is a particularly effective exercise. Using the insights noted above, imagine a company with the right combination of product offerings, business model, technology platform and speed of delivery to create exceptional customer experiences and capture significant market share. Decide whether to prevent this hypothetical worst-case competitor from coming to life, buy or develop capabilities that allow you to model certain strategic advantages, or become, in effect, that competitor yourself.