British firms to face digital disruption by 2018

The fourth industrial revolution is being driven by digitisation, big data and other rapid advances in technology - Digital Disruption Manufacturing
Disruption is imminent for a wide range of industries, according to the study.

Half of all UK business leaders fear that their industries face significant digital disruption within the next two years, according to new research published this week by Microsoft.

Microsoft’s study, Digital Transformation: The Age of Innocence, Inertia or Innovation?, examined how organisations across several sectors planned to compete and ‘survive’ in response to the unprecedented pace of change driven by digital disruption.

The report, the most extensive of its kind to date, found that while disruption is imminent for a wide range of industries, the shelf life of current business models is also extremely limited – nearly half of the 1,000 UK business leaders (44%) said their existing business models will cease to exist within the next five years.

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The study revealed that the financial services sector demonstrated the highest level of anxiety.

The financial services sector, which employs 2.2 million people and contributes £66bn in taxes to the UK economy, demonstrated the highest level of anxiety, with two-thirds (65%) of respondents fearing the impact of digital disruption on their markets over the coming 24 months.

Despite the potential threats such disruption will mean for British businesses, many organisations appeared unwilling to face the coming changes. Almost half (46%) of business decision-makers said senior leaders in their organisations were unwilling to disrupt their existing businesses to grow and compete.

General manager, marketing & operations, Microsoft UK, Nicola Hodson explained: “The dawn of the fourth industrial revolution is a massive opportunity for British businesses, but many are still living in an age of innocence or inertia when they need to be innovating.

“While this research indicates that business models are breaking, many business leaders appeared unwilling to address them.”

Industry 4.0 Tech Digital Stock Image
Digitally savvy start-ups are disrupting established markets by deploying new technologies quickly and easily.

Speaking about the seismic levels of digital disruption occurring in the UK and around the globe, Hodson added: “New challengers, many who are digitally savvy start-ups, are disrupting established markets by deploying new technologies quickly, and luring expectant customers away from established competitors.

“For many larger organisations, the challenge is how to react to this market disruption in a considered way and how they maintain competitiveness in a rapidly shifting landscape.”

The financial services sector feared that the biggest disruption will come from entirely new market entrants (33%) – significantly higher than both retail (10%) and manufacturing (10%). As a result, financial organisations are more focused on the future, with two-thirds (64%) stating that they have a formal digital strategy in place.

UK business leaders remain cautious of the long term societal impact of rapid digital transformation – 51% said they are anxious it would raise more concerns about privacy and security. Those in the public sector are most worried (56%), compared to those in financial services (48%) and retail (47%), yet the figures are relatively high across industries.

In addition, a third (33%) thought that older generations of workers would get left behind in some way, rising to more than 40% from those in retail, pointing to cultural change as a potential barrier.

This points to a need for government and business to work together to address privacy and security concerns for the benefit of all, putting people first. Education on how data is used and empowering citizens to take ownership of their data is also fundamental if society is to truly benefit from the promise of digital transformation.