If the change in the FTSE 100 has shown anything it is that no company or sector is immune to disruption. Four in ten companies listed on the index ten years ago are no longer there.
Conventional wisdom has it that large companies always have the resources and ‘know-how’ to compete. Yet in an age of disruption, many larger businesses are struggling to digitally transform at the pace, a new joint report from CBI and Oracle – ‘Bigger, Faster, Stronger’ has found.
Greater adoption of technology could unlock productivity and wage growth. Research shows that more adoption, coupled with better management practices, could add £100 billion to the UK economy and cut income inequality by 5 per cent. However, only 54 per cent of UK companies believe disruptive technologies play an important role in their organisation, much lower than in countries such as France, Germany, India and Russia.
Since the 2008 Financial Crisis, UK productivity growth has slowed considerably compared to many G7 competitors, with key sectors such as financial services and construction experiencing negative growth. At the same time, a productivity and prosperity gap is opening up between companies willing to invest in the latest technologies and those that are not.
The research highlights that larger companies – which account for 48 per cent of UK turnover and employ 40 per cent of its workforce – are especially struggling to digitally transform. They face a range of issues including skills scarcity, complex legacy systems and a 25 per cent greater threat from cyberattacks compared to other companies. By contrast, smaller start-up companies are more likely to adopt new technologies, while firms aged over 15 years are the least likely.
Felicity Burch, CBI Director of Digital and Innovation, said:
“No business can rest on its laurels when it comes to technology. Big firms must be doing all they can to stay ahead of international competitors and adopt new technologies that will boost productivity and efficiency.
“Many will assume that, with the resources at their disposal it’s easy for large firms to adopt new technology. But a host of challenges, from ageing legacy systems, cyber security threats and agile new challenger firms can make successful innovation feel like hitting a moving target.
“For the UK’s big hitters to secure their position as world leaders over the next 10 years, senior business leaders must be prepared to challenge their established ways of operating and cultivate an environment that encourages employees to seek innovative solutions to company-wide issues or these companies risk extinction.
“If larger businesses don’t want to become dinosaurs, they need a long-term plan for adoption of new technologies. But they cannot do this alone.”
Neil Sholay, Vice President of Digital Innovation at Oracle, said:
“In any digital transformation project, culture is crucial and knowledge is power. Both the latest technologies and connected thinking are needed to ensure the benefits of innovation are felt at all levels of the organisation. Digital innovation is everyone’s job, and everyone should be willing to learn from exemplars in other companies and sectors.
“One of our customers, West Midlands Police, wasn’t unique in the challenges it faced, but it’s a great example of utilising technology to its fullest. By adopting a shared services model in its back-office based on a standardised Oracle software-as-a-service module, West Midlands was able to create £36 million in savings and streamline processes for officers. This not only cut resolution time to 24 hours for 80 per cent of operations, it doubled reported satisfaction.
“At the same time, innovation isn’t an endgame, it’s a constant process of transformation. The only constant today is disruption, so businesses need to evolve ruthlessly fast to keep up with it. That means providing employees with the tools they need to be creative, collaborative and agile at all times.”
The four fuels of innovation
The joint report also sets out new guidelines from CBI and Oracle to help large businesses ease their digital transformation journeys and become more competitive. Recommendations to improve productivity and employee engagement include:
- Bring digital transformation to the boardroom – senior business leaders must commit to addressing risks, sharing learnings across departments, and being strong advocates for change
- Digitally empower your workforce – make growing digital skills a company-wide initiative and focus on building trust and fostering communication to drive further innovation
- Maximise and connect your silos – silos are a reality within any large business, but when connected to an overarching strategy they can act as useful testing grounds for innovation
- Automatically upgrade –invest insystems and software that constantly update and self-optimise to help the business keep pace with disruption