Author: Norbert Schwieters, Global Consumer and Industrial Products & Services Leader
In my last blog, I wrote about the disruptive forces affecting CEOs and their companies – based on what CEOs told us as part of our annual Global CEO Survey. This time, I wanted to look more closely at whether those forces are affecting some industry sectors more than others – and why.
I was struck by how complex the picture is; every sector is grappling to a greater or lesser extent with disruption – from shifts in customer behaviour, to new competitors, and changing regulation. I’ve tried to cherry-pick a few elements that caught my eye.
From the most disrupted…
Perhaps it’s no surprise to find that financial services (FS) collectively feels more prone to disruption than other industries, with insurance and banking particularly affected. Obviously regulation here is a big driver of change, but many other factors are at play too. The transformation in the financial sector reflects changes to the design of the financial system, the impact of digitisation and the level of transformation faced by its customers in various industries – so the combined impact is massive. In recent years, the traditional financial services arena has also been upended by new entrants like supermarkets and digital payment providers. John Neal of QBE shares his views on both the negative and positive aspects of these disruptors.
…to the most disruptive
Within the technology, information, communications and entertainment (TICE) sectors, entertainment and media companies stand out as facing the most disruption. This reflects the impact of digital transformation, with digital distribution channels and changing consumer expectations having a major impact on how content is delivered and the customer experience that’s created. Interestingly, technology CEOs don’t appear to be expecting higher levels of disruption compared to those in other sectors – perhaps a reflection that technology companies expect to be creating rather than experiencing disruption. That’s confirmed by the large number of CEOs in other industries expecting competition from technology companies in the future.
Digital transformation as the driver
The consumer and industrial products and services (CIPS) sectors are different from FS and TICE as they all – energy, industrial products, automotive, retail and consumer as well as health industries – deal primarily with physical products and services. In essence, they’re ‘analogue’ rather than ‘digital’. Transformation is taking hold here as well, although its impact is experienced in different ways depending on where along the physical value chain (up-, mid- or downstream) the industry sits.
In general, it seems that upstream/resource sectors like energy and mining are less worried about disruption than midstream/manufacturing sectors - and even less than downstream sectors like retail and consumer and pharma/healthcare. This may be because the customer experience plays a huge role in downstream sectors and offers an obvious entry point for digital transformation. Not surprisingly, many retail and pharma CEOs ranked changes in distribution channels as being disruptive for their industry. The retail industry is transforming as the continued rise of mobile as a key shopping channel drives a move towards what we call ‘total retail’. Meanwhile, in the pharma industry, new types of medications, including personalised medicine, will pose challenges to distribution strategies.
Power and utilities also stand out in terms of experiencing higher levels of disruption within CIPS. To me, this reflects the energy transformation that’s taken hold in this sector across the globe, along with the sector’s digital transformation.
It’s clear that it’s complicated
There’s no doubt in my mind that CIPS sectors are on the verge of being the theatre for a huge transformation play, as the full impact of the megatrends unfolds. The influence of technology especially will cascade down into the mid- and upstream sectors – we can already see the next generation of manufacturing coming, including the impact of the internet of things, 3D printing and advances in robotics, nano and other technologies.
However, this transformation is complex and there’s a thorny question at its core: how to combine the physical (analogue) value chain that, for so long, has been central to the CIPS DNA, with the virtual (digital) value chain that builds the foundation for an increasingly digitised world?
Every industry and every business out there is experiencing disruption at some level. And what’s even clearer is that CEOs who want to maintain their competitive edge will need to spend time exploring the implications of these disruptive trends: thinking through where their company is now, where they want it to be tomorrow, and what business decisions and strategy they need to navigate – and perhaps even harness – the disruptions on the road ahead.
Norbert Schwieters leads PwC's Global Consumer and Industrial Products & Services group. He's also the Global Energy, Utilities & Mining Leader and heads up the Energy industry team in Germany. Read more