
The average tenure for members of the S&P 500 was as follows;
- 61 years in 1958
- 25 years in 1980
- 18 years in 2011
It concludes that at this current rate, 75% of these incumbents will be gone in 13 years.
Their research on "disruptive technologies" includes threats and significant opportunities for companies over the next ten years or so. It lists how the existing digital technologies will evolve considerably including mobile internet and cloud computing and new breakthroughs in areas such as advanced robotics, next-generation genomics, 3-D printing and energy storage.
It is claimed that the impact of this activity will add as much as $33 trillion a year in economic value by 2025. This will provide big opportunities but also the reports says that there will be "big shifts in profit pools, big changes in consumer behavior, and a hungry host of new entrepreneurs eager to shake up the status quo."
Despite the disruption that lies ahead, the good news is that there are many opportunities to foster innovation at scale for larger companies who have in their arsenal large amounts of capital, an existing process for managing a portfolio of businesses and a will have a presence in several places along the value chain. These being key advantages that the attackers and start-ups do not have.
Taking into account what lies ahead it is crucial that these large companies avoid the "innovation dilemma" described by author Clay Christensen, that being, a tunnel vision approach to protecting existing profit margins and ignoring until its too late the attack by competitors using innovative low cost approaches to obtain the low end of the value chain and then use the gains to obtain more and more of the business.
In short, McKinsey concludes that each company needs to "adapt and create its own innovation playbook" In a recent white paper Eight Essentials of Innovation Performance McKinsey surveyed over 2,500 executives from 300 companies and what followed was the 5 steps to rekindle innovation namely;
1) Quantify your aspirations with clear targets
2) Reallocate assets actively
3) Make it safer to take more chances
4) Rethink talent management and extend your network
5) Above all, evolve new business models
Although this report by McKinsey primarily applies to the larger organisation and how they need to protect themselves from disruptors there are clearly lessons to be learned for the SME, the question is; can you become a disruptor yourself?
Are there large players serving the top end of the market leaving the back door open for niche innovators like yourself to offer a more simpler, more cost effective product or service to a whole group of people who do not need or can't afford the top end products.
What innovations can your business offer lower down the chain to create a market segment that you own and can build upon?