Digital Crisis Looms: Nearly 1 in 2 Business Leaders Fear Digital Start-ups Will Make Their Business Obsolete Within 3-5 Years

News highlights:

• 48% of global businesses don’t know what their industry will look like in 3 years
• 78% of businesses consider digital start-ups a threat, either now or in the future
• Around six in ten businesses are unable to meet customers’ top demands
• Just 5% of businesses can be classed as ‘Digital Leaders’
• 73% confess digital transformation could be more widespread

TWEET THIS: New Research by @Dell: 4/5 businesses feel threatened by digital start-ups http://bit.ly/2dfPNg3 #DigitalTransformation

ROUND ROCK, Texas — (BUSINESS WIRE) — October 5, 2016 — 78% of businesses believe digital start-ups will pose a threat to their organization, either now or in the future, according to new research from Dell Technologies announced today. This phenomenon is propelling innovative companies forward and accelerating the demise of others. Almost half (45%) of global businesses surveyed fear they may become obsolete in the next three to five years due to competition from digital-born start-ups.

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Dell Technologies Launches the Digital Transformation Index (Graphic: Business Wire)

Some companies are feeling badly bruised by the pace of change. More than half (52%) of business leaders have experienced significant disruption in their industries over the past three years as a result of digital technologies and the Internet of Everything, and 48% of global businesses don’t know what their industry will look like in three years’ time.

The findings result from an independent survey by Vanson Bourne of 4,000 business leaders -- from mid-size to large enterprises -- across 16 countries and 12 industries.

“So far the fourth industrial revolution has proved as ruthless as its predecessors. If companies can’t keep up, they will fall behind … or worse. The ‘delay until another day’ approach simply won’t work,” explains Jeremy Burton, chief marketing officer for Dell Technologies.

Patchy Progress or Digital Crisis looming?

Progress has been patchy to say the least. Some companies have barely started their digital transformation. Many have taken a piecemeal approach. Only a small minority have almost completed their digital transformation. Just one in three businesses surveyed are performing critical digital business attributes* well. While only parts of many businesses are thinking and acting digitally, the vast majority (73%) admits digital transformation could be more widespread throughout their organization.

Around six in ten companies are unable to meet customers’ top demands, such as better security and 24/7 faster access to services and information. Nearly two-thirds (64%) confess to not acting on intelligence in real-time.

“These are imperatives for success in a digital age. Failing to deliver in such a highly contested marketplace could trigger the beginning of a digital crisis,” added Burton.

Dell Technologies’ Digital Transformation Index supplements the research and rates companies based on respondents’ perceived performance about their firms’ digital transformation. According to the benchmark, only 5% of businesses have catapulted themselves into the Digital Leaders group; almost half are lagging behind.

1. Digital Leaders: 5% - digital transformation, in its various forms, is ingrained in the DNA of the business

2. Digital Adopters: 14% - have a mature digital plan, investments and innovations in place

3. Digital Evaluators: 34% - cautiously and gradually embracing digital transformation, planning and investing for the future

4. Digital Followers: 32% - very few digital investments; tentatively starting to plan for the future

5. Digital Laggards: 15% - do not have a digital plan, limited initiatives and investments in place

Digital Rescue Plan

Given the acute threat of disruption, businesses are starting to escalate a remedy. To advance their digital transformation:

• 73% agree they need to prioritize a centralized technology strategy for their business
• 66% are planning to invest in IT infrastructure and digital skills leadership
• 72% are expanding their software development capabilities

In order of priority according to respondents, the top planned IT investments over the next three years are:

1. Converged infrastructure

2. Ultra-high performance technologies (Example: Flash)

3. Analytics, big data and data processing (Example: Data Lakes)

4. Internet of Things technologies

Additionally, between a quarter to a third of businesses have created a full digital P&L (36%); are partnering with start-ups to adopt an open innovation model (35%); have spun-off a separate part of the organization or intend to acquire the skills and innovation they need through M&A (28%). Just 17% measure success according to the number of patents they file and nearly half (46%) are integrating digital goals into all department and staff objectives.

“In the near future, almost every business will have software development expertise at its core. Many of these companies will be brand new, others – having not written a line of code in 20 years – will have been on a momentous journey. New digital products and services will drive the transformation of IT infrastructure as businesses struggle to manage 1000x more users and 1000x more data,” says Burton.

“Digital Transformation is the result of blending the power of technology with a rapidly adaptable culture that understands not only what technology can do for its business, but why it is so important in creating the future of the enterprise,” said Daniel Newman, principal analyst, Futurum Research. “Every C-Suite leader looking to up their investment in digital transformation needs to understand the threats to their industry and how technology can take their business to the next level to stay competitive.”

Notes to editor

*In 2015, business leaders agreed on a core set of digital attributes businesses must embrace to succeed over the course of the next decade. These are:

1. Innovate in agile ways

2. Predictively spot new opportunities

3. Demonstrate transparency and trust

4. Deliver unique and personalized experiences

5. Always on, operate in real time

According to last year’s research, only 4% of businesses executed all key digital business attributes well and company-wide. This year, the figure climbed to 7%.

The proportion of businesses performing any one of these attributes well and company-wide is also higher this year.