By Nicola Shield, Governance Risk & Compliance Partner, and Arthur Hughes-Hallett, Financial Services Disruption & Innovation Lead
Disruption is an opportunity far before it is ever a risk. By having a structured, data-led approach to horizon scanning, businesses can implement a proactive strategy that enables them to take advantage of disruptive forces.
Though most organisations will have an informal approach for mapping potential disruption, it’s often an ad hoc exercise involving a subjective assessment of selected risk factors. This fails to provide a full view of emerging risks, and also means the findings will likely fail to trigger a response from the C-suite.
Instead businesses should implement an objective, quantitative approach to horizon scanning for disruptors. One that uses a transparent scoring system to monitor risks on an ongoing basis, providing a robust overview of your future opportunities.
In an increasingly complex and interconnected environment, it’s of paramount importance to understand which external factors are relevant to your organisation and what is simply noise.
Let's use an example – think of an emerging technology like vertical farming. It gives us the ability to grow vegetables through vertical hydroponics, making the most of unused space on the side of a building and helping keep the air in our cities cleaner. Who would be affected by this? If I’m a restaurant owner this is a fantastic innovation, moving from “farm to table” to “wall to table”. However, if I’m a farmer, whose core assets are my fields, I’m more threatened by this development.
This is where the crux of the matter emerges – some disruptive events are hugely beneficial to one industry, while being catastrophic to another. There are any number of new technologies and approaches that might eventually emerge as a disruptor, so how do you begin to map them out? It’s inevitably a complicated process, so at PwC we use a proprietary technology to help automate parts of it, reducing a broad range of trends and emerging risks into a shortlist of potential disruptors.
Staying in the farmer’s shoes, we’ve now defined what’s relevant to our sector based on a data-first approach. We then need to understand when these things might hit maturity. As mentioned, disruption is an opportunity far before it’s a risk. It’s knowing when is the right time to respond which is of fundamental importance.
To achieve a quantifiable measure of the maturity of each potential disruptor, you need to select data points that will monitor changes in the technical or commercial viability. These serve as the early signals that should trigger a response.
As an example, if you’re monitoring the commercial viability of vertical farming, you might select proxy measures such as patent applications (e.g. hydroponics), investment trends (e.g. VC funding), or hiring patterns (e.g. LinkedIn job posts) from relevant competitors. The exact data sources you select will depend on the type of disruptor and the availability of data points.
A data-informed approach to horizon scanning for disruptors will enable you to make measured, proactive decisions on how to respond. The exact course of action will depend on the nature of the risk and the opportunity it presents, but it will trigger structured conversations and decisions, such as an increased investment in a new technology, or even a new product launch. If we consider the vertical farming example, a farmer might respond to this new technology by changing the type of crops that they grow.
Ultimately it means you’re able to take positive action and gain an edge on the competition. Moreover, you are basing your decisions on statistical analysis, rather than hearsay and opinion.
Clearly this is a process that can’t be done in isolation by one business unit. It requires collaboration across the risk, strategy and customer-facing elements of an organisation to ensure that the most relevant disruptors and data points are being monitored. This coordinated planning will help give senior leaders the confidence that they’re making informed decisions on how to navigate the risk landscape, turning disruption into an opportunity.
Get in touch with Nicola Shield or Arthur Hughes-Hallett to find out how we can help you implement a data-led approach to risk mapping.