Middle East companies could lose $442bn if they fail to innovate
Accenture Innovation Maturity Index says business value at risk from competition and disruption
Companies in the Middle East could miss out on $442bn of enterprise value, if they fail to innovate and adapt to market disruption, Accenture says.
According to a new report from Accenture, $442 billion in value is at risk from disruption for Middle Eastern companies due to their limited innovation capabilities. The report, ‘Accenture Innovation Maturity Index 2018 - Middle East', notes that although many companies have increased their spending on innovation in recent years, these investments have not necessarily led to above-average growth. At a global level, return on innovation spend has declined by 27% over the past five years.
The report is based on an analysis of 200 of the largest companies by revenue across 18 industries and a survey of 150 C-suite executives from 11 industry sectors across the UAE and Saudi Arabia.
Sixty percent of C-suite executives said they expect their industry to be significantly disrupted in the next three years. In addition, 45% of Middle Eastern companies are feeling the impact of disruption today, and 44% are highly susceptible to future disruption. The most susceptible today are in the high-tech, chemicals, industrial machinery and equipment, infrastructure and retail sectors, with companies in the travel, auto and healthcare industries likely to be heavily affected in the coming years.
"With more than $400 billion of enterprise value at risk and with unrealized market opportunities in the Middle East, industry leaders must change their approach to innovation," said Xavier Anglada, managing director of Accenture Digital in the Middle East and Turkey and co-author of the report. "By preparing a comprehensive digital strategy, they will be able to pivot to new growth opportunities without abandoning their core business."
Accenture notes that while transformation is difficult, some 6% of businesses sampled in the Middle East have been able to reinvent their core business and build for the future. These companies, which Accenture dubs ‘Innovation Champions' have been able to pivot their business, using digital platforms, big data analytics and other technologies, to scale innovations and tap new market opportunities.
These innovation champions typically create a repeatable innovation process, to continually introduce new ideas, and change the organisational structure to make innovation a part of their structure. These innovation champions typically report 12% higher revenues and 10% higher profits than other companies in the study.
"The digital revolution has exposed abundant value opportunities for companies to raise efficiency and develop new kinds of products and services," said Yusof Seedat, a research director at Accenture and co-author of the report. "Companies that can leverage innovation to drive deep organizational change are more likely to unlock trapped value. If the average Middle Eastern company does not find a way to release trapped value, somebody else will. Those failing to embrace innovation's transformative power risk falling by the wayside."