A report from The Economist Intelligence Unit THE HYPERCONNECTED ECONOMY PHASE 2: HYPERCONNECTED ORGANISATIONS EXECUTIVE SUMMARY Human society is becoming ever more interconnected, with the number of connected devices expected to increase thirtyfold between 2009 and 2020 The sharp increase in interconnectedness that results from the Internet, mobile technology and the Internet of Things (IoT) is referred to as “hyperconnectivity” This is not merely a technology trend It is the era-defining cultural milieu in which we live—and in which businesses operate—in the 21st century The hyperconnected economy is a multi-phase research programme conducted by The Economist Intelligence Unit (EIU), sponsored by SAP The first phase reviewed the existing literature and interviewed experts and academics on the economic consequences of hyperconnectivity Phase two examines how hyperconnectivity applies at an organisational level For this, the EIU surveyed 561 business leaders from across the globe and from a range of industries, job functions and company sizes The results of the survey are presented in this executive summary A forthcoming report will analyse the findings in greater depth The key findings are: Organisations recognise that adapting to hyperconnectivity is crucial for their survival Almost six out of ten respondents (59%) agree with the statement that “failure to adapt to hyperconnectivity is the biggest risk that our organisation faces” This response is most common among retailers (68%) but unusually low among consumer goods companies (45%) A clear majority of respondents nevertheless believe that hyperconnectivity has been positive for their organisation (86%) and for their industry (83%) so far However, nearly onethird agree that it “presents more threats than opportunities” This view is more common among retailers (44%) and companies from the AsiaPacific region (44%) Organisations generally believe that they are meeting the challenges effectively, with 69% of respondents agreeing that their company “is doing a good job of The hyperconnected economy: Phase Hyperconnected organisations adapting to hyperconnectivity” The industry with the least support for this statement is healthcare, with 65% of respondents agreeing Digital offerings from established competitors, not digital start-ups, are the most significant source of competitive pressure Disruption at the hands of a Silicon Valley start-up is the business bogeyman of the current era, but so far companies have experienced more competitive pressure from established companies launching digital products Over half (57%) of respondents say they have experienced “moderate” or “severe” competitive pressure as a result of digital offerings from established competitors This proportion is highest among IT and technology firms (81%) and companies from Asia-Pacific (74%) Startups based on digital technology have been the source of this kind of pressure for just under half (49%) of respondents today Looking ahead to the next three years, again more respondents expect “moderate” or “severe” competition from the digital offerings of established competitors (69%) than from digital startups (58%) The acceleration of business processes is pushing companies to automate The most widely cited organisational impact of hyperconnectivity is that “business processes have accelerated” Healthcare providers and manufacturers are especially likely to have experienced this (in both cases 53% of respondents) It stands to reason that “automat[ing] business processes” is the most commonly cited organisational response (46%) Healthcare companies are particularly eager adopters of business process automation (58%) In future, respondents believe that hyperconnectivity will make their organisation more agile, more innovative and less centrally controlled, the most popular prediction being that “the ability of central management to control the organisation will be reduced”, cited by 46% of respondents Working methods and skills requirements are evolving Nearly four out of ten respondents say their organisation has introduced digital skills training (39%), reflecting the changing nature of everyday work in the hyperconnected age This training is especially common among manufacturers (45%) The way in which work is organised is also changing, and the same proportion (39%) say they have “adopted agile development and/or project management techniques” This proportion is highest among IT and technology firms (53%) The least common of the organisational responses offered is “having appointed a chief digital officer” Cited by just 19% of respondents, it is most common among financial services (25%) and manufacturers (25%), and least among healthcare companies (10%) The most common response to increased competition resulting from hyperconnectivity is to enter new markets, as adopted by 47% of respondents Luckily for them, hyperconnectivity has also made it easier to identify new markets that are suitable for companies to enter (41%) Organisations are looking to other geographical locations for suppliers as well as customers, and 38% of respondents report that hyperconnectivity has improved their ability to work with international suppliers This is especially true among manufacturers (44%) Looking forward as hyperconnectivity grows, 45% of respondents believe that an increasingly globalised supply chain will allow them to reduce costs significantly Interestingly, this view is widely held among healthcare (including pharmaceutical and biotech) companies (59%) Hyperconnectivity is driving a move towards mass personalisation Half of respondents (50%) believe that the continued growth of hyperconnectivity will mean that “products and services will be increasingly tailored to customers’ individual needs” Surprisingly, this view is less widely held by retailers (36%) than by other industries To date, the most common consequence of hyperconnectivity for customer relationships has been that “digital channels have allowed more direct contact between customers and employees” (39% of respondents)—a view that is actually more widely held among retailers (50%) In second place is “customers typically check online reviews or social media before purchase” (38%) Nearly half of the organisations surveyed (48%) have responded to hyperconnectivity by “tak[ing] efforts to improve our visibility and reputation on social media that have improved our business” This approach is particularly popular among financial services companies (54%) © The Economist Intelligence Unit Limited 2015 .. .The hyperconnected economy: Phase Hyperconnected organisations adapting to hyperconnectivity” The industry with the least support for this statement is... competitors, not digital start-ups, are the most significant source of competitive pressure Disruption at the hands of a Silicon Valley start-up is the business bogeyman of the current era, but so far companies... hyperconnectivity will make their organisation more agile, more innovative and less centrally controlled, the most popular prediction being that the ability of central management to control the organisation