The impacts of digitisation and automation are transforming the way businesses operate. Professors Nada and Andrew Kakabadse consider the key challenges ahead.

There is a myth that new digital start-ups do not really have customers, reputations or markets to defend. Nor do they have equity, revenue or profit. They rely, the argument goes, on equity investors, and their services are usually free because the pursuit of customers is very important for them.

This line of thinking adds that established companies with long-term business models have high profile reputations to defend, possess less flexible capital, and face multiple points of physical and digital customer contact.

However, such misguided opinions fail to fully appreciate that only certain organisations seem to be more adaptable.

Our research shows that mission-driven entities have a better chance of successful transformation, making them fit for Industry 4.0 (the name for the current trend of automation and data exchange in manufacturing).

This is not the case for organisations pursuing the vision of an incumbent CEO, often in post for little more than three to four years.

Established organisations should, in theory, have the necessary capital and market channels to successfully transform their business model. Despite this, poor leadership and closeted thinking means they are often unable to fend off more agile and aggressive digital newcomers.

This is important as digitalisation is fundamentally changing existing value chains across industries and public sectors.

Mobile apps, big data, (ro)bots and the Internet of Things (the interconnection using the Internet between computing devices embedded in everyday objects), are enabling organisations to send and receive data, while the Industry 4.0 economy is penetrating both business language and models.

Media, banking, telecom and insurance industries are all now pioneering sectors undergoing a large-scale digital transformation.

These new digital technologies are spawning disruptive changes that inevitably lead to networks, communities and financial markets engaging in fundamental transformation. In addition, new market entrants, which hold no legacy concerns, are introducing change at a phenomenal pace.

To address this disruption, established firms must adapt to operating in the digital economy. New, native digital start-ups’ competitive advantage stems from their rapid utilisation of information as a basic resource through digital channels, and the automation of business processes.

Alongside changes being made in sales, including e-shopping and self-serving, and with a new digital ecosystem creating an entirely new business model, this process is also accelerating the emergence of increasingly innovative companies.

Barriers to market entry have been substantially reduced and, through automatisation, operating costs have also substantially reduced making it much easier to launch a new business today.

It is clear is that the digital challenges facing industry are known. It is up to those organisations being held back by the ever-changing nature of a CEO’s vision, and the underlying short termism which undermines shareholder value, to change.

In these disruptive times, success can only be achieved by those who make mission and sustainability their prime purpose as part of a wider digitisation strategy. Emphasising the ability to react quickly and effectively to navigate new challenges is crucial.