HC3031 - T1 2019: Trends in Global Business Environment Report

This report delves into the key drivers of disruptive innovation in the global business environment, examining the impact of sustainability, customer preferences, demographic changes, and emerging markets. It explores how sustainability concerns are prompting innovation in renewable energy and other sectors, and how customer-centric approaches are shaping product development. The report also analyzes the influence of demographic shifts, particularly millennials and the aging population, on business models and customer engagement. Furthermore, it highlights the opportunities and challenges presented by emerging markets, and how companies are adapting to the rapidly changing competitive landscape. The report emphasizes the importance of collaboration, consumer behavior, and technological advancements in driving innovation and shaping the future of global business.

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Trends in Global Business Environment
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Introduction
Disruptive innovation refers to the type of innovation that assists in creating a new
market as well as a value market. Eventually, the innovation disrupts the existing market and
value network, thus displacing an existing technology. Specifically, the term disruptive
innovation is applied in technical literature and business to define the type of innovations that
improve a service or a good in several ways that are not expected in the market. Typically, the
innovation enhances both products and services by designing them tailored to a specific group of
clients in a new market and later through reducing prices in an existing market. The introduction
of the new technology or a new business model enhances the adoption of a solution that was
initially unavailable in the traditional market as a result of the reduced price of adoption.
Eventually, the adoption becomes global and the traditional also ends up adopting the solution
and as a result, becomes “disrupted”.
To determine the potential drivers of disruptive innovation, it is worth referring to
resources, processes, and values (RPV) that are common in an affected company. Referring to
the theory of disruptive innovation, the three elements are together referred to as the RPV-
framework. Based on a company’s resources that are either tangible or intangible, a core driver is
accessing high-quality ones. As a result, strong Research and Development capabilities have the
potential of resulting in merging disruptive technology. Processes also are drivers of disruptive
innovation but they should foster creativity as well as entrepreneurial thinking. Nonetheless,
combining recognition with a sensible degree of risk-taking is the other driver that is capable of
carving a disruptive innovation. The report aims at determining the key drivers of disruptive
innovation. The report’s body identifies the finding of studies conducted on the topic. The

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discussion section summarizes the literature review by highlighting the most important findings.
The conclusion provides a consensus on the topic.
Key Drivers of Disruptive Innovation
Sustainability
Questions relating to sustainability can no longer be ignored. Individuals, as well as
organizations, are discovering disruptive innovations aimed at tackling such issues and
transforming entire business segments. In the recent decade, there have been many disruptive
innovations but more disruptions are still been forecasted and which are being driven by the
sustainability problem experienced universally (Carayannis, Sindakis and Walter, 2015, pp.92).
Renewable energy that comprises of energy efficiency along with energy storage has begun to
usurp the industry of fossil fuels. Among other means, this is just one example of how
sustainability is driving the emergence of several disruptive innovations. Other such technologies
which are likely to have similar effects include 3D printing, fuel cells, including electric
vehicles. Sustainability is among the key drivers of disruptive technology in the current
competitive business environment (Gobble, 2012, pp.65). The primary reason behind this is that
the world requires to deal with issues relating to the environment as well as social issues. The
issues comprise of resource scarcity, climate change, air along with water pollution, and
increasing demand of an affluent middle class, as well as a growing and an aging population.
The need for tackling sustainability issues is reflected in the increase in regulations. For
example, recent reports made by the New Climate Economy made claims that it was possible for
cities to save approximately $17 trillion if they were able to cut on greenhouse gas emissions,
identifying the fact that it becoming sustainable involves opportunities and risks. Nonetheless,

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consumers also demand sustainability both in the products an organizational strategies, - this has
resulted in business leaders paying more attention to disruptive technologies if they intend their
companies to become sustainable (Seebode, Jeanrenaud and Bessant, 2012, pp.199). According
to the UN Global Compact, the Accenture CEO Study indicates that 97% of CEOs believe that
sustainability will be crucial for the future success of their organizations. In addition, PwC also
notes that 75% of CEOs believe that their firms are creating new products as well as services
with the intention of responding to climate change while 25% of these CEOs claim that
sustainability has been a key driver that is accelerating the growth of their businesses (Klewitz,
Zeyen and Hansen, 2012, pp.452). Organizations that wish to tap the disruptive power of
sustainability are producing products that help the customer become more sustainable. Example
of these brands includes Gap and Marks & Spenser that sell clothes capable of being washed at
30 thus reducing energy bills.℃
Nonetheless, other sectors such as the financial service industry are also not immune to
these disruptive innovations as portrayed by the growth and demand for crowd-funding and
internet banking. As a result, sustainability has also become an increasingly essential factor in
this industry. This has either been through the introduction of new products that consists of green
bonds or even initiatives aimed at disclosing and reducing the portfolios’ carbon footprints that
may include the Montreal Carbon Pledge and the Asset Owners Disclosure Project. However, it
is not only the new products that are likely to disrupt the new ones but also new ways of
conducting business as well (Schaltegger, Lüdeke-Freund and Hansen, 2012, pp.101). As a
result, in the wave of sustainability as a driver for disruptive innovations, collaboration, as well
as a partnership, will be an important factor for organizations and their leaders.

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Customer Preference
According to Schumpeter, consumer preferences are already provided and they do not
undergo sudden changes. Based on Schumpeter’s words, consumers do not cause economic
change. Rather, the above statement denotes that entrepreneurs, as well as businesses, are at the
forefront as the key drivers of change (Petrick and Martinelli, 2012, pp.53). Innovation is
considered to be imperative for competition. However, innovators that are considered to put
more emphasis on consumer centrism are more successful compared to innovators that see an
entrepreneur as the Schumpeterian economic superman whose primary objective is to drive
change. In the present markets, customer feedback has been lopped and amplified in products
and processes. Organizations are increasingly seeking for customers’ input around decisions
relating to features that the organization should develop (Greer and Lei, 2012, pp.70). This is to
mean that an organization’s growth map requires some kind of validation from the consumers.
As a result, aimed at becoming profitable, businesses have been forced to innovate. Despite this
need, in the current constantly evolving markets, the direction of innovation has become elusive,
leading to the proliferation of the Break Things and Fail Fast Business Models (Corsi and Di
Minin, 2014, pp.82). Customer preferences are no longer predictable. In fact, customers’
consumption patterns are actually the most disruptive driver towards disruptive innovation in the
present business environment.
The current environment in which businesses operate has become fast-paced as a result of
customers’ demand for instant gratification. The constant changes in demand could be as a result
of accessibility along with the availability of substitutes as well as alternative products due to the
growth and development of the online business, however, loyalty is quickly waning away
(Zortea-Johnston, Darroch and Matear, 2012, pp.152). Responding to this, organizations are

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constantly and continually iterating and developing new and better versions of the current
offering with the key goal being to meet the constantly changing and evolving consumer needs.
In addition, consumer purchasing decisions have also drastically changed. Social media,
comparison sites along with influencers have changed the manner which individuals source as
well as seek product reviews making it more of a customer-to-customer review process
(Bohlmann, Spanjol, Qualls and Rosa, 2013, pp.239). Based on these facts, customers are indeed
powerful players in the entire scheme of change. Surely, consumption patterns drive disruptive
innovation.
Demographic Change
Of all the forces that drive disruptive innovation, demographic changes among consumer
markets are the most powerful. Considering the most affluent markets, customers born after 1980
have forced organizations to reconstruct their entire marketing as well as customer engagement
strategies, including increasingly influencing the purchasing behavior of their parents. However,
the ‘silver market’ of individuals of over 60s (Kohlbacher, Herstatt and Levsen, 2015, pp.74). As
the global population ages, this group of people, in their twilight years, have resulted in the
creation of the first market for a disruptive technology such as robotics both at homes and
telehealth.
In respect to the youth, there are approximately 3.8 billion individually globally that were
born after 1986. As a result, most of the emerging markets have got a huge ‘youth bulge’ thanks
to improvements in child health. By 2022, it is estimated that the share population of individuals
between 15 and 29 years in Africa will be approximately 28% of the total global population
(Mostaghel, 2016, pp.4899). In India, between 2010 and 2040, approximately 300 million young

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people will begin working. Disruptive innovation seems to be in favor of the young, from Jack
Dorsey to Mark Zuckerberg. Most of the world’s ‘disrupter’ billionaires are people born in the
1980s. This is the same in Silicon Valley as well as in emerging markets such as the founders of
India’s Flipkart including Snapdeal are millennials. In addition, the younger generation is also
driving business models through their behaviors as consumers. Companies in the business of
fashion, entertainment, and music have always paid keen attention to what young individuals
need (Wan, Williamson and Yin, 2015, pp.103). However, in the current business environment
that is driven by the online behaviors as well as expectations of the youth, organizations are
remodeling their engagement approaches including coming up with novel and experimental
marketing along with customer relations initiatives.
The millennials are driving disruptive innovation in the manner which organizations are
engaging with their customers, and are becoming ‘advertising avoidant’ (Schulze, Paul and
Täube, 2015, pp.608). The youth’s attention is fragmented across several websites and social
media, hence making it hard for businesses to identify the best places to place their
advertisements. As a result, there has been a rise of “YouTube Influencers’ whereby
personalities develop their audiences by the use of DIY video content. Instead of organizations
considering advertising as a one-way broadcast from their brand to the customer, organizations
can now piggyback on the Influencer’s relationship with the clients (Grimm, Fox, Baines, and
Albertson, 2013, pp.442). As such, market demographics, for example, millennials have resulted
in disruptive innovations in customer engagement thus resulting in the development of new
models such as the Influencer Marketing.

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Emerging Markets
There has been and will be enhanced business opportunities in the developed and
emerging markets. As a result, the increased number of suppliers have resulted in changes in the
manner in which the products and services they produce are consumed. The marketplace
pressure in to provide goods and services as well as increase their utility from the perspective of
the customer is driving and will continue to drive disruptive innovation (Habtay, 2012, pp.292).
The emerging markets are fighting to offer value to the consumer while at the same time
maintaining profitability. Nonetheless, the developed markets are also increasingly trying to
guard their current market share against emerging markets through cooperating allies along with
searching for means of expanding service innovations, thus leading to disruptive innovations.
In addition, in the current business environment, there have been changes in the rules of
competition. The reason for this change is due to the fact that knowledge regarding technologies
spreads very fast to various parts across the world. Also, the ability, as well as the tools required
to make this knowledge practical, are at the disposal of people and companies at a scale that has
never been witnessed before (Tiwari and Herstatt, 2012, pp.104). For instance, UNIVAX, the big
computer that was developed approximately sixty-five years ago for use in the creation of the
Atomic Bomb filled an entire football stadium. Also, this machine required more than 100
engineers to keep it running. However, today, compared to the UNIVAC, a hand-held device has
got a higher computing power. As a result, emerging markets in the global competition are
disrupting the business environment in many (Palacios and Tellis, 2016, pp.63). Such ways
include applying new technologies in the production as well as the distribution of low-cost,
simple, including convenient goods and services that have got reduced functions that existing
organizations had not thought of availing to the market. The incumbents mainly focus on

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sustaining current innovations as well as existing product and service features. Essentially, their
leaders act like maintenance engineers that make use of today’s innovations in keeping products
as well as ideas flourish, instead of being architects that image the products and services of
tomorrow which will be demanded in the emerging markets.
The disruptive innovation resulting as a result of emerging markets can best be explained
using the pharmaceutical industry. For instance, 80% of the prescription drugs that are currently
in use in combating diseases were not available a decade ago. However, most of these drugs are
now being developed and tested in the emerging markets (Gawer and Cusumano, 2014, pp.421).
The success of this development can be attributed to increased technological readiness, enhanced
training, and educations, as well as the freedom of trade which is linked with these emerging
markets and which are attributes of disruptive innovation. The example of the pharmaceutical
industry is meant to show that rising organizations in the emerging markets are creating
increased competition and threatening premium players in every market. Newcomers are driving
disruptive innovation thus becoming competitors in today’s global competition (Pantano, 2014,
pp.348). Many organizations in the emerging markets are rising in the world ranking as the most
innovative firms and hence threatening the market share of firms from developed countries. Such
innovative organizations in the emerging market may include TATA Motor Company (India),
LG (South Korea), BYD (China), and Petrobras (Brazil).
Discussion
Innovation has disrupted the existing market and value network. There are several
disruptive innovations which are focused on handling sustainability issues in order to transform
the entire business segments. Technologies such as 3D printing, electric vehicles, and fuel cells

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are examples of disruptive innovations. Sustainability among the key drivers of disruptive
technology in the present business environment (Osiyevskyy and Dewald, 2015, pp.63). The
main reason behind this that the globe needs to handle issues relating to the environment as well
as social problems. one of the issues that sustainability needs to handle include resource scarcity,
climate change, air along with water pollution, and increasing demand of an affluent middle
class, as well as a growing and an aging population. As per the research conducted by the UN
Global Compact, the study reveals that 97% of CEOs believe that sustainability will be
significant for the future success of organizations. Moreover, the studies of PwC indicates that
75% of the CEOs believe that their companies are developing new services and products with the
aim of responding to climate change.
The second driver of disruptive innovation is the customers' preference. The forefront of
change are the businesses and entrepreneurs. Since innovation in the current business world is
considered as a competitive advantage, many businesses have been forced to learn about the
preferences of consumers (Sultan and van de Bunt-Kokhuis, 2012, pp.173). Organizations are
increasingly seeking for customers’ input around decisions relating to features that the
organization should develop. This is to mean that an organization’s growth map requires some
kind of validation from the consumers. There have been several changes in consumer demand
since the tastes and preferences vary from time to time. The constant changes in demand can be
attributed to the growth and development of the online business, however, loyalty is quickly
waning away.
The third driver is the demographic change. As people transform from one stage to
another, their needs change. The age of persons is a big influence on their demand. The
purchasing behavior of children is different from young adults and old adults. Young adults

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mostly use social media sites which greatly impact their buying compared to children and old
adults (Pegoraro, 2014, pp.135). Instead of organizations considering advertising as a one-way
broadcast from their brand to the customer, organizations can now piggyback on the Influencer’s
relationship with the clients. Due to this, market demographics for example millennials have
resulted in disruptive innovations in customer engagement thus resulting in the development of
new models such as the Influencer Marketing. The driver of emerging markets explains the
pressure that businesses get to offer value to the consumer while at the same time maintaining
profitability (Nagy, Schuessler and Dubinsky, 2016, pp.122). The emerging markets are fighting
to offer value to the consumer while at the same time maintaining profitability. Nonetheless, the
developed markets are also increasingly trying to guard their current market share against
emerging markets through cooperating allies along with searching for means of expanding
service innovations, thus leading to disruptive innovations.
Conclusion
Over the past two decades, technological innovation has slowly but constantly become
embedded in the lives of humans. As a result of disruptive innovations, costs of goods and
services have continued to fall with the range of potential use becoming dramatically high.
Innovation has helped transform industries and assisted in designing new business models.
Sustainability, demographics change, customer preference, and emerging markets are the key
drivers to disruptive innovation. The rising concern for sustainable energy and environmental
pollution has driven the need for new ways that will reduce the rate of pollution. Such
innovations include the manufacture of electric cars which have disrupted the motor vehicle
industry. Nonetheless, consumers are also concerned with goods and services that are

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environmentally conscious. Consumers tend to get aligned with companies that are
environmentally savvy.
Nonetheless, the buying patterns of the young generation is inclined towards the use of
online platforms. Youths tend to be less concerned with advertisements being conducted through
the use of billboards and other traditional advertising methods. Hence, this has called for
companies to devise new innovations to advertise to the young generation. Also, customer
preference is continuously changing and companies are inventing new means of meeting the
unpredictable customer demands. Emerging markets are also leading to disruptive innovations by
inventing ways of cutting costs while maintaining profitability. The four drivers are driving
disruptive innovation and it is the time that the incumbents become open to change. To do this,
they should take the data they acquire through technology and work with other individuals in re-
inventing processes and adjusting the manner in which they conduct their daily activities to
harness full benefits. The needs, as well as the expectations of the consumer, are continuously
evolving and only innovation can help meet these new expectations and needs. Disruptive
innovation is all about value, efficiency, choice, demand, sustainability, and transparency and the
four drivers are at the helm of disruptive innovation.

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