In digital economy, success often comes at expense of innovation

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There is a significant gap between institutional investor expectations for disruptive innovation and how well prepared CEOs say their companies’ are to seize the opportunity disruption presents, according to a new report from consulting firm EY.

The report, which comes from the EY think-tank EYQ, found that global organizations need to embrace the concept of duality, in which they sustain the core business while also creating disruptive new business models.

About two thirds (67 percent) of the 100 global institutional investors surveyed want companies to undertake potentially disruptive innovation projects even if they are risky and might not deliver short-term returns. Only 50 percent of the 101 global CEOs surveyed said they are well prepared to take advantage of disruptive change and opportunity.

While CEOs and institutional investors agree that technology innovation is the number one source of disruption, when it comes to other sources of disruption their opinions differ. New business models are the second biggest source of disruption for institutional investors, while for CEOs it is changing customer behaviors.

“Innovation is a challenge that often becomes more difficult with success, as growing and larger companies find themselves faced with more short-term concerns,” said Mark Weinberger, EY global chairman and CEO. “In today’s accelerated digital economy, CEOs must strike the right balance by delivering on current business plans while strategically disrupting existing offerings in order to ignite the next phase of growth.”

In other findings: Only 54 percent of CEOs report being the owner the company’s disruption agenda; and just 43 percent of CEOs assign their companies a “good” or “very good” score for investing in exploratory, long-term projects that may not deliver a short-term return.

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