June 7, 2023 | InBrief

The innovation landscape is rapidly changing—and increasingly distributed

The innovation landscape is rapidly changing—and increasingly distributed

As long as technology continues its creep into every facet of our daily lives, customer expectations for organizations’ products, services, and experiences will continue to evolve. That’s why innovation is so critical. 

But the innovation landscape is changing fast—and not in linear fashion. 

Why? Because the digital age has amplified the speed and the scale of disruption, thanks to ongoing technological advancement—and things aren’t likely to slow down.  

Read on to learn how organizations—in the tech industry as well as traditional industries such as manufacturing and banking—are responding to these changes.

Tech is facing strong headwinds  

In today's digital world, technology plays a crucial role in driving disruption and innovation—not to mention in the U.S. economy. However, the tech industry is experiencing significant challenges these days—and they’re manifesting in the form of layoffs, declines in mergers and acquisitions (M&A) activity, and volatile stock performances. 

  • In 2022, 1,056 tech companies announced public layoffs, resulting in 164,951 tech employees being laid off globally. And in just 2023 so far, the number of laid-off employees is already 21% higher than last year. (In fact, the numbers have increased since we published our trends e-book.) 
  • The total value of tech M&A deals dropped from $786 billion in 2021 to $584 billion in 2022.  
  • Additionally, there was a decline in tech startup funding and stock prices. The Dow Jones U.S. Technology Index and NASDAQ experienced significant declines, especially when compared with overall market decline in the S&P 500.
  • The collapse of Silicon Valley Bank (SVB) further intensified uncertainties. SVB had provided loans to emerging tech businesses that were considered too risky by traditional banks.  
  • With SVB's collapse, remaining banks may become more cautious about lending to startups, and venture capitalists (VCs) are likely to slow down their funding. The numbers reveal that around 50% of VC-backed startups had SVB loans, which will have implications for future investments. 

Despite overall industry disruption, some tech leaders have responded by focusing on retrenchment and finding places to innovate where they can. Key strategies include a heightened focus on artificial intelligence (AI), digital acquisitions, and consolidating market positions. For example, companies like Alphabet, Microsoft, Meta, Baidu, Alibaba, and Adobe are racing to elevate their in-house AI projects. And the increase in software acquirers buying other software companies, and the growing adoption of AI-related terms during earnings calls, show some industry players are doubling down on innovation. 

Industry organizations embrace digital transformation

To effectively compete with both traditional tech companies and digital startups—even in the current environment—industry organizations have been pursuing three core strategies:  

1. Digital acquisitions and partnerships. For example, industrial manufacturer Caterpillar made its first acquisition of an energy management SaaS platform in May 2022.  

2. Hiring digital-centric talent. Top employers of tech talent now include traditional tech companies as well as organizations in banking and financial services, consulting, healthcare, retail, and defense. In fact, 59% of employees with tech occupations don’t work in the tech industry. 

3. Digitizing revenue sources. For example, Walmart partnered with Salesforce in 2023 to roll its retail-focused tech tools into Salesforce’s suite of products. The company’s goal: become a tech-services provider for other retailers. 

Business leaders: Respond by shedding old strategies

Organizations need to recognize that market displacement can occur unexpectedly—and from previously undervalued players. (Just look at how OpenAI’s launch of ChatGPT drove Big Tech companies like Google and Microsoft to kick their generative AI projects into high gear.) Bottom line? Even the most successful companies can lose their position if they fail to adapt.  

That's why it’s crucial for businesses to embrace digitization to remain competitive and support an environment of continuous innovation. Those that don’t? They risk being disrupted—and left behind by an increasingly digital world. 

Need an innovation action plan?

Download West Monroe’s Tech Trends to Watch to get ideas on:

Download West Monroe’s Tech Trends to Watch to get ideas on:

  • Where to center your innovation strategy 
  • Building a new approach to innovation by becoming more product-oriented 
  • How to balance risk and innovation 
  • And more  
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