CITIGROUP: Half of all global companies could be disrupted in the next decade

Technology is changing the world.

Yes, I know you know that. But knowing that the world is changing, and figuring out how to prepare for that change, are two different things. And it’s the latter that CEOs are focused on.

A case in point: Citigroup just published a big report on corporate finance priorities for 2017, and included alongside talk of activism, financial engineering, and capital allocation, there’s a newer entrant: adapting to “disruptive innovation.”

“As pioneering technologies develop and mature, they will have a broad and profound impact on many corporates,” the report said. “For some, this will be a matter of survival.”

To make the point, the report includes this chart below. The graph on the left-hand side shows how the emergence of the Apple iPhone and Samsung Galaxy “dramatically altered mobile markets.” The report identifies the likes of Nokia, Motorola, LG and Blackberry as “old market leaders,” and Apple and Samsung as “new market leaders.”

This is a topic we’ve discussed before, but the Citigroup report goes so far as trying to put a number on the percentage of companies impacted by this kind of disruption:

“Over the past two decades, technological disruption affected approximately 10% of global public companies by market capitalisation. In the coming decade, up to 47% could face pressure to adapt to some form of technological disruption, according to our analysis of the most promising emerging innovations today.”

That 47% figure is based on the aggregate market cap of industries “potentially at risk of future disruption” from a whole host of emerging technologies, ranging from autonomous vehicles to the internet of things to 3D printing.

One response has been for old-industry companies to reinvent themselves (see GE) or to buy or partner with newer, technology-focused companies. The auto sector is a case in point. Mergers and acquisitions activity into the tech sector from non-tech companies has grown 179% since 2013, according to Citigroup.

Business Insider discussed this topic with Wall Street dealmaker and Moelis & Co. founder Ken Moelis last year. Here’s what he had to say:

Digitization has created opportunities for everybody to accumulate information in a way they were never able to, and analyse it with a speed that just wasn’t there. Everybody is looking at their base business and saying, “What else is it? Sure, we do this, but while we’re doing that, what else do we know about our customer, and what does that enable us to do?” That comes from the access to information and the ability to analyse it with a speed they never had. I think everybody is thinking that way.”

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