Digital Acceleration: The Disruption Imperative

To help raise the bar on innovation, internal auditors can work with stakeholders to nurture opportunities for disruption and manage the risks of falling behind.

This article comes from the April 2021 issue of Internal Auditor magazine: Digital Acceleration. As data continues to grow at exponential rates, organizations are challenged with how to assess, use, and govern it.

Change can bring new business opportunities for those organizations that are willing to embrace it — or the death knell to those that choose to ignore it. Yet despite that stark choice, organizations appear to be polarized over the pros and cons of disruptive innovation. It has the power not only to accelerate the pace of business and afford new ways of working, but also to turn long-standing business models on their head or make them obsolete. 

Some early adopters have reached meteoric heights quickly: Consider the impacts that "disrupters" Airbnb, Amazon, and Netflix have had on the hotel, retail, and home entertainment industries, respectively. And spare a thought for the former behemoths they left in their wake because they failed to adapt — video rental firm Blockbuster and booksellers like Borders. 

According to Breaking Through Disruption, a report from consultancy Accenture, C-suite mentions of "disruption" during earnings calls, investor conferences, and company announcements have increased significantly over the past decade — and with them, the anxieties of executives across industries. Indeed, in The IIA's latest OnRisk report, chief audit executives (CAEs) cite disruptive innovation as one of the top risks facing their organizations. More ominously, however, they also described it as one of the risks that they had the least personal knowledge of and the least capability to manage. 

But experts say there are many ways internal audit can help their organizations manage disruptive innovation. Looking at both the risks of falling behind industry advancements and the need to explore opportunities for innovation, internal auditors have the ability to add significant value to today's fast-paced, highly disruptive environments.

A Host of Risks

Remko Renes, assistant professor, Corporate Governance, at Nyenrode Business University in the Netherlands, says the debate organizations face often involves whether they should move first (into the unknown) or second (after a competitor). "Innovation largely requires companies to throw money at a problem, but disruptive innovation can require them to consider completely changing their business model or their service offering," Renes says. "It is little wonder, therefore, that some boards find the whole concept of disruptive innovation a terrifying one."

Continue reading The Disruption Imperative on the website of Ia.