Many companies may underestimate how close they are to an industry tipping point concerning digital competitors. Research shows that when rates of digitization hover below 30 percent, fewer than one in ten incumbent players across industries have adopted offensive corporate strategies that change their portfolios and business models. New digital entrants typically hold less than 10 percent of the market.
However, when industry digitization climbs toward the 40 percent mark, the environment changes abruptly. That’s when digital attackers will likely have locked in a 15 percent market share and incumbents will sense that the upstarts have sufficient momentum to tilt the market to their advantage.
As companies approach the 40 percent threshold, the portion of revenue digitized by incumbents still remains modest, just 20 percent, since they still have considerable legacy businesses. However, it’s here that the two camps divide the market’s overall digital revenues roughly evenly, so the risks of inaction are high.
While room to maneuver narrows substantially, fastmoving incumbents still have a chance to stay in the game if they move boldly. However, companies in the bottom quartile of digitization will struggle to remain competitive.