Davos Agenda

Tech companies can survive digital disruption – here's how

Composite image of hand holding smartphone with smartphone icons

Image: Freepik.

Dana Aulanier
Practice Director, Global Technology and Cloud Services Practice, Bain & Company
David Crawford
Partner; Leader of Global Technology and Cloud Services Practice, Bain & Company
Ravi Vijayaraghavan
Partner; Technology and Cloud Services Practice Leader, Bain & Company
Our Impact
What's the World Economic Forum doing to accelerate action on Davos Agenda?
A hand holding a looking glass by a lake
Crowdsource Innovation
Get involved with our crowdsourced digital platform to deliver impact at scale
Stay up to date:

Davos Agenda

This article is part of: Global Technology Governance Summit
  • The technology industry is disruptive by nature – once a company falls behind, it can be hard to keep up with the competition.
  • As a result technology companies are constantly having to evolve and innovate to stay ahead.
  • So what's enabled some businesses to weather digital disruption while others have lagged behind?

The landscape for big technology companies is growing more challenging, as regulatory scrutiny and antitrust efforts intensify around the world. But the fact is, regulation alone isn’t likely to dethrone the top technology companies. Let’s remember: rapid change at the top is the way it works in the technology industry.

Just look at the sheer magnitude of the turnover among the highest-valued technology companies over the past two decades. By 2009, newcomers had replaced about half of the 1999 list of the 15 highest-valued technology companies worldwide. From 2009-2019, 40% of the top 15 turned over again. Only four companies remained on the list through the entire 20 years: Microsoft, Intel, Cisco, and Oracle.

Have you read?

There’s a reasonable argument that those fast-paced dynamics aren’t going to stop, regardless of what happens in the regulatory landscape. While technology executives are rightly paying attention to regulatory developments, they shouldn’t lose focus on their most enduring challenges: staying ahead of customer needs and behavior – as it relates to technology adoption – and remaining ever paranoid of the competition. That’s particularly important in the context of the industry’s eternal disruptions and shifts in leadership. The technology sector’s vibrancy and capacity for innovation leads directly to its rate of creative destruction, with or without regulation.

This dynamic nature isn’t par for the course in most industries. Bain & Company research conducted in 2019 of more than 1,300 companies’ performance from 1996-2018 shows that technology companies are 12% more likely to be disrupted than companies in retail and 25% more likely than those in financial services – two other industries that have historically gone through disruptions. Although the term “disruption” has become something of a cliché, here we’re specifically referring to companies whose annual market capitalization growth lags their sector’s average by 2% or more for at least three years in a row. Only advanced manufacturing and services companies have a higher likelihood of being disrupted than technology companies.

Disruption isn’t just more common in tech – it also can be more damaging and permanent. Once a technology company falls behind, it can be difficult for it to catch up. The same Bain research suggests that a technology company that has been disrupted is 12% less likely to return to sector-average market capitalization growth, or higher, than companies in retail and 17% less likely than those in healthcare, for example. Even more striking, the data shows that once a technology company trails its sector for three years, its chances of turning things around drop below 20% and continue to decline as time goes on.


What is the World Economic Forum doing about the Fourth Industrial Revolution?

Furthermore, recent evidence suggests that even the mightiest of technology companies, the leading cloud tools and services providers, are subject to disruption. A decade ago, as the hyper-scalers grew (Microsoft, Apple, Amazon, Google, Facebook), they largely avoided one another. Over the last five years, they have increasingly crowded into one another’s core businesses. For example, Amazon has challenged Facebook and Google in online advertising. Microsoft and Google have challenged Amazon’s leadership in cloud infrastructure-as-a-service.

In addition, a decade ago, the hyper-scalers were a decidedly American phenomenon. Today, technology competition has clearly globalized, with China-based Alibaba Group and Tencent now two of the most valuable companies in the world.

Lastly, entrants from outside the technology sector have gained traction. Walmart is challenging Amazon in online retail and Disney has joined the video streaming war, taking on Netflix, Amazon and Apple.

Increasing competition between these mighty technology firms stimulates vibrant innovation. For example, one of the hottest sectors of value creation in technology today is cloud-native software. These companies, which include Confluent, Snowflake, MongoDB, Elastic, and Twilio, have collectively grown their enterprise value by more than $400 billion in the last two years, according to Bain analysis of data from S&P Capital IQ, Pitchbook, and Cowen. The roots of some of these companies can be traced to technical problems solved or leadership teams trained from within the big cloud service providers. Likewise, many of the most compelling innovations in technology today (including microservices, edge computing, artificial intelligence, and silicon design), are being driven largely by the cloud service providers.

These realities make regulators’ jobs all the more challenging. When the big technology companies were avoiding one another, it was easier to justify new rules on data sharing and constraints on mergers and acquisitions. In today’s more competitive reality, regulatory actions introduce the possibility of shifting the balance of global leadership, undermining natural scale benefits, and reducing innovation and the associated consumer benefits of scaling new concepts. Whatever regulators do next, they should carefully consider the existing disruptiveness of these markets and innovative contributions of the companies within them.

Don't miss any update on this topic

Create a free account and access your personalized content collection with our latest publications and analyses.

Sign up for free

License and Republishing

World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use.

The views expressed in this article are those of the author alone and not the World Economic Forum.

Related topics:
Davos AgendaDavos Agenda
World Economic Forum logo
Global Agenda

The Agenda Weekly

A weekly update of the most important issues driving the global agenda

Subscribe today

You can unsubscribe at any time using the link in our emails. For more details, review our privacy policy.

From 'Quit-Tok' to proximity bias, here are 11 buzzwords from the world of hybrid work

Kate Whiting

April 17, 2024

About Us



Partners & Members

  • Join Us

Language Editions

Privacy Policy & Terms of Service

© 2024 World Economic Forum