Hyperconnected Economy 02, EIU

THE HYPERCONNECTED ECONOMY: PHASE 2
HYPERCONNECTED
ORGANISATIONS
HOW BUSINESSES ARE ADAPTING
TO THE HYPERCONNECTED AGE
The hyperconnected economy: Phase 2

Hyperconnected organisations
Contents
About this study
Executive summary
Introduction
Understanding the challenge
Organisational adaptation
Market disruption
11
Conclusion
13
Appendix: Survey results
14
The Economist Intelligence Unit Limited 2015

About this
study
The hyperconnected economy is a multi-phase

research programme conducted by The Economist
Intelligence Unit (EIU) and sponsored by SAP.
Hyperconnectivity is defined as the sharp
increase in the interconnectedness of people,
organisations and objects that has resulted from
three consecutive waves of technology innovation:
the Internet, mobile technology and the Internet
of Things (IoT). This report investigates its impact
at an organisational level and draws on the
following two research methods.
1. A global survey of 561 executives. Survey
respondents were drawn from a range of industries,
including 16% from financial services, 13% from
manufacturing and 11% from IT and technology.
One-third of respondents are of C-level seniority or
higher; one-third are senior vice-presidents, heads
of department or of equivalent seniority; and the
remaining one-third are other senior managers
representing a range of industries. Just over half of
respondents (58%) work for companies with
annual revenues of up to US$5bn; the remaining
42% have annual revenues above US$5bn. The

geographical split is as follows: 30% North
America, 30% Europe, 30% Asia-Pacific, and the
remainder from the rest of the world.
2. A series of expert and executive interviews.
The EIU interviewed the following experts and
executives for this report (listed alphabetically):
l Phil Abram, chief infotainment officer, GM
l Andrew Brem, chief digital officer, Aviva
l Jim Buczkowski, director of electronics and
electrical systems engineering, Ford
l David McCorquodale, UK head of retail, KPMG
l Mark Curtis, chief client officer, Fjord
l Davide Strusani, assistant director, economic
consulting, Deloitte
The Economist Intelligence Unit would like to
thank these interviewees for their time and
insights.
The report was written by Michael Kapoor and
edited by Pete Swabey.

Executive
summary
Hyperconnectivity is high on the corporate agenda.

The majority of executives believe that failure to
adapt to hyperconnectivitythe growing
interconnectedness of people, organisations and
machines that results from the Internet, mobile
technology and the Internet of Thingsis the
biggest risk their organisation faces.
Executives generally feel positive about
hyperconnectivitymost say it presents more
opportunities than threats, and they believe they
are doing a good job of adapting to it.
But while experts warn of the need for
substantial change to meet the challenges of
hyperconnectivity, only about one in five survey
respondents expect to restructure radically as it
intensifies in future. These are the findings of a
study by The Economist Intelligence Unit,
sponsored by SAP. The study, which is based on a
global survey of 561 executives, examines their
views on hyperconnectivity and its impact on their
organisation.
The key findings are as follows:
Adapting to hyperconnectivity is a matter of
survival, most executives agree. Six out of ten
survey respondents agree that failing to adapt to
hyperconnectivity is the biggest challenge their
company faces. This view was especially common
among retailers, reflecting the considerable
disruption seen in this sector in the last decade.
Hyperconnectivity is nevertheless viewed

positively, and organisations believe they are
adapting well. Eight out of ten respondents
believe that hyperconnectivity has been beneficial
for their organisation, and only one-third say it
presents more threats than opportunities. This may
reflect the fact that its impact within organisations
has been broadly positive by boosting
collaboration, for example.
However, the extent to which organisations have
adapted is limited. Under half of respondents
have introduced digital skills training, and while
experts predict that it calls for deep organisational
change, just under one in five (19%) expect to
reshape their business radically in response to
hyperconnectivity.
The Internet is still seen as having more
potential to be revolutionary than mobile
technology and the Internet of Things (IoT). This
is true even among industries such as
manufacturing, in which embedded IoT
connectivity is expected to have far-ranging
implications. This suggests that companies expect
the future impact of hyperconnectivity to be a
continuation of historical trends, rather than
introducing new and unprecedented changes.

Executives see digital offerings from established

competitorsnot start-upsas their biggest
source of competitive pressure. The threat of
disruption by a Silicon Valley start-up is one of the
most widely discussed challenges businesses face
today, but in fact more respondents say they have
felt severe or moderate competitive pressure from
the digital strategies of their established
competitors.
Hyperconnectivity is seen as important, but

there are signs of inertia or complacency. Experts
interviewed for this report warn of the need for
deep and fundamental organisational change,
and the risk of irrelevance. While they
acknowledge hyperconnectivitys significance,
most respondents give few signs of this kind of
radical action. Time will tell if their confidence is
merited.

Introduction
It is not yet known how many smart watchesa

recent high-profile extension of hyperconnectivity
Apple has sold since they were introduced in April
2015. Market watcher Slice Intelligence, which
analyses US consumer spending, believes the
number to be around 2.5m worldwide, which
suggests that annual sales will be around 11m units.
This is not a bad start for a new product, but its
a drop in the ocean compared with the 60m-plus
iPhones sold in the first quarter of 2015 alone.
Observers are eagerly watching for clues whether
the Apple Watch will be a short-lived toy, with
limited functionality and a fierce price tag, or
whether it will follow the lead of earlier Apple
products, from the iPod to the iPad, and create a
new market segment.
Mark Curtis, chief client officer at service-design
consultancy Fjord, is among the believers. Sales
will be big, he expects, because you dont have to
take them out of your pocket. Its the sort of
simple advantage that has the potential to change
consumer behaviourand in so doing change the
face of business.
In October 2014 The Economist Intelligence Unit
(EIU) published The hyperconnected economy, an
examination of how the rapid increase in the
interconnectedness of people, organisations and
objects seen in the last 30 years is affecting the

global economy. It found that from a global
perspective, this hyperconnectivity is a tide that
raises all boatsin fact, hyperconnectedness is
expected to be especially valuable for developing
economies.
But for organisations, it poses challenges as
well as opportunities. Look no further than the
industries disrupted by online media delivery or
mobile apps, such as publishing or camera
manufacturing, to see how high the stakes are.
In the second phase of the hyperconnected
economy programme, therefore, we investigate the
organisational impact in more detail through a
survey of executives and a series of expert
interviews (see About this study).
This reveals that businesses are well aware of
the significance of hyperconnectivityindeed, the
majority believe that adapting to it is the key
challenge their organisation faces.
But there are also signs of a degree of
complacency. The majority of companies believe
they are doing a good job of adapting to
hyperconnectivity. Yet while experts warn of the
need for substantial changes, there is little
evidence in our survey sample that radical
measures are under way.

Understanding the challenge
Organisations are well aware of how significant

hyperconnectivity is for their future, this study
reveals. Nearly six out of ten (59%) respondents
agree that failing to adapt to hyperconnectivity is
the biggest danger faced by their company.
Predictably, its importance is most keenly felt in
those industries that have been most acutely
affected by the Internet so far. More than twothirds (68%) of retailers say that the need to adapt
to hyperconnectivity is their companys biggest
challenge, for example, with a well above-average
44% saying that it presents more threats than
opportunities (compared with one-third of all
respondents). This is not surprising given the
disruption caused to their industry over the past
decade or more.
A wave of retailers, from the bookseller Borders
to the video chain Blockbusters, has been driven
out of business as sales have migrated to the net.
More recently, retailers have been struggling to get
to grips with omnichannel retail, linking different
sales platforms such as physical stores, the
Internet and smartphones. These have often been
launched as separate divisions and profit centres,
leading to unfortunate outcomes, such as the
refusal by a retailer, for example, to accept at a
physical store returned items that had been bought
online.
Addressing this situation requires fundamental
change, says David McCorquodale, head of retail
Chart 1. The majority of firms believe that failure to adapt to hyperconnectivity is their
organisations biggest risk
Failure to adapt to hyperconnectivity is the biggest risk that our organisation faces
(% respondents)
Agree
Disagree
Dont know
Consumer goods
45
33
21
Financial services
64
24
12
Healthcare, pharmaceuticals and biotechnology

55
33
13
IT and technology
67
29
Manufacturing
60
30
10
Retailing
68
21
12
Source: The Economist Intelligence Unit survey, May 2015.

at KPMG. Sometimes, even established retailers are

at a surprisingly early stage here. UK retailer Marks
& Spencer only took control of its own website last
year; previously its online sales had been
outsourced to Amazon. Now, it has relaunched
some of its stores to offer omnichannel services,
with iPad-wielding sales assistants and Internet
kiosks allowing customers to buy items online if
they are not available in-store.
Retail remains one of the starkest examples of
the upheaval that can be wrought by rapidly
changing consumer behaviour enabled by new
connectivity, but the same argument applies to
many other sectors. Some of these sectors may be
underestimating hyperconnectivitys disruptive
potential, the survey suggests.
Only 45% of consumer goods companies, for
example, consider hyperconnectivity to be their
greatest threat (see chart 1). In fact, these
companies are arguably among the most exposed.
Hyperconnectivity is disrupting the retail channels

through which they reach customers. It is also
assisting the globalisation of manufacturing, which
affects the goods they sell, and it is empowering
customers to provide feedback over the Internet
and social media, which affects everything from
branding to marketing.
Nike, for example, has transformed itself from a
sportswear maker to a fitness and lifestyle brand,
using social media to foster communities and
driving customer engagement through mobile
fitness apps. Car companies are integrating digital
connectivity both into their production and into
the products themselves, thereby improving
component design and mechanical reliability.
Most companies have acknowledged the scale of
the challenge posed by hyperconnectivity, the
survey reveals. However, it also suggests that they
have not acknowledged how much they will need to
change.

Organisational adaptation
The three components of hyperconnectivity, as

defined in this study, are the Internet, mobile
technology and the Internet of Things. It is not
surprising that for the majority of respondents the
first of thesethe Internethas had a
revolutionary or significant effect on their
organisation so far (84%, versus 71% for mobile
and 71% for the IoT).
It is surprising, however, that respondents are
most likely to say that the Internet will have such
an effect in the next three years (80%, versus 75%
for mobile and just 57% for the IoT).
Even among manufacturers, only 61% believe
the IoT will have a revolutionary or significant
effect. This is especially surprising given the
transformational impact that the embedded
systems are expected to have both on the
manufacturing process and on the resulting
products. This suggests that respondents might be
more focused on the hyperconnectivity trends they
know and understand than the ones that are still
emerging.
This helps to explain why respondents are
remarkably confident about their progress in
adapting to hyperconnectivity. Overall, a
significant majority (69%) say they are doing a
decent job of adapting to hyperconnectivityeven
in the least confident sector (healthcare), around
two-thirds of respondents reckon they are adapting
well.
This confidence may also reflect the fact that for
many respondents, hyperconnectivity has had a
positive organisational impact so far. For example,

45% believe that collaboration, both within and
between divisions, has improved as a result of
hyperconnectivity.
The most commonly cited organisational impact
of hyperconnectivity is that business processes
have accelerated, as identified by 47% of
respondents. Companies appear to be reacting to
this acceleration of pace through automation: the
most common organisational response to
hyperconnectivity is to have automated business
processes (46% of respondents).
Nonetheless, respondents bullishness masks
fairly limited progress. For example, only 39% have
introduced digital skills training. With companies
from banks to shops saying that their offerings
need to span web and physical stores and
manufacturers talking of the importance of
digitalisation to improving efficiency, digital skills
might be expected to be standard across industries
by now.
Many respondents believe that the continued
growth of hyperconnectivity will change power
dynamics in the organisation, with 45% saying the
control of central management will be reduced.
This is a positive indication, given the
recommendation of Fjords Mr Curtis that
companies need to become more agile, with less
rigid hierarchies, if they are to evolve at the pace of
hyperconnectivity.
Mr Curtis likens the process to the different
states of matter. Many companies are still in a solid

On autopilot
Infotainment has become a core source of
competitive advantage for the auto industry,
according to Phil Abram, chief infotainment officer
at US car manufacturer General Motors. Now that
engine and component design are increasingly
standardised and fuel economy is regulated, in-car
information and entertainment systems are among
the few ways in which carmakers can differentiate
their products these days.
GM is currently rolling out 4G connectivity
across its vehicle range worldwide, offering its
customers more rapid Internet access on the
move. Mr Abram says that the essential elements
of an infotainment system do not vary by
[geographical] market, although the detail
components might.
Another iconic US car maker, Ford, gained a
competitive edge by launching an effective
infotainment system back in 2007, ahead of many
of its rivals. However, it damaged its reputation
with a glitch-ridden upgrade some time later,
which is now being replaced by a simpler, more
reliable system.
In reality, both companies are largely
outsourcing the work for these infotainment
systems to companies like Microsoft, which have
developed software that allows people to link
their smartphones to the cars own systems. The
carmakers themselves are concentrating many of
their own resources on the information side,
feeding car-performance information to drivers
state, stable and predictable but slow to react to

change. More advanced firms have become fluid,
with adaptable structures that can flow into new
areas as they emerge. The real need, he says, is for
companies to become like gasformless beasts
that exist to cater for constantly changing
customer demand.
Indeed, hyperconnectivity calls for deep
organisational change, according to Mr Curtis.
However, only 19% of survey respondents believe
and dealers to allow for timely maintenance, and

to their own development teams so that real
information continuously informs product
development and production.
According to Jim Buczkowski, Fords director of
electronics and electrical systems engineering,
one challenge is the need to sieve the mass of
information now available from in-car sensors to
extract that which is usable. Ford hired in a chief
data and analytics officer at the end of last year to
co-ordinate these efforts in what Mr Buczkowski
describes as a company reorganisation.
In other words, these companies are putting
some meat on the bones of theories of smart
production and product development as they
start to get to grips with analysing the wealth of
data they can now generate. They are also
keeping a keen eye on developments from tech
competitors such as the search engine Google,
which has a project to develop a driverless car.
GM has worked with Google (and Apple) on
bringing phone integration to its vehicles. Phone
integration allows users to interact with select
applications from their smartphones through the
vehicle systems (steering wheel controls, touch
screen, etc.).
We make sure that we can change with the
market by building platforms, he says, adding
that driverless cars could completely change the
market for everything from commuter cars to
taxis. Rather than fighting to protect its existing
customer base, GM plans to ensure that it has the
products to sell to the new type of customer.
they will have to restructure radically.

The same proportion (19%) has introduced a
chief digital officer (CDO). There is some evidence
to suggest that appointing an executive to lead
digital activities is a growing trend: the CDO Club (a
global network of chief digital officers) says that
the number of CDOs is doubling each yearto
1,000 worldwide in 2014 and an expected 2,000
this year.
US motor giant General Motors, for example,

Chart 2. More respondents believe the Internet will have a more significant or revolutionary impact in the
next three years than the Internet of Things
What impact do you expect the following technologies to have in the next three years?
(% respondents)
Revolutionary
impact
Significant
impact
Limited
impact
No impact
Dont know /
not applicable
Internet
34
46
13
Mobile
33
42
14
IoT
31
26
18
18
hired Phil Abram as its chief infotainment officer

last year to advance the information and
entertainment systems built into its cars.
Previously, Mr Abram had worked for electronics
firms such as Japans Sony as the carmaker
recognised that shifting consumer tastes meant
looking beyond its traditional expertise. Similarly,
Aviva, the international insurer, hired Andrew
Brem as its chief digital officer in August last year
to overhaul its digital interaction with customers.
His background was with utility and mobile-phone
10
companies, rather than in insurance.

It is debatable whether a new executive role is
the best way for every company to adapt to
hyperconnectivity, so the low base of CDOs in our
sample is not necessarily evidence of inertia.
Nevertheless, there are signs in the survey data
that on an organisational level, companies are
overly confident of their ability to weather the
hyperconnectivity storm. When asked about how it
has affected their competitive stance, the story is
quite different.

Market disruption
Much has been written about the disruptive

potential of digital companies, from big retailers
such as Amazon and eBay to person-to-person
platforms such as Airbnb, a site allowing people to
rent out their houses to people who might
otherwise choose a hotel. The impact of these
companies has been strong, driving scores of
shops, magazines and indeed hotels to the wall as
they lose sales to online competitors.
Nonetheless, our survey finds that executives
are more concerned with competition from existing
companies than with being wiped out by a wave of
new-tech upstarts: some 57% say that they have
faced notable competitive pressure from digital
products launched by established companies,
compared with less than half who feel pressure
from digital start-ups. Respondents expect
competition on both fronts to grow in future.
This is not as surprising as it might seem at first
glance. While the likes of Amazon and Airbnb are
highly visible owing to their novelty, in many
industries established players remain dominant. In
these sectors, the main contribution of digital
start-ups has been to force companies to adopt
digital practices.
Supermarkets offer an example. In many
countries, online groceries were first launched by
Internet-only brands, such as Ocado in the UK. As
time went on, supermarkets launched their own
Internet-based grocery services. Online sales still
account for only a small proportion of grocery
shopping, but the big supermarket chains, from
11
Carrefour in France and Asia to Walmart in the US,

are spending heavily on their own online offerings.
These operate in parallel with services such as Click
& Collect, which exploit their big store networks
and provide an advantage over Internet-only
retailers such as Amazon.
The strategic significance of such moves online
is evident in the fact that supermarkets appear to
be underpricing this service. According to HSBCs
retail analyst Dave McCarthy, the true cost of a
home delivery is around 20 (about US$30),
whereas supermarkets typically charge 3-4. In the
UK alone, he estimates that this underpricing costs
the major supermarket chains 100m a year.
Clearly, though, supermarket retailers consider this
burden to be preferable to the losses suffered by
rivals which are only now struggling to break into
the online market.
It is a similar story in other sectors.
International banks, from HSBC to Citibank, have
started to offer smartphone apps allowing people
to make payments and complete other transactions
from mobile devices.
Other sectors of the financial services industry
are following suit. Insurance, for example, has
lagged behind banking to date, but that is
beginning to change as the sector is waking up to
the competitive consequences of hyperconnectivity
says Mr Brem at Aviva.
Its only a matter of time before a digital
disrupter hurts insurers, he says, pointing to the
impact of digital start-ups from PayPal to the taxi

Chart 3. Respondents are more likely to see digital offerings from traditional competitors as sources of
severe or moderate competitive pressure than start-ups
How do you expect the following to affect competition in the next three years?
(% respondents)
Will create severe

competitive pressure
Will create moderate

Start-ups driven by digital technology

25
Will create limited

33
Digital offerings from our traditional competitors

23
Will create no
Dont know /
not applicable
20
17
43
Established companies that are using digital technology to enter our market(s) for the first time
22
35
20
25
6
9
13
4
5
service Uber. With Uber, its one click and your car
is on its way. You can see it approach on a map. You
know who your driver is. No cash, no hassle. People
will start to resent firms that do not offer this [kind
of] convenience.
He points out that digital has already
transformed many areas of finance, from payments
to lending and investing, but that insurance has
yet to embrace the change. Customers now expect
a choice of ways to interact with their insurer or
broker, in person, over the phone, online or
through chat rooms. That means insurers must join
up their services in the same way as omnichannel
retailers.
Mr Brem adds that we have a mass of data
allowing us to personalise offerings to customers.
Motorists can use data from their cars to show that
12
they are safe drivers, reducing premiums, while

homeowners and people buying health insurance
can be monitored to show their risk levels, allowing
them to take out cover tailored to their needs and
lifestyles. Its a great opportunityand we will
become irrelevant if we dont take it.
Fortunately, just as hyperconnectivity exposes
companies to new sources of competition, it also
allows them to exert some pressure of their own.
Nearly half of respondents (47%) say their
organisations have reacted to the competitive
pressure resulting from hyperconnectivity by
entering new marketsfar more than those who
have lowered prices (28%) or exited the market
(18%), for example. Meanwhile, 41% say
hyperconnectivity has allowed them to identify new
markets that are suitable for them to enter.

Conclusion
Our study shows that companies are well aware of the

significance of hyperconnectivity. The unprecedented
uptick in interconnectedness that began with the
Internet, was extended by mobile technology and
now continues with the Internet of Things is not just
a technological trendit is one of the eras defining
characteristics. Its little wonder that companies see
adapting to it as their greatest challenge.
Their confidence in their ability to do that
should not be dismissed out of hand. Compared
with the aftermath of the dot-com crash, when
anyone making grand claims about the Internet
was treated with suspicion, there is now
widespread acknowledgment of the significance of
digital technology. It stands to reason, therefore,
13
that organisations have made some progress in

putting it to use.
However, the consensus among experts in the
field is that gradual progress will not be enough to
meet the growing competitive pressure that
companies will encounter as hyperconnectivity
intensifies. They believe radical restructuring is in
orderand yet only one in five survey respondents
expect to undertake such an endeavour.
This implies a deficit in leadership. Whether or
not they appoint an executive with specific
responsibility for digital business, organisations
will only effect substantial change if it is led from
the top. The hyperconnected economy calls for
hyperconnected leaders.

Appendix:
Survey
results
Percentages may not

add to 100% owing to
rounding or the ability
of respondents to
choose multiple
responses.
In which of the following business functions does the Internet play a crucial role at your organisation?
Select all that apply.
(% respondents)
Finding new customers
80
Communicating with customers
80
Working with suppliers
73
Managing internal operations
73
Developing and delivering products and services
73
Collaborating internally
72
In which of the following business functions does mobile technology play a crucial role at your organisation?
(% respondents)
68
68
53
53
50
42
14

In which of the following business functions does the Internet of Things (IoT) play a crucial role
at your organisation?
(% respondents)
46
41
40
37
32
32
In which functions do you expect the Internet to play a crucial role in three years time?
(% respondents)
77
77
75
74
73
73
In which functions do you expect mobile technology to play a crucial role in three years time?
(% respondents)
74
67
61
60
59
57
15

In which functions do you expect the Internet of Things (IoT) to play a crucial role in three years time?
(% respondents)
59
50
49
49
45
45
How would you describe the impact that the Internet, mobile technology and the Internet of Things (IoT)
have had on your organisation so far?
(% respondents)
Revolutionary
impact
Significant
impact
Limited
impact
No impact
Dont know /
not applicable
Internet
44
40
11
3 1
Mobile
24
47
18
IoT
18
23
27
12
20
What impact do you expect them to have over the next three years?
(% respondents)
Revolutionary
impact
Significant
impact
Limited
impact
No impact
Dont know /
not applicable
Internet
34
46
13
Mobile
33
42
14
IoT
31
26
18
18
Do you agree with the following statements?

(% respondents)
Agree
Disagree
Dont know / not applicable
Hyperconnectivity has been beneficial for my organisation

86
Hyperconnectivity has been beneficial for my industry

83
Hyperconnectivity presents more threats than opportunities
30
9
56
8
13
Failure to adapt to hyperconnectivity is the biggest risk that our organisation faces
59
30
11
My organisation is doing a good job of adapting to hyperconnectivity

69
16
18
13

To what degree have the following factors placed competitive pressure on your firm in the last three years?
(% respondents)
Have created severe

17
Have created moderate

Have created limited

32
Have created no
23

17
Dont know /
not applicable
22
40
29
14
35
27
6
10
18
4
6
And how do you expect them to affect competition in the next three years?
(% respondents)
Will create severe

25
Will create moderate

Will create limited

33
Will create no
20

23
17
43
22
35
Dont know /
not applicable
20
25
6
9
13
4
5
How has your organisation adapted to the competitive pressure resulting from hyperconnectivity?
(% respondents)
Lowered prices
28
Lowered margins
28
Entered new markets
47
Exited markets
17
Divested divisions
19
Acquired one or more competitors for their digital capabilities
26
None of the above
14
Dont know
4
17

Which of the following strategies have you adopted as a result of hyperconnectivity?

(% respondents)
Diversified our channel partners
38
Used digital channels to enter new markets (ie, sell new categories of product or service)
38
Launched products or services that are only available through digital channels
35
Adopted dynamic pricing for sales through digital channels
29
Sold directly to customers for the first time
25
Offered prices that are only available through digital channels
25
None of the above
12
Dont know
3
How do you think the continued growth of hyperconnectivity will affect your organisations position
within your industry in the future?
(% respondents)
Digital channel partners will become the dominant force in our markets
34
We will acquire one or more digital start-ups
31
Our market share will be significantly reduced as a result of digitally-enabled competition
19
We will merge with a more digitally capable organisation
17
We will divest or close production and focus on distribution
15
We will divest or close distribution and focus on production
14
None of the above
19
Dont know
8
What impact has hyperconnectivity had on global competition in your industry?

(% respondents)
Hyperconnectivity has:
Lowered barriers to entry for foreign companies in the developed economies in which we operate
33
Lowered barriers to entry for foreign companies in the developing economies in which we operate
30
Boosted local competition in the developing economies in which we operate
35
Boosted local competition in the developed economies in which we operate
32
Helped us identify new markets that are suitable for us to enter
40
None of the above
11
Dont know
5
18

What impact has hyperconnectivity had on your supply chain so far?

(% respondents)
Hyperconnectivity has:
Improved our ability to find suppliers from around the world
34
Improved our ability to select suppliers competitively
39
Improved our ability to work with international suppliers
38
Reduced our supply costs
35
Increased the range of materials we can purchase through our supply chain
27
Increased visibility into our supply chain
33
Increased the complexity of our supply chain
20
Improved the reliability of our supply chain
26
None of the above
8
Dont know
6
What impact do you think the continued growth in hyperconnectivity will have on your companys
global business and its supply chain?
(% respondents)
Declining barriers to market entry will help us grow internationally
34
Declining barriers to market entry will place us under increasing pressure in our established markets
39
An increasingly globalised supply chain will allow us to reduce costs significantly
45
An increasingly globalised supply chain will expose us to greater risk
26
Increasing demand from global markets through digital channels will require us to expand globally
27
Increasing automation of supply chain transactions will expose us to greater risk
16
What impact has hyperconnectivity had on your relationship with customers?

(% respondents)
Customers mostly hear about us online
29
Customers typically check online reviews or social media before purchase
38
Our online reputation is the biggest influence on customer perception of our company
34
We are reaching customers around the world for the first time through digital channels
31
Digital channels allow us to search proactively for customer demand
35
Digital channels have allowed more direct contact between customers and employees
39
Digital channels are our principal means of communicating with prospects and customers
20
19

Which of the following measures have you adopted as a result of hyperconnectivity?

(% respondents)
Taken efforts to improve our visibility and reputation on social media that have improved our business
49
Used digital processes to customise products and services to individual customers
40
Fed customer information from digital channels into product development
37
Embedded digital functionality into our products to measure customer use and/or improve customer service
37
Built an integrated view of our customer interactions across all digital channels
33
Boosted customer privacy as a way to differentiate our products and services
30
What impact do you think the continued growth of hyperconnectivity will have on your interactions
with customers in the future?
(% respondents)
Products and services will be increasingly tailored to customers individual needs
51
Input from customers will be deeply integrated into product development
41
Customer service will be mostly automated
33
A more globally diverse customer base will challenge our ability to communicate with and engage with customers
33
Our business will be more vulnerable to negative online publicity
32
Mobile will become our primary customer interaction channel
31
What impact has hyperconnectivity had on your organisation?

(% respondents)
Business processes have accelerated
47
Collaboration within divisions and geographies has improved
45
Collaboration between divisions and geographies has improved
45
Organisational strategy has become more data-driven
42
The pressure we are under to innovate has increased
33
Our ability to innovate has increased
32
Organisational strategy has become more effective
29
20

What organisational measures has your company introduced as a result of or to derive greater benefit
from hyperconnectivity?
(% respondents)
Automated business processes
46
Adopted agile development and/or project management techniques
39
Introduced digital skills training
39
Outsourced functions to accelerate digitisation
33
Flattened the organisational hierarchy
25
Appointed a chief digital officer
19
How do you think the continued growth of hyperconnectivity will affect your organisation in the future?
(% respondents)
Our ability to effect substantial organisational change will increase
39
We will reduce our staffing levels as more work is automated
38
We will match employment opportunities to candidates faster and more effectively
37
Information overload will damage the wellbeing of our employees
24
Our organisation will have to radically restructure
23
Ability of central management to control the organisation will be reduced
22
How does your organisations performance compare with the average in its industry?
(% respondents)
Better than average
Worse than average
Dont know
Profit
73
18
Revenue growth
71
21
Innovation
63
25
12
Organisational agility
52
21
35
13

What are your organisations annual revenues in US dollars?
What is your primary industry?
(% respondents)
(% respondents)
$500m or less
Financial services
16
Manufacturing
$500m to $1bn
13
22
IT and technology
$1bn to $5bn
11
36
Healthcare, pharmaceuticals and biotechnology
$5bn to $10bn
14
Consumer goods
$10bn or more
28
Retailing
6
Energy and natural resources
In which region are you based?
(% respondents)
Aerospace and defence
North America
Automotive
4
30
Asia-Pacific
30
Western Europe
30
Latin America
Chemicals
4
Professional services
4
Telecoms
Middle East
Transportation, travel and tourism
Construction and real estate

3
Logistics and distribution
Which of the following best describes your job title?
(% respondents)
Education
Board member
Government/Public sector
CEO/President/Managing director
Agriculture and agribusiness
CFO/Treasurer/Comptroller
Entertainment, media and publishing
CIO/Technology director
8
CMO/Head of marketing
3
COO/Head of operations
2
CDO (Chief digital officer)

1
CXO (Customer experience officer)

1
Other C-level executive

3
SVP/VP/Director
12
Head of business unit

6
Head of department
19
Manager
31
Other
2
22

What is your main functional role?

(% respondents)
Finance
11
IT
11
Sales
11
General management
10
Human resources
9
Marketing
9
Procurement
9
Strategy and business development

7
Supply-chain management
5
Operations and production

4
Customer service
3
Information and research

2
Risk
2
R&D
2
Legal
1
Other
3
23

Whilst every effort has been taken to verify the accuracy of this
information, neither The Economist Intelligence Unit Ltd. nor the
sponsor of this report can accept any responsibility or liability
for reliance by any person on this white paper or any of the
information, opinions or conclusions set out in the white paper.
24
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THE HYPERCONNECTED ECONOMY: PHASE 2

The hyperconnected economy: Phase 2

About this study

Understanding the challenge

Appendix: Survey results

The Economist Intelligence Unit Limited 2015

The hyperconnected economy: Phase 2

The hyperconnected economy is a multi-phase

The Economist Intelligence Unit Limited 2015

42% have annual revenues above US$5bn. The

The hyperconnected economy: Phase 2

Hyperconnectivity is high on the corporate agenda.

The Economist Intelligence Unit Limited 2015

Hyperconnectivity is nevertheless viewed

The hyperconnected economy: Phase 2

Executives see digital offerings from established

The Economist Intelligence Unit Limited 2015

Hyperconnectivity is seen as important, but

The hyperconnected economy: Phase 2

It is not yet known how many smart watchesa

The Economist Intelligence Unit Limited 2015

objects seen in the last 30 years is affecting the

The hyperconnected economy: Phase 2

Understanding the challenge

Organisations are well aware of how significant

organisations biggest risk

Healthcare, pharmaceuticals and biotechnology

Source: The Economist Intelligence Unit survey, May 2015.

The Economist Intelligence Unit Limited 2015

The hyperconnected economy: Phase 2

at KPMG. Sometimes, even established retailers are

The Economist Intelligence Unit Limited 2015

Hyperconnectivity is disrupting the retail channels

The hyperconnected economy: Phase 2

The three components of hyperconnectivity, as

The Economist Intelligence Unit Limited 2015

positive organisational impact so far. For example,

The hyperconnected economy: Phase 2

state, stable and predictable but slow to react to

The Economist Intelligence Unit Limited 2015

and dealers to allow for timely maintenance, and

they will have to restructure radically.

The hyperconnected economy: Phase 2

next three years than the Internet of Things

Source: The Economist Intelligence Unit survey, May 2015.

hired Phil Abram as its chief infotainment officer

The Economist Intelligence Unit Limited 2015

companies, rather than in insurance.

The hyperconnected economy: Phase 2

Much has been written about the disruptive

The Economist Intelligence Unit Limited 2015

Carrefour in France and Asia to Walmart in the US,

The hyperconnected economy: Phase 2

severe or moderate competitive pressure than start-ups

Will create severe

Will create moderate

Start-ups driven by digital technology

Will create limited

Digital offerings from our traditional competitors

Source: The Economist Intelligence Unit survey, May 2015.

The Economist Intelligence Unit Limited 2015

they are safe drivers, reducing premiums, while

The hyperconnected economy: Phase 2

Our study shows that companies are well aware of the