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.

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?

The World Economic Forum was the first to draw the world’s attention to the Fourth Industrial Revolution, the current period of unprecedented change driven by rapid technological advances. Policies, norms and regulations have not been able to keep up with the pace of innovation, creating a growing need to fill this gap.

The Forum established the Centre for the Fourth Industrial Revolution Networkin 2017 to ensure that new and emerging technologies will help—not harm—humanity in the future. Headquartered in San Francisco, the network launched centres in China, India and Japan in 2018 and is rapidly establishing locally-run Affiliate Centres in many countries around the world.

The global network is working closely with partners from government, business, academia and civil society to co-design and pilot agile frameworks for governing new and emerging technologies, including artificial intelligence (AI), autonomous vehicles, blockchain, data policy, digital trade, drones, internet of things (IoT), precision medicine and environmental innovations.

Learn more about the groundbreaking work that the Centre for the Fourth Industrial Revolution Network is doing to prepare us for the future.

Want to help us shape the Fourth Industrial Revolution? Contact us to find out how you can become a member or partner.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.