Three Signals Your Industry Is About to Be Disrupted
Legacy companies are falling like dominoes to disruptors. Together, emerging technology and new business models have created new ways of serving customers. The same way Airbnb, Uber, and LinkedIn fundamentally changed the lodging, taxi, and recruiting industries, titans such as Amazon, Google, and Facebook are now poised to disrupt every industry as wide-ranging as health insurers to grocers. It’s safe to say that no industry will be left untouched — but is yours next?
A number of industries seem to be “safe” from disruption, but often the markets most at risk do not see it coming. Who would have predicted, for example, that Amazon would follow its acquisition of Whole Foods Market with a jump into health care? We have looked at common patterns among more recent business model innovations and determined three major signals that your industry could be on the precipice of major change.
The first major sign is that your industry is highly regulated. While heavy regulations have a long tradition of protecting companies from new entrants, this may not be true in the future. Industries with high regulation often suffer from complacency, as they may not have had to worry much about customer experience or optimizing operations. However, emerging technology is changing this landscape.
The thing about new technologies is that they are not well-regulated. Years ago, people likely would not have anticipated that turning their back bedrooms into pseudo-hotels and advertising them on apps would be an accessible and profitable venture. Therefore, regulations regarding hotel lodgings didn’t clearly apply to Airbnb rentals, allowing the startup to accelerate user reach quickly, unfettered by the constraints of the hotel chains that were its primary competitors. Airbnb grew quickly and become a major player in the market before city and state regulations began to catch up. A similar story can be told for Uber, telemedicine, and even autonomous cars. If you think regulation will protect you from disruption, just remember that startups are bold and many will ask forgiveness later, rather than permission now. By the time regulations catch up with disruptors, they may have already taken your customers and market share.
The second signal for disruption is that your cost models are difficult to understand for customers. This is often the situation when there are one or more middlemen between the origination point of the product or service and the customer. Handoffs in the supply chain often increase cost without adding value, and they also can contribute to poor customer experience. A good example is how Tesla Inc. sells cars directly to consumers, cutting out dealerships. This greatly improves the experience for customers, most of whom hate the hassle and haggle of the car dealers. Mattresses are another great example. Innovators like Tuft & Needle, Casper, and Leesa are selling directly to customers online rather than going through retailers that sell the same product at a wide variety of price points and often negotiate with customers. If your product requires a great deal of work on the part of customers in order to manage their cost, either through price tracking or haggling, consider yourself at risk.
The third signal often exists as a side effect from the first two: Your industry is not optimized for modern customer expectations — which means that customers aren’t delighted to interact with you. This often happens in industries where the consumer doesn’t have a lot of choice and is beholden to the provider out of necessity.
