Is Your Industry Ripe For Disruption?
With digital technologies and automation on the rise, the risk of disruption is affecting more and more industries. Even long-established industries with practices that date back through the generations are vulnerable, as anyone who drives a taxi will tell you.
To be a successful disruptor, a new startup doesn’t have to replace every part of your industry’s normal functions. In fact, the most successful startups have targeted just one function and optimised it to lure customers away. Amazon doesn’t sell different books to other booksellers, for example, but it offers overnight shipping. Airbnb still hosts people for holiday stays, but it vastly expanded the range of venues available. And of course, the attraction of the digital space is that barriers to entry have been dramatically lowered. The next disruptor could come from anywhere.
No industry is safe, but are some more vulnerable than others? It would appear so. The Accenture Disruption Index divides companies into four states, ranging from durable to vulnerable. At each state, industries have some risk and some strengths, but how they respond will determine their fate. We explore the four states introduced by Accenture’s research to help you determine if your industry may be the next to be disrupted.
Established and mature industries are more likely to be in a durable state. They often have structural and financial advantages that can help them weather disruptions and changes to the industry. For example, multinational beer companies have been able to respond to the rise in craft beer’s popularity by acquiring the most competitive craft breweries and incorporating them into their business.
Established businesses must, however, continue to reinvent their offering, rather than focusing on preservation and tradition. This might involve investing heavily in R&D or be willing to trial innovative new products, services or delivery models.
Some of the areas that Accenture reports fall within this state are automotive, consumer goods and industrial equipment.
Industries in a viable state are those which are new, or who have reimagined themselves to weather a disruptor. These industries need to be able to constantly reinvent themselves. Amazon exemplifies this state by constantly expanding their core retail business into other areas. In 2017, they acquired supermarket giant Whole Foods, and have expanded into media streaming services, cloud services and even robotics.
Newspaper publishers are in this state, having responded to the digital news landscape by expanding into digital content and subscription models to survive. Those shifts haven’t meant that they can relax, though: news organisations will need to continue to evolve if they are to stay viable.
Other industries and areas that have and are likely to continue to reinvent themselves to ensure longevity are electronics, software, retail and media.
The volatility stage occurs when an industry’s strengths become weaknesses. If the company doesn’t decide to pivot at the critical moment, they’ll find themselves ripe for disruption. Sometimes this occurs when consumer preference shifts, other times it’s due to greater market forces. The oil and gas industry has responded to this state by diversifying into different types of exploration and splitting out its operations. That way, if one area becomes too cost ineffective, it can be jettisoned without threatening the company as a whole. Other industries that could be classed as volatile are infrastructure and transport and postal services.
Industries which contain significant structural weaknesses, but have traditionally survived through high barriers to entry, are increasingly vulnerable. Banking, insurance and utilities are examples of this: they are not usually agile, can have problems with customer service and are often behind the times technologically. But because they’re difficult to break into, they’re able to survive.
These companies are vulnerable to disruptors targeting one small function of their core business, and should turn their own attention to those niches. Westpac’s development of contactless payment apps that work with popular wearables, and providing a wearable device of its own, is one example of a company responding to this threat.
The threat of disruption is one every industry should be prepared to meet. One approach is to stop thinking of it as a threat at all, and instead, embrace it as an opportunity. In periods of change, look to your core business to see what can be grown or transformed. Scale new ventures when appropriate, and pivot wisely. Visit Accenture’s website to learn more about how susceptible to disruption certain industries may be.
This article was written by Tanya Ashworth-Keppel on behalf of the Australian Institute of Business. All opinions are that of the writer and do not necessarily reflect the opinion of AIB. The following sources were used to compile this article: Adweek, Tech Republic, Wired, Harvard Business Review, Accenture.