In many conversations with people who bring new technologies into business as well as people who make decisions in traditional businesses, I often hear that disruption in markets takes business away from existing players. That sounds so simple. But it isn’t.
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If we take a closer look at industries that have recently come under pressure from new players, we can see that the rapid upheaval often has various causes. I differentiate between a real, technologically driven disruption and the so-called alibi upheaval.
From my point of view, the alibi upheaval is the far more widespread process. It arises because existing conventional players act the way they do because they have reached a point of saturation. In other words, they are pushing ahead with the further development of their business at a ponderous pace. Quite simply because the companies are doing well and are therefore becoming negligent. New players on the market see this as an opportunity. An opportunity to be faster to market, to produce better and cheaper and – what is often the easiest – to deal with the customer faster and better.
You simply do something that is common practice in the market, better, cheaper or faster. Though this poses a threat for established companies, in reality it is not a big challenge. The big challenge for these companies is to leave their comfort zone. However, often the corporate culture is lacking to be able to move in this manner.
A good example of alibi disruption is E-Commerce. At the end of the day, E-Commerce is still trade, negotiation and commission. The reason why we see extremely successful new online providers is that the traditional players overslept the development and reacted too late. The upheaval is largely due to this circumstance.
Characteristic for such upheavals is that the market per se remains, but the channels, for example, change.
True upheaval, on the other hand, is due to the fact that a new (or existing) supplier can completely change the rules of the existing business with the help of a new technology. The existing market typically disappears completely and the problem the market has solved for customers is now solved in a completely different way.
A good example of this could be the market for individual mobility. Whereas electric mobility simply replaces one technology with another in the sense of an alibi disruption, the market for passenger cars is likely to disappear almost completely due to the technology of autonomous driving. Another good example is the music industry. With the introduction of legal digital music not only have the distribution channels changed – but the entire market and the way music is consumed.
Now, one often goes hand in hand with the other, which makes the situation much more difficult for the existing providers. However, I think it is advisable to analyze exactly what the driver of this change is when the market changes. In my opinion, dealing with an alibi upheaval is much easier than dealing with technology-induced disruptions.
For, once the rules of the game have changed in a market, it is very difficult to learn the new rules of the game in a short period of time. The bigger the company, the more difficult it becomes to master these challenges. The difficult thing about this situation is that you have no preparation or plans at all for the developing scenarios.
This makes it all the more important to prepare the company for agility, innovation and efficiency in stable and successful times. Ultimately, this is the very best insurance to be able to play a leading role in the future.