Frontiers

Three Signals Your Industry Is About to Be Disrupted

It’s safe to say that no industry will be left untouched by digital disruption. Is yours next?

Megan Beck and Barry Libert Reading Time: 6 min 

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Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
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Disruption Digital Transformation Technology Dominoes

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.

Sign No. 1: Your Industry Has Significant Regulatory Burdens

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.

Sign #2: Your Customers Have to Work at Managing Their Costs

The second signal for disruption is that your cost models are difficult to understand for customers.

Topics

Frontiers

An MIT SMR initiative exploring how technology is reshaping the practice of management.
More in this series

About the Authors

Megan Beck is CIO at OpenMatters, a machine learning company, and a research fellow at the SEI Center for Advanced Studies in Management at the Wharton School of Business. She tweets @TheMeganBeck. Barry Libert is CEO of OpenMatters and a senior fellow at Wharton’s SEI Center. He tweets @barrylibert.

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Comments (3)
Subramaniam Iyer
There can be a disruption in these three industries only when the baton of control is passed to the Customer / Consumer rather than the businesses. All the three are essentially Service Oriented sectors that are critical to the Life Journey of an individual. The enterprises in this sector must transform their mindsets from being the master to the servant. It is only then that the true value of the disruptions will impact positively for both the enterprises and their customers. Until then every other thing that is touted in the name of disruption is a hogwash.
JONATHAN KNOWLES
Thank you for some excellent analysis.  You remind us that the customer demand is the source of economic value so disruption is most likely to occur in industries where current customer demand is being met, but poorly (whether due to regulation, complacency, or simple monopolistic behavior by the incumbent providers).  I particularly appreciate you sharing some ideas about the industries that you consider ripe for disruption.
Alberto Randazzo
Thank you for an interesting articles. 
Sooner or later all industry and business model get disrupted and I think the challenge is to identify what is the timeline. 
It seems to me that there're two forces that increase or reduce maturity for disruption in industry;
1-  emerging of  enabler for business model substitution: for instance Uber relied on the universal availability of mobile phone and apps to connect demand and supply and a lot of B2C direct selling was made possible by development of logistic that enable a cost effective and timely home shipment; On the other side disruption in the movie-content industry was delayed until wide spreading of increase in internet bandwidth allowed smooth online streaming (Netflix and Youtube)
2- reliance of physical asset: the more the business model is linked to physical asset the slower it is the disruption: Although there have been transformation in the airline industry (with Ryanair and southwest) full disruption with say a high speed train will require the long time for infrastructure to be set up; Similarly for car production, although Tesla brought disruption in the market,  given the relative long time  it took Tesla to set up and run an efficient production-supply chain system,  big players had time to adapt to the new threat and develop their E-car. 
Any other thoughts?