Disruptor Danger
Industries are being decimated by innovative garage-based startups. Here is how you avoid being a casualty.
Are you prepared for your revenue to drop 25% or 50%?
Every day, garage-based startups are not just gaining traction, they’re destroying industries. Uber and Lyft have decimated the taxi industry. Online streaming services have severely impacted cable television and now they are targeting the studio production industry. AirBNB now has more global rental properties listed on its site than the top 5 biggest hotels combined.
The world is changing fast and savvy entrepreneurs that can spot market inefficiencies and opportunities are creating the next generation of unicorns. The Internet offers a quick and easy delivery method to reach the public at minimal cost while eliminating the overhead of brick-and-mortar stores. The next disrupters are probably in a garage somewhere incubating their next creative idea. Your industry could be their next target and your company right in its cross-hairs. As a risk manager, I am pretty good about dealing with known risks – it is the new novel risks that I am unprepared for.
So how do you protect your company, job and shareholders from these innovative and opportunistic disrupters? Begin by creating a technology and public trends committee. This committee should survey the public, customers and employees to better gauge both risks and opportunities in your industry.
When companies fail to pinpoint and address their weaknesses it presents an opportunity. This allows knowledgeable industry insiders to swoop in and steal profits. In most cases, industries that failed to be honest with their practices, are now struggling.
The taxi industry above should have seen it coming. Taxis were propped up on regulation alone and the customer was continually gouged. Customers had little sympathy watching taxi drivers struggle when Uber and Lyft launched.
The cable TV industry is the most hated industry by its customers. They’re known to continually overcharge customers, change fees and pull bait-and-switch tactics. Cable companies forced consumers to buy channel packages, even when the client only wanted one channel. If a customer wanted the History Channel they were forced to buy a package of 15 other channels that they didn’t want. This move alone made customers want to leave them, even before their famous price gouging and bad customer service.
Watch out airlines and credit reporting agencies!
The hotel industry continues to overprice its rooms – leaving the customer with little or no loyalty to a specific brand, while they shop for the best deal. They could have offered some sort of surge pricing or discounts to build a better relationship with customers. But they didn’t.
In virtually all of these cases, the companies failed to really understand their customer and foster products that truly met their needs. If your customers dislike or do not trust you – then there is no loyalty. If there is no loyalty, they will have no qualms about actively searching for a replacement that may be cheaper, or that may better meet their needs.
The real solution here is to become a partner with your customers and continue to innovate products that; 1) meet their needs, 2) ideally cannot easily be replicated, 3) become sticky and cause your service to become indispensable to them.
What if the cable TV industry offered buffet-style channels and reached out to proactively offer discounts rather than hidden price increases? I would still have the tennis channel along with my Netflix subscription (yes they would take a revenue haircut, but that is not as bad as massive customer attrition.)
What if taxi companies had voluntarily rolled back pricing so that Uber and Lyft were not viable options? Certainly cabbies would take a hit. But I doubt if that hit is greater than not being a driver at all.
I highly recommend that you create a technology and public trends committee and include a wide variety of employees – including the younger ones. Your younger employees may see trends quicker than senior employees as they are typically more adaptable to changes and trying new things. Every company has a blind spot, and you can’t afford to not see yours.
The very best companies create specific and individualized solutions to solve their customer’s problems – and tell the customer what they need before they realize they need it. If you are perceive as a trusted partner with innovative offerings that meets critical needs, then it will be a lot harder for customers to leave you, and a lot harder for a disrupter to dazzle them away.
Sources:
https://www.businessinsider.com/airbnb-total-worldwide-listings-2017-8
