Change makes people nervous, and by the rate at which entire industries are being disrupted in the 21st century, many people are looking for advice on just where the next changes might come from. Dion Chang, owner of Flux Trends, as well as journalist and author on the subject, defines his role as one of “getting business people to think differently and so plan how to manage their businesses in an environment of rapid change and disruption”.
Chang presented to the FNB Franchise Leadership Summit his view on the current drivers and mega-trends of business, as well as an insight into what three industries he believes are next in line to be ‘disrupted’.
To gauge the pace at which business disruption is increasing, Chang gave the following Fortune 500 statistics: in 1920 the average lifespan of the companies listed was 67 years – today it is 16 years. “It’s speeding up – at this rate of acceleration 40% of today’s Fortune 500 companies will be gone in 10 years,” he said.
The on-demand world is closer than we think: the e-hailing Uber platform is well established; delivery of packages by drone within minutes is imminent; driverless and ‘roaming’ cars are on the horizon. “All the consumer needs is a smart phone and app, and holding up all this is only attempts by governments to regulate innovation. You can’t: the pace of technological innovation will always outstrip regulation,” said Chang.
As to why legislation will make little impact on slowing innovation, Chang said that innovations such as Uber and Airbnb were spawning such a host of derivatives “so well accepted by happily-disrupted consumers that the latter won’t wait for regulators to catch up”.
He listed several mega-trends driving this disruption:
- Digitisation started collapsing value chains some time past.
- Social media changed the way in which businesses interact with customers. Effectively, it is the customer who now leads the marketing process.
- Individualisation has long been around but has become more pronounced within the Millennial generation, which questions the very notion of a job or meaning of a ‘career’.
There are a number of industries which have already experienced fundamental disruption, and indeed some are into their second wave of disruption. Since 2009 the print media has been feeling the impact of social media, and its response was to give away free editorial online. Chang explained that this created one of the most common attributes of Millennials, that they want and expect things for nothing. “Once that expectation is created it becomes very difficult to go back and charge for it, and indeed the media has not managed to do so.
“The immediacy of the internet also affected media. For instance, magazines with three month lead times found they cannot compete with the immediate peer-to-peer content of social media. Though there is no filtering system for online communication, bloggers stepped into the role previously held by editors and established themselves as authorities,” said Chang.
Similarly, the advertising industry has been completely altered by digitisation. A marketing campaign starts today with how a page looks on mobile, and works backwards – rather than the other way around, as it used to be.
The music and entertainment industry is into its second wave of disruption as its value chain collapsed. Digitisation occurred some years ago, and today an artist with 80 million followers can simply advise followers that a new recording is available which they can download from iTunes, completely bypassing the traditional music marketing chain.
“In the light of these changes, and the fact that disruption can come at a moment’s notice, from any direction and any industry – your competitor is no longer from just your industry – business owners need to be asking where they and their suppliers sit in that value chain should some disruptor come along unexpectedly,” said Chang.
The new trends of 2016 will come even more so from evolution of the on-demand economy, with more and more apps available to provide almost anything consumers want on-demand.
Netflix is one example that is available and about to disrupt broadcast media in South Africa. As fibre-optic cables reach more households, viewers will be able to watch whatever movie or series they want on demand, something which is already harming the value of media houses.
Another 2016 disruptor will be the ‘hashtag economy’ – already led by Amazon and Starbucks where people can tweet an order to the nearest outlet. Already seen overseas is the trend for physical outlets to evolve from traditional retail stores to sample stores where consumers can choose from a massive range (because goods are no longer kept in bulk for sale) and then order online or mobile. In this manner, said Chang, some overseas stores like Stylepit have started displaying multiple brands and in the process established themselves as a brand.
Some of the case studies of disruption and digitisation are today household names. Airbnb beat every hospitality group at the Brazil Soccer World Cup, capturing 20% market share, by giving a much richer and personalised travel experience.
Chang lists other industries as being in the firing line for disruption in coming years as: financial services; automotive; and healthcare.
“Uber is part of a greater trend of car sharing – keyless cars that simply float around and can be accessed by a smartcard or mobile phone.” Chang said he had personally experienced this from using Uber and found it 30% cheaper than hiring a car, as well as more convenient. He predicted that by 2030, the automotive and ancillary industries such as finance, insurance, parking and aftercare will start collapsing as driverless cars become ubiquitous. “The automotive industry should be concerned. Driverless cars will start to replace car ownership as the norm once it achieves 56c/km cost and a waiting time of 36 seconds,” he said.
In healthcare, many systems already exist for remote patient monitoring, and here not only does regulation but professional resistance impact on new systems. But Chang says the advantages should outweigh professional obstinacy.
“It is a disincentive for unwell people to have to take three hours out of their day to visit a doctor. Apps exist which can read your vital signs and you get a diagnosis and prescription while on the move,” he said.
“Disruption is not easy to anticipate, but companies have to be aware that it is achieved not through size but through speed. Companies have to be nimble, but also have to be more tolerant of failure. They have to try new innovations and not be put off if it fails. The motto should be ‘If you don’t try you will be left behind’,” he said.