How can you determine if your company is at risk of attack from a disruptive technology? How can you take advantage of the next wave of business opportunities?
Clearly, if you can answer these questions you are well on your way to becoming the next billionaire. Since finding the answers will be challenging it is important to identify a process to review industries and businesses and discover indicators that might identify opportunities.
Clayton Christensen’s theories on disruptive technologies can provide some insights. His theories show that disruptive technologies often are created when industry leaders’ products have been improved to the point that a significant share of the market’s customers do not want or need all of the product’s attributes. This allows a new market entrant to provide a lower cost “good enough” product that doesn’t have all of the “bells and whistles” of the industry leader’s product. This new entrant will attract the least profitable customer of the industry leader and makes it difficult for the industry leader to create strategies focused on its most profitable customer (wants all the “bells and whistles”) and its least profitable customers at the same time.
The new market entrant, as a result, is allowed to grow its customer base until it overwhelms the market leader.
To use this principle to spot emerging opportunities requires a bit of research and the ability to identify potential market disruptions. The steps we recommend are as follows:
1) Identify markets ripe for disruption. A market ripe for disruption is one where the profits are very high and the mid to lower profit range customer base growth is at a point where it is stagnating or possibly shrinking. This is an indication that the products provided might have reached the point where customers may not want or need all of the attributes offered or that the price is reaching an unacceptable or unsustainable level. An example might be the health care industry. Here the cost of medical care has gotten to the point that care without insurance is difficult to afford. Further the costs are driving up insurance costs to the point that insurance is difficult to afford. While the total market for health care remains large and the demand is high, the lower profit segment is stagnating and some are foregoing all but the critical health care.
2) Identify new market entrants that are focused on the industry’s least profitable customers. New entrants would be providing products that are less expensive than those provided by the industry leaders. For health care it might be the clinics operated by nurses that are located in grocery stores and drug stores. Another entrant for health care might be the telemedicine technologies that can provide diagnosis and some treatment protocols via telecommunications. For retailers, a disruptive technology was RFD mail delivery that spawned the catalog business in the late 1800s.
3) Make sure that the new entrants are disruptors. There are certain new technologies that might appear to be market disruptors that are in fact a sustaining technology that can be used by market leaders to better serve their best customers. The Internet, for example, is considered a disruptive technology for the newspaper business. The problem with this conclusion is that the Internet market entrants targeted the newspapers’ most profitable customers. This, while in the short run, had a significant impact on newspapers it also allowed newspapers the ability to focus on counter strategies. That is, the new entrant didn’t focus on the least profitable customers that would have created a dilemma for the newspapers to have to abandon very profitable customers to protect a marginally profitable customer base. The result is that newspapers and media companies have integrated the Internet into their businesses and are beginning to develop new digital strategies.
4) Create an analysis that compares opportunities across industries. There may be similarities across industries that provide very large opportunities. RFD mail delivery provided an opportunity for retailers to reach new communities by providing non-custom, “good enough” wares to be ordered through the mail. This delivery also allowed opportunities to printing, graphic and media industries. The Internet has been a boon for social networking, search engine and retailing but quickly became a key component for the delivery of new technology such as telemedicine and energy production.
After going through this process there will be a large number of choices and even the best analysis may result in a less than optimal choice. The analysis will, however, likely increase the probability of identifying a potential market disruptor.
My guesses for the next big disruptive technologies are:
1) Telemedicine – new bioscience, telecommunication and digital technologies will provide the ability to deliver quality health care globally with smaller facilities on site. The new technologies will include bio monitoring and feedback, micro robotics and high resolution, 3D teleconferencing during diagnosis and treatment.
2) Energy – Hydraulic fracking will continue to provide energy at lower costs. This technology will allow expanded global manufacturing capabilities in the U.S. as well as developing nations.
3) Education – Internet based college courses and degrees will increase and allow more training that directly impacts career development. College degree costs will drop and access to top tier universities will be available globally.
I am personally focused on telemedicine. In Houston, MD Anderson Cancer Center, Rice University and the National Space Biomedical Research Institute have agreed to create an eHealth Research Institute. This institute will review and vet telemedicine projects that can advance the use of technology to deliver health care at a distance. As projects are approved to be accepted for development the research institute will seek funding for the project by attracting investment partners that will participate in commercialization of the project’s products.
If you have an interest in learning more about the eHealth research Institute or about becoming a project partner send me an email at gary@gwrresearch that includes some background on you and your company.
Popular posts from this blog
When introducing a new product or service to the market a key, and often critical, consideration is the price for this offering. I have seen folks simply take the cost of production and use a percent mark up as a pricing model. This is the simplest model and it provides a good example for the need to consider other pricing model options. Here are 10 things to consider before setting a price for your product or service: · Mark up Based on Cost Vs Retail . In the opening paragraph I gave the example of a model being used that marked up a product by a percent over the cost. The cost used here is generally direct cost or labor and materials. If someone wants a 30% of the asking price to be the mark up, then using 30% of cost won’t provide the desired outcome. Simply put, it is the wrong math. If something costs $1 to make and it is marked up by 30% for a selling price of $1.30 then the profit of based on the asking price is 23.07%. To arrive at
Here is the third example of developing a marketing strategy project for a new product. This is a fictional company developed by a team of MBA students in my marketing strategy course at the University of Houston C.T. Bauer College of Business. Executive Summary Avenir is a forward thinking and progressive technology company seeking to positively impact the lives of our customers, collaborators, and shareholders through the creation of new technology. We were established in 2001 and are proud to employ 211 hardworking individuals at our Houston, TX headquarters. Avenir designs, markets and licenses the K-1 battery, a new kinetic powered battery that will enhance cellular telephone battery life. The K-1 battery will alleviate the need to constantly charge cellular phone batteries through electronic devices. Our new battery offers a significant leap forward in the world of portable electronic power to the cellular customer. Our collaborators will se
Here are some more thoughts on why newspapers may still be a wise investment and how they may find ways to develop a stable of print and digital products that complement each other. Virtually all newspapers have websites that look good and have great functionality. So why aren't they all producing acceptable amounts of profit? The question probably should be asked differently, "What do consumers and advertisers expect from newspapers?" Then ask, "What do they expect from the Internet?" The answers are different but there is overlap. The area of overlap is the area of opportunity for creating a business that is needed by consumers and advertisers and capable of creating value that translates into profits. To determine the real value of the website it is useful to measure the total advertiser dollars spent on a website only ad buy versus those being bundled with a newspaper or distribution ad buy. These stand-alone purchases might give so