How the Nature of Competition Has Changed

wadhwa wsj Not long ago, you could see your competition coming. What you had to worry about most was a new entrant within your industry that had a simpler, lower-priced product. To stay ahead, you could either improve your product’s functionality or build new products that extended the range and value of your offerings. Management guru Clayton Christensen coined the term “disruptive innovation” to describe how competition worked: a new entrant attacked a market leader by launching low-end, low-priced products and then relentlessly improved these. Christensen created several frameworks to help incumbents defeat emerging competitors as they saw them coming.

Now Christensen’s frameworks have themselves been disrupted — because you can no longer see the competition coming. Technologies are no longer progressing in a predictable linear fashion, but are advancing exponentially — and converging. Fields such as computing, medicine, artificial intelligence, 3D printing, robotics, nanomaterials  and synthetic biology are simultaneously making advances, and combining these allows one industry to rapidly disrupt another — before market leaders even know what hit them.

Note Airbnb’s rapid advance to become the fifth-largest hotel chain in the world, and Uber’s threat to the taxi industry. The sharing economy also extends into areas such as social and commercial lending and crowdfunding, car sharing, clothes- and book-swapping, garden sharing, and peer-to-peer task assignments. Information technology has enabled people to come together in new ways to better manage their resources. When some of the legal, tax and trust issues have been resolved, almost any industry that has a middleman — including finance and banking — could be disrupted. They will not need bankers and taxi dispatchers.  A large fraction of the population may choose to share possessions such as cars, tools and garden instruments rather than own objects that are used only on occasion.

Wearable health devices such as Fitbit, Nike and Jawbone are creating excitement because they allow the measurement of daily activity. Such devices, or more likely our smartphones, will also contain a range of other sensors that perform an electrocardiogram and monitor our blood pressure, blood glucose, blood oxygen, respiration and even sleep. And they will test for disease. With genome sequencing costs already at the $1000 level and dropping, this will become as common — and cheap — as a blood test. Artificial Intelligence–based digital assistants will constantly monitor our health and advise us on what medications to take. Entrepreneurs will find ways to combine all this data to understand the correlation between our genome, habits and disease — to develop new treatments. To put it simply, the medical-device industry, Big Pharma, and even doctors will be disrupted by technology companies and entrepreneurs.

Bitcoin has created a lot of hype and may not survive, but digital currencies surely will. They are already transforming countries large parts of whose populations don’t have access to banks. In Kenya, for example, a mobile-phone payment system called M-Pesa has become the country’s dominant method for sending remittances and for almost all day-to-day purchases: 31% of the country’s GDP is processed through it. With companies such as Google, Microsoft, Paypal, and Square jockeying with digital wallets and payment systems, it will not be long before the banks and financial-services companies feel the threat and start lobbying regulators to rein in their imminent competition.

The communications industry was first shaken up by the advent of mobile phones. Out went the landlines, phone booths, and long-distance charges. Then the mobile carriers faced a threat from data — you could make calls over Facetime and Skype and avoid the exorbitant international calling charges. Now, their threat comes from the unlikeliest of places — Facebook and Google. Both companies are “piloting” programs to provide Internet access through the skies. Google is rolling out super fast fiber-based Internet access to several cities. It has also been testing helium balloons with its Project Loon. Facebook has announced that its Connectivity Lab will research and test experimental technology to spread Internet access, including drones, satellites and lasers. If Wi-Fi based Internet were available everywhere, why would we need the expensive data plans offered by cell carriers? They could be disrupted in as big a way as could the cable industry.

As well, we will soon see robots disrupting the manufacturing industry. Already, with their increasing sophistication and falling prices, they are becoming capable of performing surgery, milking cows, undertaking military reconnaissance and combat and flying fighter jets. They will start automating almost any physical task that a human does. We will also see self-driving cars disrupting industries such as transportation and insurance and eliminating the need for traffic police and traffic lights.

What industries will change and who the winners will be in this era of exponential technologies are uncertain. The only things that are certain are that we are in for dramatic changes, and that the old rules don’t apply any more.

Link to article on Wall Street Journal\’s website