As customers, we often get so conditioned to an industry that we assume there’s only one way of doing something. As entrepreneurs, we understand that there’s rarely only one way. If you look at some of the most successful startups that launched in recent years, it’s readily apparent that disrupting an existing market is the quickest way to the top. So what industries are being shaken up – and how can you tell whether disruption is the way to go?
What it means to disrupt an industry
Before we dive into which industries are being disrupted, let’s define what we’re talking about. In every industry, some businesses create new products or services that are cheaper or more efficient, shifting around components of the marketplace but not wholly transforming it. To cause disruption, a company must create innovations that change an industry at its core and add value to the market.
A business may do this by creating a product or service that is more accessible or efficient than what is currently on the market or by creating something that reaches a new audience. The smartphone is an example of a revolutionary product that disrupted the phone industry, allowing phone users to access the internet outside the home, utilize applications and shop from handheld devices while on the go. Years from now, this industry could be disrupted again as technology continues to evolve and new ideas are born.
How to identify industries that are ready to be disrupted
A business industry is a unique organism that’s made up of numerous organizations, brands, characteristics, consumers and channels. While it’s challenging for a single business to come in and disrupt an entire field, it’s not impossible. All it takes is the right timing and execution.
Most entrepreneurs want to know how to recognize an industry that’s ready to be disrupted. If it was easy to decipher, every business owner would enter the market and automatically catapult to the top. It’s not a question with a simple answer. However, with that said, here are a few general signs that a sector is ready for disruption.
Complacency in the marketplace is one of the biggest signs that something needs to change. For existing businesses in any given industry, complacency should be viewed as a troubling indicator that disruption is approaching. You could argue that the cable industry has become complacent in recent years, and it appears that this mistake has cost cable providers dearly. They have consistently introduced price hikes without adding any real value to their service offerings. Meanwhile, streaming services like Netflix, Hulu and HBO Max have come in and taken a healthy share of the marketplace.
Bottom Line: It’s once businesses begin coasting – as opposed to innovating – that markets become stagnant.
Another hint of impending disruption is chronic customer frustration. As consumers become frustrated with products and services, they voice their opinions, tighten their wallets and look for alternatives. This is where savvy entrepreneurs recognize an issue and create an alternative solution.
One example of a company that recognized consumer frustration and capitalized on it is MedPro Disposal. The medical waste industry was relatively top-heavy – meaning much of the market was controlled by a single player, Stericycle. However, over the years, doctors and hospitals became frustrated with the hefty costs of Stericycle’s services.
That’s when MedPro Disposal’s founder, George Shanine, recognized an opportunity to create a cost-effective alternative. By offering cost savings of 30% to 40%, Shanine has been able to disrupt the industry and take away a sizable share from Stericycle. [Learn how to use customer feedback to gain a competitive advantage.]
According to Luke Williams, author of Disrupt: Think The Unthinkable to Spark Transformation in Your Business, the key to identifying markets that are ripe for disruption is to look for tension points instead of massive pain points.
What’s the difference? Williams believes that tension points are much more subtle. They aren’t typically big enough to be considered major problems, which means most businesses aren’t paying attention to them. However, once a solution is developed, it’s obvious that fixing the underlying issue offers an excellent opportunity to penetrate and revolutionize the industry.
Did you know? There are four specific types of tension points, according to Williams: workarounds, values, inertia, and shoulds vs. wants.
An industry or market that is dominated by a few companies is the perfect space for disruption. Due to the imbalance of power within the industry, it may seem difficult to break through the power structure and disrupt it. However, startups often can work faster, adopt more efficient technologies into their processes, and develop innovative products or services quicker than the businesses at the top. They can find space to move up in the industry and begin to shake things up, causing the dominating companies to either shift or crumble. [Related article: At What Point Are You No Longer a Startup?]
Since technology is constantly evolving, industries must stay on top of technological changes and implement the latest tools – or risk disruption. Since a lot of massive companies use complex systems, it can be hard for them to transition to new tech quickly. This is what makes those businesses the perfect target for disruption: There’s a chance for others to come in and give customers easier access to products and services that benefit them. For example, enterprises ready to shake things up might implement mobile apps, self-service options and other innovations that use newer technology, appearing on the cutting-edge to consumers.
Industries being disrupted
Now that you understand the telltale signs of markets that are ready for disruption, let’s take a practical, real-world look at some markets on the verge of or already being disrupted in 2022. You’ll notice one company in particular is largely responsible for the disrupting.
Small business lending
The process of applying for and obtaining a small business loan can take anywhere from 60 to 90 days or more due to the paperwork and documentation required. Banks and other lenders may see a disruption soon with companies like Amazon Lending, which offers much simpler systems for lending. It is easier for Amazon to distribute loans due to the amount of data they collect on potential borrowers, which allows it to make better-informed decisions on borrowers than banks can. Amazon can process approvals faster, and it offers business loans ranging from $1,000 to $750,000 and invests in small businesses.
Pharmacies and larger pharmacy benefit managers (PBMs) are seeing a disruption this year with the increased ability to purchase prescriptions through mail order or online using sites such as Amazon. Physically going to the pharmacy to pick up a prescription can be inconvenient. With that tension point in mind, Amazon Pharmacy has begun to disrupt the industry by allowing customers to purchase their prescriptions online and get them delivered to their homes. The pricing is transparent, unlike with PBMs, and the company offers a simple process for refilling medications – all from a customer’s desktop or mobile device.
Fulfillment and delivery
The fulfillment process includes inventory, putting together customer orders and shipping them. This requires companies to invest in inventory management software as well as delivery technology. Delivery services such as USPS, UPS, FedEx and DHL are beginning to see a shift in the industry due to companies like Amazon implementing faster shipping and more efficient delivery tracking software. This development was partly sparked by a factor few could predict: the coronavirus pandemic.
As COVID-19 shook up the world and the way people shopped, most consumers took to using Amazon and other online stores, and many still prefer to do so. Some companies are now offering two-day, next-day or same-day deliveries, while others are taking advantage of a subscription business model to lower shipping costs. Companies like Amazon are attempting to make delivery and fulfillment processes faster, more efficient and predictable, using robots, AI and other machinery to quicken processes. Ongoing supply chain issues will only hasten the need for industry improvements.
During the pandemic, customers increasingly began ordering groceries online for delivery to their homes the same day or picking them up outside the store. Since then, this remote grocery shopping method has become more convenient (and safer when it comes to public health) than spending time physically walking around a brick-and-mortar store and waiting in a checkout line. Even with the advent of COVID-19 vaccines, some consumers still aren’t rushing back to in-person shopping. Companies that further revolutionize grocery shopping will have a huge impact on this sector.
Alongside online grocery stores, digitized stores have gained popularity as well. Amazon’s digitized stores took the shopping industry by storm when the company launched its Dash Carts, physical shopping carts that have software to identify the items placed in them. Customers can then pay for their groceries without having to interact with a cashier or wait in line to check out. This is the next evolution of self-checkout and may further reduce the need for clerks.
Bottom Line: The industries likely to see disruptions in the near future are ones that can use new technology to make purchasing easier for consumers – and it may be a behemoth, not a startup, doing the bulk of the disrupting.
How to disrupt an industry
For an entrepreneur, disrupting an existing industry is a very challenging proposition. It can’t be done without first having a clear understanding of what it is you’re looking for – the first thing being market complacency. Industries that have stopped innovating are almost always due for a shakeup.
The second thing to examine is the presence of customer frustration. When customers are no longer satisfied with an industry’s existing product and service offerings, there’s ample opportunity for another business to come in and cause a disruption. Finally, you have to look for tension points. As mentioned, these are much smaller and more discreet than pain points, but the solutions to these issues can fuel significant change.
Once you identify an industry that is experiencing one or more of these characteristics, you can begin to think about disruption. And as you can see from the examples above, plenty of industries are facing significant shakeups this year.
Anna Johansson contributed to the writing and reporting in this article.