“One force to overrule them all"
For many years the strategy paradigm has been driven by Porter’s Five Forces of Competition model.
This caused organizations to focus on their competitors, possible substitutes and barriers to entry.
The Porter Five Forces model
But now there is a sixth Force that can overrule all of them – I call it “Superfluousness”
This is when your products or services are rendered totally superfluous to the market. You can be the most cost-efficient, have the greatest customer service with the highest barriers to entry – but you just become irrelevant.
Take for example, Amazon. You can now buy a book via the Kindle feature and seconds later it is on your local machine. The typesetting, printing, binding, packaging, distribution and retailing dimensions have been rendered totally superfluous. However good, cheap or fast they are these industries are now irrelevant to the transaction. No amount of cost cutting will change this.
The opportunity to render industries, products or services superfluous is significant and growing.
The original examples of market disruption were where the product could be made digital – books, records, photos and films. Rather than produce the physical product, it was created digitally and all of the physical production products and services were rendered superfluous.
In the education field you no longer need to buy a whole book but only the relevant chapters - electronically.
Indeed the whole education field is being turned on its head by technology. In place of “learning” meaning “hear and repeat back” with Universities going to massive efforts to try to detect plagiarism; “learning” is now meaning “go out and find the information you need to solve problems” with the use of other people’s materials now expected rather than having to be ‘detected’.
We now see standard services being disrupted by new alternatives. Taxis replaced with private cars through Uber. Licensed accommodation premises replaced by private homes or flats through AirBnB.
Banks are seeing online transactions bypass them. Non-banks like Paypal and now Apple are bypassing the banks and offering simpler, more convenient services. As banks offer little-to-no incentive to have all of your financial transactions with the one bank, they are likely to be picked off service by service.
A parts manufacturer may feel safe – but 3D printing may allow its clients to make their own custom parts eliminating the need for the manufacturer’s value-add services. Or, the product their parts go into may be made superfluous, thereby vaporizing that market.
Even doctors are being supplanted by online medical diagnostic applications. As people have been shown to be more honest with a computer than with a doctor (less chance of embarrassment), the possibility for an application to give a better diagnosis exists. So even five-years of medical education can be made superfluous.
The relationship between doctor and patient is also liable to change via online health services. Initial diagnosis or vetting may be performed by “the system,” rather than a general practitioner, allowing direct access to the relevant specialists to be driven by the patient not the medical system.
The nature of the threat (or opportunity)
A technological threat does not come from a single technology. Technological threats come from new combinations of technology that change the game.
Technology makes new things possible. What is made possible is in turn determined by what is feasible and the market’s readiness to adopt.
The cloud, big data and 3D printing are all single technologies. They need to be leveraged into a process or a product to be a threat.
NB Threats can also be opportunities IF you are in a position to exploit them. Sometimes you’ll be constrained by your existing infrastructure, your existing systems or just your mindset. Sometimes you’ll not see the threat/opportunity until it is too late (eg newspapers).
But, at any time, someone somewhere is trying to redefine almost every market – so you need to be vigilant.
To survive you may need to redefine your market or find new ways of delivering or positioning your goods or services. Physical books, for example, may evolve from just printed stories into assets or collectables with short run editions able to be sold at a premium.
Every organization needs to both review their market and their customers’ markets to identify areas where they can be supplanted or made superfluous. You can’t stop it (ask the taxi or record industries) but you do need to respond.
Brainstorm – How could someone else undermine our business?
We say, ‘someone else’ as this removes your current constraints.
For example, if you’re in banking, most financial transactions are electronic. What therefore does it take for a non-bank (like Paypal) to process financial transactions?
If you’re in retail, why will people incur the time and cost to travel to your store when they can buy the same or comparable products online from the comfort of their own homes?
If you’re in manufacturing, can your own or your customer’s products be supplanted? If your customers’ market disappears, so does yours.
Do you need to exist (in your current form)? Can your suppliers link directly to your customers and add value in the process? That should be a concern.
What exactly is your ‘value-add’? Convenience? Aggregation? Lower costs? Expertise?
Extrapolate – How can what is happening in other industries be replicated in yours?
Most books now are electronic. Most records are downloads. Films are going in the same direction. How can your product or service be digitalized and substituted?
Your product may not be substituted, but your supply chain may be. How would you (or anyone else) disrupt your supply chain?
Can someone set themselves up between you and your customers and provide a better (or at least an acceptable) service?
Financial brokers have moved to become broking websites. Online markets have replaced newspaper classifieds as the place to sell and buy. And who buys airline tickets from airlines these days rather than from a ticket pricing aggregation site?
No industry or service is safe. Someone somewhere is plotting to change each industry. Even food outlets are being supplanted by home-delivery services. Constant vigilance and the capability to respond fast and effectively are vital.
Are you looking or are you going to be made superfluous before you realize it?
The capability to respond fast is what TOP provides.