SOURCE: Innosight

March 29, 2017 10:00 ET

Radical Change Is Coming to an Industry Near You -- And It May Kill Off the Companies at the Top of Their Game, According to Innosight

From Insurance and Banking to Shipping and Healthcare, Leading Firms in Once-Safe Industries Are Potentially on the Endangered Species List as the Next Wave of Disruptive Innovation Sweeps Through The Economy

LEXINGTON, MA--(Marketwired - Mar 29, 2017) - The knock-on effects of disruption are hard to predict. Waves of radical innovation have upended the mobile handset business, personal computers, cameras, the publishing industry, the music business and so on. And now, seemingly safe industries -- not to mention ones that serve them -- are next in the firing line of disruption, according to the growth strategy consulting firm, Innosight.

"The companies most vulnerable to disruption today are those at the top of their game," says Innosight co-founder and senior partner Mark Johnson, co-author of the forthcoming book Dual Transformation: How to Reposition Today's Business While Creating the Future (Harvard Business Review Press, April 2017). "In mature industries, incumbent leaders are extremely vulnerable to competitors offering greater simplicity, convenience, accessibility, and affordability."

"In many cases, these companies think their industries and business models are insulated from disruption because it hasn't happened yet," says Scott Anthony, Innosight managing partner and co-author of Dual Transformation. "But earthquakes are preceded by light tremors. Incumbents seldom lose their position overnight. It takes years of incremental change before the shockwaves are large enough to unseat the biggest, safest market leaders. And when that happens, aftershocks can ripple through connected industries, too."

Who's Next? The Answer May Surprise You

A look at dozens of industries to assess the potential for market disruption -- especially for supposedly safe incumbents -- reveals some provocative takeaways:

  • Could driverless cars kill the auto insurance business?
    Cities across the country and around the world are making way for a radical kind of driverless car: one with no steering wheel, no pedals, and nobody inside. Sure, it's a game changer for car companies. Ford and GM are quickly getting into the "mobility" game, but so is Intel, with its $15 billion purchase of a company that makes sensors and cameras. But what about auto insurers? Companies like Geico and Progressive make most of their money from auto insurance. What happens to their business model when there are no more car accidents?

  • Could consumer banks go the way of VHS players?
    Recent studies have found that millennials hate banks more than just about any other industry. And their options are growing rapidly: telecom companies offering mobile payments; e-commerce companies offering escrow-type payment services; traditional banks losing market share to online banks and non-bank mortgage lenders; even Starbucks held more than $1 billion in prepaid card assets as of 2016. It won't be long before non-banks and tech companies offer an entire suite of financial services -- without the reputational baggage. How soon until consumers "cut the cord" with banks, like they're doing with cable TV companies?

  • Could 3D printers take a bite out of the shipping business?
    3-D printers can cut labor costs, shorten design and development timelines, improve overall manufacturing efficiency, and even make low-volume manufacturing cost effective. The impact will be felt in a wide variety of manufacturing-dependent industries, like the aerospace, automotive, and medical device industries. But what happens to trucking, logistics, container and rail companies when manufactured goods are smaller, lighter and made closer to where they are used? If you are the business of shipping millions of tons of manufactured goods over long distances, what happens to your business model?

  • Could robots and algorithms replace white-collar professionals?
    They already are. Think: tax preparation software. And the applications for artificial intelligence (AI) are proliferating quickly. The venerated Washington Post is using Heliograph (an AI "bot") to write breaking news stories for the Post's website. A Japanese insurance company is replacing human claims workers with a version of IBM's "Watson" computer. From paralegals to professors, and even radiologists reading x-rays, rapid advancements in AI pose a growing threat to "safe" white-collar jobs.

Responding with a Transformation Agenda

The right way to respond, according to Innosight, is with a "dual transformation" agenda: transform and reposition today's core business, while building the business of tomorrow in a new, under-served market that can provide rapid growth.

It's the kind of transformation that Ford Motor Company is undertaking with its focus on "mobility services." By the time driverless cars take over America's roads, Ford will be a different company, with a transformed business model, aiming to maintain its leadership position in a radically changed market. Will Ford still make "cars"? Yes. But the identity of the company will be very different: it will no longer be a "car company."

"There is no such thing as a safe incumbent because disruption is never over," says Anthony. "But it doesn't have to mean death for market incumbents. When leaders stop spending too much energy defending the status quo and start preparing for transformation, disruption can create an equal or even greater opportunity and power their next wave of growth. Disruption nearly always creates new markets and opportunities -- and incumbents have as much a right to win there as startups do."

For more information, a copy of Dual Transformation: How to Reposition Today's Business While Creating the Future or an interview Mark Johnson and Scott Anthony of Innosight, please contact Katarina Wenk-Bodenmiller of Sommerfield Communications at +1 (212) 255-8386 or Katarina@sommerfield.com.

ABOUT INNOSIGHT
Innosight, the strategy and innovation business of global professional services firm Huron, helps organizations design and create the future, instead of being disrupted by it. Acquired by Huron in 2017, Innosight is the leading authority on disruptive innovation and strategic transformation. The company collaborates with clients across a range of industries to identify new growth opportunities, build new ventures and capabilities, and accelerate organizational change. Learn more at www.innosight.com and www.huronconsultinggroup.com.

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