The present century is relatively much different from the past century. The past century witnessed two World Wars, but otherwise the industry was calm. On the other hand, in this century the war is happening within industries. There is a heighted competition and the market became a buyer market rather than a seller market. With the advent of smart phones and high-speed internet, consumers have access to the information all the time and numerous choices are available to the buyers. Also there is a saturation happening in various markets across the world in terms of the basic products. How long you will be able to sell television in USA? Everyone has at least one television. In many industries, we have more producers and less buyers, hence it very well became a buyer’s market than a sellers market. So the companies got into a never ending race where one has to continuously bring new, sophisticated products in a continuous manner. Now the rule is, if your company don’t make your product obsolete, somebody else will do. So you better innovate.

So what is disruption in industries?

The sudden arrival of a new way of doing business that challenges the traditional businesses to the extent of their survival. The arrival of call taxis in India challenged the auto operators and the arrival of radio taxis disrupted the call taxi business. The birth of online book stores challenges the traditional book stores. Several manufacturers of printed greeting cards vanished with the advent of eGreeting Cards.

Long back one of my friends told me a that there are three kinds of companies.

First, few companies have a deep understanding of the market and customers and they create products and services and enjoy the first-move advantage. These companies fall under disrupters.

Second, some smart companies they immediately catchup this trend and redesign their products and services. These companies are called followers.

Third, there are companies that wonder what’s going on in the market. These companies are called victims.

The first and second category companies typically have business analysts who constantly monitor what is going on the market? What their competitors are doing? How the customer preferences and expectations are evolving? Where the industry is heading to?

Sustainability and growth are the two key words for the companies. Here the word sustainability refers to the longevity of the business and growth refers to the year-over-year increase in sales (top line), profit (bottom line), brand image, valuation, number of clients, etc. A company can be engrossed on the operational activities, but at the same time their development eye should be wide open to recognize and respond to the changes that are happening in the market.

What are all the sources of disruption in industries?

The are numerous ways an industry may be disrupted and some of the most important are presented below:

• The arrival of a new business model – As you may know no one sells a product or a service below the cost price (that is the cost required to produce), but now you have seen that many ecommerce companies sell the product below the cost price to acquire customers and to increase their customer base.
• A new invention – digital photography fully replaced the conventional film photography both at home and at the film industry.
• A new technology – LED bulbs are fast replacing the Incandescent Bulbs as the LED bulbs are more energy efficient, long lasting and emits less heat.
• Discovery of mineral resources – new oil fields in USA reduced its imports of oil from other countries, which reduced the global crude oil price.
• Government regulation – Environmental Protection Agency of a country mandates that all the Leather Manufacturers should install Effluent Treatment Plant (ETP) to treat the wastages coming out of their manufacturing facility. This increases the cost of manufacture and it makes them unviable to compete in the international market.
• Consumer preference – In my childhood, it is an annual ritual to go to a popular circus in Chennai during the summer vacation. But off late you may be hearing that circus companies are going out of business as they need to compete with other entertainment providers such as movies, theme parks, malls etc. Also the increased awareness about animal rights among us restricts the circus companies to use the animals in their shows that makes the circus less interesting for some customers.

Compared to the past century, 21st century is facing disruption in almost all industries and the frequency of disruption is also much faster. The best example is the smart phones industry. From the year 2000 to 2017, within a period of 20 years, several mobile companies rose to the height as market leaders and disappeared. We will be hearing more such examples in the coming years as the industry disruption is becoming more intense and more frequent.

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