The Age Of Disruption Is Over

Incumbents have launched a come back as they take ground and win customers.

‘Disruption’ has been a tag line of the 21st Century. There’s arguing that the internet and the power of big data have changed the way we live. The hype about companies like Airbnb, Uber, Facebook, Google, Netflix and Amazon has grown into the stuff of myth and legend as they’ve stormed through and created new markets, products and services for consumers. Until now, major businesses have been paralysed and stuck looking on as their industries were ‘disrupted’ and their customers changed forever. The ‘Age of Disruption’ minted new billionaires like Mark Zuckerburg, Jeff Bezos and Elon Musk, but that time is coming to an end as incumbents have the resources, knowledge and capital to take back consumers.

Where Incumbents Are Fighting Back

The Battle for Eyeballs aka ‘Streaming Wars’

Netflix was first to capture our love of bingeing tv and online streaming. They were soon followed by competitors around the world. Last quarter Netflix announced that they lost 100,000 customers. Why?

The Future of Transport and the Electric Car

Tesla was revolutionary. Elon Musk was an eccentric visionary. Together they were going to change the car industry for a better and address the challenges of climate change. Now, Tesla has burnt through billions of dollars and Elon Musk has lost any semblance of a vision. Toyota, General Motors, Honda, Ford, Volvo, Volkswagen, BMW, etc. are bringing out hybrid, electric, and even hydrogen cars as they push the industry forward.

Finance

AfterPay, SplitIt, Sezzle and the rest have burst through the noise onto customers phones and into shops all over the world. The micro finance and ‘Buy Now, Pay Later’ products have unleashed a world of spending and a dramatic change in how customers use credit for shopping. Companies that solely focus on Buy Now, Pay Later have over 6 million customers but compare that to Bank of America who has over 50 million customers or Commonwealth Bank of Australia that has 16 million.

Food

Beyond Meat has caught the world by surprise since its IPO. Not only have investors been loving the stocks meteoric rise but customers have been loving the product. This feel good story has drawn competitors from everywhere, and Nestle has even signed a deal with McDonalds to supply plant based burgers.

Where we go from here

The example markets are only the beginning of resurgent incumbents. These phenomena are happening across countries, markets and geographies. This isn’t to say that we are at the end of disruption, that disruptors will fail or that companies shouldn’t ‘disrupt themselves’. What these examples highlight are the changing nature of the world we live in, and that these are trends and factors you should be thinking about for the future — especially if you are investing.

Risks To Disruptors

Incumbents have an edge over disruptors in several key risk areas.

  1. Regulatory catch up. Regulators, law makers and politicians haven’t been able to keep up with technological growth. As they do start to create laws around privacy, data security and consumer lending the disruptors entire business model may be at risk.
  2. Privacy breaches. Much like oil leaks they spill out and damage a wide environment that is expensive to clean up, have a severe impact on brand and trust, and prioritising or preventing them will be a complex and expensive process. Disruptors may not have the brand or resources to resolve such issues.

Investing for the Future

The next decade looks to be the decade of the well established incumbents that are profitable, innovative and able to incorporate technology. There is still lots of upside and a big future for disruptors but investors need to become very careful when putting their capital at risk.

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