How to disrupt your own industry?

Most people work for years, even decades, in a specific industry and never have seen disruption happening. As such when it happens they first do not see it, afterwards belittle it, followed by talks about soon overtaking the disrupter, before over time the actual disruption happens. We are seeing this at the moment in the automotive industry. Tesla was founded almost 20 years ago. The first 15 years, none of the car manufacturers saw them as a disruption to their business. Around 2018/2019 they belittled Tesla for not being able to scale up car production. In 2020 all brands promised to launch better EVs than Tesla. However Tesla's disruption is not coming from making better EVs. The real disruption will be autonomous robot taxis which convert cars from something you own to a service you subscribe to. This disruption will substantially reduce the number of cars sold to families and businesses because one robot taxi can service 5 to 15 families a day. VW, the previous leader, is struggling to compete as can be seen from the announced self-driving delays. The core of this disruption are new technologies and changes to business models which cannot be easily copied by existing players. EVs do not have a big maintenance bill, as such economically they are less interesting for traditional car manufacturers who make a big chunk of their profits from selling high-margin after sales components through garages. Transport as a service will reduce the demand for cars to be manufactured and requires knowledge of deep learning AI, custom AI hardware,... None of these skills were available at any car manufacturer.

Let's look at other industries

Transport

Close to car manufacturing, and as such, also at risk of being disrupted. Public transport is a sub sector with trains being a big part. Trains will see the move from train drivers to self-driving trains in the next years. However autonomous robot taxis, combined with tunnels into major cities [courtesy of the Boring Company], can offer a better experience which often will be cheaper to commuters. So expect passenger transport into cities to be disrupted for trains but also for any type of underground and overground transport, including buses.

Autonomous navigating ships, lorries and planes will come sooner than later. In a world where you take a rocket to go to the other side of the world or even the moon, Airbus and Boeing are not a player. Neither are they offering 4 people drones as a service to take you on short trips. See manufacturing later on as to why container ships might see a sudden drop in demand. Autonomous driving lorries and vans with humanoid robots like Tesla's Optimus loading and unloading can disrupt the short haul industry.

Telecom

Telecom had a major disruption in the form of Apple and Google shifting the power away from handset and infrastructure providers, towards the software ecosystem of apps. SMS and call revenues were eaten by WhatsApp. The next disruption is the network. Google and Facebook tried but at the end SpaceX with Starlink will be the big disruptor. Any telecommunication outside of cities will be done via low orbit satellites. That includes while driving, flying or on the water. 5G will only be marginally successful inside cities and urban areas but because Facebook open sourced the infrastructure hardware via OpenInfra, companies like Nokia, Ericsson, Huawei,... will see no-name competitors go for low margin high volume products. Operators will no longer run the network outside of cities and more and more companies will be deploying their own infrastructure within buildings and private campuses. The same for residential customers when their broadband modem and WiFi will also get a 5G base station in it. At this stage, the network will be able to be decentralised and telecom operators will be disrupted.

Financial Services

Stock brokers went from alpha-males shouting at exchanges, to high-frequency trading quants. Robinhood and eToro allowed the masses to trade without needing a broker. Revolut and other challenger banks are disrupting retail banking and expanding quickly into SME banking with corporate and institutional finance on their long-term radar. Moneybox and others make saving and pension contributions easier. However nothing compares to the next disruption: DeFi 2 or decentralised finance 2nd generation. Just like how Tesla was ignored, blockchain was ignored by most financial services companies until recently. We are now clearly in the belittling phase where many financial services companies talk about how crypto went from riches to bust. However where two years ago, transaction fees were tens of dollars, we are now seeing new layer 1 networks with gas fees below $0.01. Transactions per second have grown from 5 per second [Bitcoin] to 100,000 per second which beats Visa's 25K. Finality of transactions has gone from minutes to one second. So in the next two years we will see any financial instrument being "tokenised". This means that stocks, investments in real assets, pensions, insurance, savings, loans,... will all be represented in crypto tokens which can be transferred from one wallet to another in a second for less than $0.01, with 100K or more transactions per second. Buildings can be fractionalised, hence investments in a $1B building can be divided into 1B tokens, each representing a future share of office/apartment rental and future sales gains. Decentralised insurance allows Lloyds syndicates on steroids. If regulators do not want to play along, then having one country in the world which allows to register DAOs as legal entities, will even disrupt the financial regulators.

Manufacturing

3D printing and other technologies are becoming viable. Robotics has improved substantially. Tesla's Optimus Humanoid robot can in 5 years time be doing a lot of boring repetitive tasks, e.g. bringing a package to a front-door, changing a 3D printing cartridge, packaging a product in a box,... Adding the global logistics nightmare with pandemics, high oil costs,... and you have the perfect conditions for a transition from global mega factories to personalised small robot factories. One or multiple containers connected to one another. A couple of humanoid robots doing repetitive work around packaging and basic maintenance, and all of a sudden you can have factories working 24 by 7 in each neighbourhood. People will add value through creating innovative personalised designs and selling them through the design store. Want a pair of shoes? Pick a personalised design and hours later a pair of perfectly fitting shoes will be delivered to your door.

Energy

The next big revolution will be around energy. Wind and solar will become exponentially cheaper. Batteries will see both faster charging, more energy storage and cheaper pricing. The model with centralised energy manufacturing and nationwide distribution will be disrupted by each party being able to be a supplier and a customer. Tokenisation can enable high upfront investment costs for wind/solar/battery farms to be sold to many investors who would get future revenue shares. Car batteries can be used both for storage as well as return energy to the grid in case of urgent electricity need. Dynamic energy pricing is done via decentralised automated markets. The biggest disruption however will be in 5 to 15 years when the actual price of energy will get close to zero on windy and sunny days and overproduction is possible. With highly productive solar/wind and low-cost batteries, a future with too much energy will present new challenges but will have disrupted the existing oil, gas and electricity companies some years before.

Health

Healthcare was critical during the pandemic but also demonstrated that current processes to get vaccines produced are open to improvements. The Oxford vaccine showed that new non-profit models can be a better model for public healthcare. IoT sensors and home healthcare kits allow remote diagnostics of the majority of minor non-life threatening illnesses. This can substantially reduce the need for local GP practises and A&E facilities. The impact of DNA analysis and other more diagnostic focused healthcare will transform the industry. The dirty secrets of healthcare are that the big majority of patients will cure in 3 to 10 days, even if nothing is done, and that early discovery makes treatment cheaper. With that in mind, a disruptive healthcare provider could offer a solution for the 95% of patients that aren't critically ill but cost billions each year and combine this with early discovery of more worrying illnesses, e.g. cancer. AI chatbots, mobile apps, wearables, IoT medical home devices, generic painkillers/medicines, non-stitching wound solutions,... are your friends in this case. You can easily have a platform where doctors and other medical staff can connect to and earn extra. Sort of the Uber of doctors and nurses. Soon you will see that many doctors and nurses will prefer this employer over the NHS or some profit-maximising private health provider. The actual buyers might be the employers instead of the government because they lose lots because of absenteeism and this would be a cheaper alternative to private healthcare insurance. Combine this with a critical illness insurance and you have a very disruptive offering.

Why wait for disruption

As shown with the last example, building an industry disruptive solution is not nuclear science. You can wait around for somebody to do it but if they are successful you are out of a job. Potentially the best solution for companies is to always invest in ventures which try to disrupt their own industry. It is better to own the majority of your industry disruptor, than to own zero.

Most people think that quitting their day job and founding a startup is the only way to this disruption. However the current startup and VC model is broken. Startups spend too much time chasing VC money instead of building disruptive solutions. Most VCs aren't industry experts so they are limited in their ability to offer more than money. Everybody is looking for a startup which has a product generating profits and lots of customer interest. The only thing needed is money to scale. This sounds very much like music labels who want artists to launch a successful hit on TikTok before they are interested. If the artist/startup does all the hard work, what value does the label/VC bring?

Large companies can innovate but scaling any innovation within an existing company is suicide because some executive will need to lose power and before they do, they prefer to torpedo the innovation. The best model is for large companies to create disruptors at arms length. A small group of industry veterans are teamed up with outside innovators and doers. A key industry problem is focused on. A 4 to 6 weeks prototype phase is started. If the solution convinces top management, then a 3 to 6 months pilot is started with real customers. When and if this is successful, a separate venture is created which can offer products to anybody in the industry, even competitors. If the team does not have to focus on raising funds, then they are willing to give more to the founding company. The founding company should focus on failing cheaply, not looking for guaranteed success. It is ok that 7 out of 10 prototypes fail and 1 out 3 pilots. That is a lot cheaper than investing in one too many unsuccessful ventures. Several of the award-winning products and departments I stood behind, were following this model.

Let's start some more industry disrupting ventures...