Only five years ago, the taxi industry was powerful enough to lobby local governments for a virtual monopoly on private ground transportation. Taxi licenses were scarce, companies were highly profitable and no competition seemed to be emerging to challenge the status quo. Now, following the release of ride-sharing applications like Uber and Lyft across the world, taxi companies are struggling to keep up with the competition. Disrupted by new, agile business models that reduced consumer prices while externalizing many costs traditionally incurred by taxi companies, taxi companies are facing significant challenges to their very existence, and they're not alone. Many industries, from retail to banking, are highly vulnerable to disruption through new business models and technological advances. Understanding their vulnerabilities and keeping up with major technological developments will be key for existing businesses to survive these challenges.
In addition to increased competition from online warehouses, new technologies are emerging which have the potential to revolutionize the retail industry. Companies like Amazon are already introducing physical stores that detect and automatically charge the consumer for any purchases in their bags, eliminating the need for checkout lines and significantly reducing labor costs as compared to traditional retail environments. Marketing analytics allow retailers to provide shopping suggestions uniquely tailored to an individual's needs, increasing the success of marketing campaigns dramatically. By using context-specific services, retailers can deliver coupons or other incentives to shoppers as they're viewing an item, significantly increasing the chances of purchase without a major increase in costs. As larger companies are beginning to adopt these emerging technologies, it's essential for small businesses to keep up with these technological developments.
Health care accounts for a staggering 20% of the United States economy, and, since it is a universal requirement, many executives may think their industry is safe from technological disruption. The reality, however, is that all organizations in the industry from small doctor's offices to medical campuses spanning multiple city blocks are on the verge of major revolutions from the IT industry. Machine learning has allowed software like Watson, of Jeopardy fame, to become better at diagnosing cancer in patients than leading oncologists. Devices designed for monitoring chronic conditions like diabetes and cancer promise to reduce the number of necessary doctor's visits by automatically treating underlying conditions and notifying users of changes in their biochemistry. Bioinformatics promises to improve patient treatment and reduce drug research time by granting doctors and chemists deeper insight into the genome, allowing them to hone in on treatments that would be effective for that particular patient.
Consumer Financial Services
Big banks have been very unpopular across the world since the mortgage crisis led to a prolonged recession, but until recently consumers have had very few choices about where to deposit their money for safekeeping. Now, as money becomes an increasingly digital commodity and spending is redirected to online venues, banks are facing a credible threat from the rise of online consumer financial services. Companies using new, more refined instruments for credit-checking and loan-worthiness have begun lending to consumers looking to refinance their homes or consolidate debts, at lower interest and default rates than traditional lenders. Companies like Paypal and Stripe can handle payments for small businesses at better rates than many banks, while apps like Venmo allow users to pay their rents or dinner bills without incurring any fees. These new digital business models pose significant threats to traditional consumer banking revenue streams, and are rapidly becoming more popular with consumers.
Traditionally, schools and private courses or tutoring has been the only available way for people to learn new skills, languages and ideas. Now, a wide variety of online training courses allow people to gain and solidify new skills more quickly than traditional models. Duolingo, a language learning application, has been proven faster and more effective than traditional education in learning new language skills, and has been used by millions of people to improve their grasp of a foreign language. Online schools like Khan Academy allow users to study math, science, economics and other subjects online and free of charge, and has helped millions of advanced students improve their skills beyond traditional curricula. Machine learning algorithms will allow educational platforms like these to customize their learning styles for each student's needs, and will soon be more effective than traditional education methods.
Before the smartphone, consumers used many single-function devices, like MP3 players, in their daily lives. Now, as devices can handle more and more applications, revenue from single function digital devices has dropped dramatically. In an increasingly digital world, consumer products without digital functionality are vulnerable to new technologies that support multiple applications and network interfaces. Wearable technologies promise to massively disrupt the apparel and fashion industries, while distributing computational power across the user. Appliances and utilities in the home are particularly vulnerable to emerging Internet of Things technologies, which allow users to customize and monitor the performance of their appliances over the web. Companies that produce consumer goods will need to be especially mindful of digital applications for their products, even in traditionally analog domains.
By keeping abreast of new technologies, small and medium businesses can mitigate the risks posed by disruption. Even if businesses choose not to adopt every technological change, understanding the impact that change will have on the marketplace will be essential to surviving a disruptive event in a competitive business environment.