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On Demand Businesses 101

When Giants Fell : Industry Disruption

The rise and fall of giants in today’s competitive markets is not something unheard of. In the spirit of fair competition, we see that the history of any realm can teach us invaluable things, given that we are willing to understand.

The greatest enemies of any business are rigidity, and with that, obsolescence. Understanding that your business will never operate in the vacuum that may show itself in economics textbooks – the vacuum of ‘ceteris paribus’- is the first step to navigating this volatile world. One can be the greatest behemoth in the industry, only to put a bankruptcy sign by the next morning because that is how fluid your ejection from the competition can be, if you do not foresee it.

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The grandest equalizer of all has been technology, and it has also been the grandest assassin. Adapt to it in order to thrive, or keep it at a distance and even survival will seem like a wishful dream. One can illustrate the point with several examples, but first, let us understand the problem.

Technology allows giants and ants to compete in the same market, because the many, many levels of operation that enterprise level businesses have are now matched by the effective automation that technology has provided small-scale businesses in the process of transition. Technology is also largely making ‘space’ as we know it redundant due to the sheer abundance of ‘virtual space’ that we are now dealing with. Online marketplaces, platforms and the volume of ecommerce transactions are testament to that.

Technology is also compressing time by automating workflow and other operational processes that would normally require clearances on several levels. In tandem, it is changing the way organizational models work – introducing vertical workflows in horizontal environments. Why, even the time it takes for such companies to reach the billion dollar mark has been shortened substantially – a process that would take as much as 20 years for businesses, now takes as little as 1.5 years (Instagram), or even 8 months (Slack). The two fundamental differences are:

-These companies own no assets of their own, most of the time. Airbnb does not own the properties on display, nor does Facebook create its own media – and Uber does not own any cabs by itself.

-While providing alternatives that are cheaper than the top players in the market, disruption is ensured because of technology, which manages to automate workflow to a degree that demand is almost always guaranteed. Hive systems and unceasing digital promotion create working networks like none other.

The Bigger they Were

businessman had been fired from his job. vector

Kodak

Remember Kodak? The question may seem insensitive, but internal disputes in the company resulted in the single-minded focus on photographic film and film cameras. Many cited that people would still want to print their pictures, thus, going digital was not really advisable. This enabled Sony, Fujifilm and Canon to overtake Kodak as they saw the digital curve ahead of its time, and adapted accordingly. Digital as a medium itself is less restrictive, more transmutable and efficient in terms of photo development and the time taken for the process, making it a natural (if not technological) successor which Kodak failed to anticipate.

The result? A company which once employed 140,000 people, valued once at $28 billion, now fell prey to all sorts of digital competition – even people posting pictures on the internet instead of using print was detrimental for them – and it filed for bankruptcy in January 2012.

Blockbuster

Blockbuster was the king of video rental companies in the late 90s and early 2000s. Netflix founder Reed Hastings even offered up his company to them, but was laughed out of the boardroom – or so the story goes. Regardless, Netflix began to emerge as one of the top market disruptors in the industry. Their process was somewhat cumbersome earlier (videos arrived by email) but their newly developed video on demand model really upped the ante – they also had negligible brand awareness since there was no Netflix store, to be exact.

With the increasingly more accessible power on the internet via tablets, smartphones and laptops, we see the online sphere making great leaps and bounds as concerns the volume of transactions. Netflix’s monthly rental model, with greater availability and variety, is fast becoming the way to watch television. Online streaming and its popularity catalyzed this rise. Yet another case of reticent thinking – or complacency in one’s advantageous position which sees the giant fall.

Myspace

Myspace perhaps had one of the most meteoric falls – another testament to the steady adoption of technology by the world. Mobile first happens to be a key game-changer here, with Myspace realising the need for an app only too late. Facebook had already colonized the smartphone world by the time Myspace released an app – this lapse was not merciful.

Border Books

While the world is undoubtedly also populated by reading puritans who staunchly do not wish to sacrifice the ruffling of actual pages in ecstasy, the eBook market is fast on the rise. More bookworms can actually be found reading from a screen because of the sheer access and storage space devices provide. A book for every mood without really sacrificing much – the Kindle’s eInk display has been reportedly quite pleasurable too.

Border Books served the twin purpose of catalysing Amazon’s rise with their own fall. They outsourced the online segment to Amazon, and Amazon rapidly developed its own product with a dedicated consumer base. The Kindle, while not being the most legendary pieces of technology ever (in effect, it serves as an exceedingly simple tablet) – happens to have acquired its own charm, and a strong brand identity. In addition, Amazon is synonymous with the purchase of online books today, while Border Books declared bankruptcy in 2011, laying off more than 10000 employees. Failure to adapt to the ecommerce market in tandem with bad managerial decision-making were cited as major reasons, obviously keeping the Amazon factor in mind.

The Taxi and the Hotelier Industry

Here of course are the touted Uber and Airbnb businesses – their market disruption has successfully revolutionised industries that seemed to have become all but monolithic in their operation. While quite a few are familiar with their success stories, the point to stress here is this – for companies that are dabbling in today’s business landscape, it is essential to not get hung up on acquiring tangible assets and workforce. Nor should the primary idea be the amount of money one pours into the business.

Conclusion

TIME TO EVALUATE

To conclude, one can say that the ingenuity of an idea, if convincing, can take off in Angel Investing circles and see it go forth and manifest, provided it merges with the technological realm and is subjected to its efficiency standards. A digital veneer now exists over our physical world, and it is best that we adapt ourselves to navigating it. The rest is all about fluidity and dynamism – one cannot confine oneself to rigidly take shape according to short-sighted complacency, even if you are one of the biggest players in the market.

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