For years, experts have been warning business leaders that new technologies can disrupt entire industries, rendering old business models antiquated. In a short burst of time, startups that offer new ways of operating — for example, by putting machine intelligence to good use — can swipe market share. Companies that have been powerhouses for decades can suddenly find themselves scrambling to stem losses.
But despite all the talk about disruption, most businesses nevertheless remain unprepared. In one recent global survey, 94% of decision makers at big businesses said they’re under pressure to rethink approaches and processes as a result of disruption in their industries, and 61% said they feel underprepared to “strategically address market disruption driven by competitors.”
The stakes are unprecedented, both for individual businesses and for entire economies at the national and global levels. A whopping $41 trillion in enterprise value is already exposed to disruption, Accenture found in a study. “Disruption is an inescapable and growing challenge for all industries,” the study warned. It “comes with serious casualties, no matter the industry” – and contributed to the bankruptcies of 3,217 U.S. companies across 18 sectors between 2011 and 2018.
Incumbents, the big companies that lead their fields, have in many cases withstood previous eras of change. So they instinctively rely on “high barriers to entry” to fend off disruption, the Accenture report noted. “This blind spot distracts many from a great opportunity: scaling up new ideas and venturing into new markets.”
As startups in numerous sectors keep proving, there no longer are barriers high enough to keep out innovative competition. Our experience at States Title proves this. It highlights the risk to incumbents who fail to disrupt, and the opportunity for entrepreneurs to overcome those barriers and change the game.
When our founder and CEO Max Simkoff went to buy his first house, he discovered how antiquated the title insurance and escrow process was. As he explained in MIT Sloan Management Review:
I asked why the title and escrow industry hadn’t embraced new technologies, from automation to machine learning to predictive analytics, given the rise of disruption in similar sectors. People in these companies told me this was simply how it’s done. But they also made an argument that they felt was enough to explain why new technologies should stay out of the sector: Because some cases require special care or involve unusual situations, people must be handling all processes in their entirety.
They were wrong. Despite an exceptionally high barrier to entry — which included the need to raise tens of millions of dollars — States Title was born, and is transforming a $25 billion market.
Goliath Joins David: The Story Behind States Title’s Acquisition of North American Title
What we’ve done for this market, others have set about doing for other industries.
Ninety percent of chief strategy officers (CSOs) at healthcare companies “think new technologies will upend their industry over the next five years,” but only 13% believe their industries are prepared, a survey found.
Financial Service businesses are unprepared as well, according to Information Age. The manufacturing sector is in for seismic change as well. “Classic players are weak and completely unprepared. My experience is that start-ups do not have to fear incumbents because they are able to act much faster,” the CEO of an automotive start-up told McKinsey.
Small businesses aren’t safe either. Overall, they may be showing a bit more optimism than large corporations about their ability to adapt quickly, according to a survey. Even still, reports from around the world find that many small businesses are unprepared for the risks ahead.
All businesses, big and small, are facing the same storm. And they can’t simply batten down the hatches to try to ride through it. The key is to instead steer the ship into new waters. Embrace the idea that in this era, success = constant change and advancement.
Businesses should get to know the full gamut of new technologies available to them, including data analytics, machine learning and more. (See our rundown explaining various emerging technologies here. And in this Scientific American column, learn why Max and our Chief Data Scientist Andy Mahdavi believe that true artificial intelligence doesn’t exist yet – and what they expect will happen once it comes about.)
To take advantage of the opportunities afforded by these new technologies, businesses should fill their ranks with innovative disruptors and empower them to experiment.
If you’re an innovator looking to help your business evolve, you’ll want to build support inside the organization. How can you do that?
Experts from top business schools offer ideas on how to make a workplace culture more innovative. Encourage curiosity by challenging how things are done and praising others when they do so. Hold “idea generation meetings.” Organize an innovation fair at which various departments showcase their big ideas. Embrace failure, and even offer a “Dare to Try” award for someone who had a great inspiration that did not achieve its intended results.
It comes down to the need to “innovate or die.” Businesses must disrupt their own operations internally, or expect to be replaced by someone who does. As States Title’s experience proves, this time of profound change can open up doors to faster, better ways of operating. The question for every business is whether it will be a part of that change — or become a relic of the past.