As the saying goes, it’s not if but when. Will your industry be disrupted? The answer is yes. How you prepare for it is the real question large incumbents need to be asking.
This summer I have had the pleasure to be teaching a course in Disruptive Innovation, which is part of the MSc in Digital Currency at the University of Nicosia in Cyprus. Lecturing online to students from around the world my key point has been that, by definition, disruption can come quickly and unannounced. Disruption happens by working within the framework of a well-established industry with the objective to cannibalize it — either by discovering methods for new efficiencies, or through the wholesale innovation that creates a new industry. Of course, the marquee examples of this phenomenon are music and publishing, still trying to find their footing in a fast changing digital landscape.
Digital is the driver of the transformative epoch we are now living through. Fifteen years into the 21st century, this point is well-understood. The new reality of our everyday experience consuming news or listening to music helps ensure that. But the industry-specific nature of disruption, its shape-shifting tendencies, and the inevitability that vested interests will resist change means the experience of disruption will continue to be one of an interloper unwelcome by the status quo.
As Joseph Schumpeter, the Austrian economist and popularizer of the concept “creative disruption” wrote “Capitalism is by nature a method of economic change.”
A simpler way of saying this is Don’t get too comfortable — in whatever business you happen to be in. Just over a decade ago in 2003, Futurist Ray Kurzweil stated “We’re entering an age of acceleration”. As if to prove his point, today 2003 sounds like ancient history. Business innovation and disruption is an everyday experience and a general public that books Airbnb for their vacations and take an Uber instead of a cab, are perhaps more acclimatized than ever to our era of accelerated change.
This new receptivity to change can also be a driver of business success. At Decentral Consulting, our focus is on advising clients about developments in Finance Technology (popularly known by its coinage Fintech), the most significant new wave of disruption currently underway. With a sharp eye focused on the newest innovations, the companies we advise are actively working to understand the risks but also cultivate the opportunities Fintech will bring.
In its recently released report on The Future of Financial Services, the World Economic Forum noted there is “significant uncertainty” in the financial services industry, a problem stemming from a “lack of common understanding” on two points; 1) which innovations are most relevant and 2) what implications these innovations have for incumbents.
The WEF report predicts that the effects of Fintech will be “most immediate” in banking, but “most profound” for the insurance industry. Decentral’s corporate clients in Toronto are already adapting to meet this challenge, using test projects and innovation teams to promote company adoption and incorporate new Fintech & blockchain technologies (including the upcoming blockchain 2.0) into their business prognostics. The WEF report notes “the pressure to innovate will be continuous” and this “will shape consumer behaviour, business models and the long term structure of the financial services industry”. Toronto, a relatively young and rapidly growing metropolis is well-positioned to take advantage of the immense opportunities Fintech holds out. In future blog posts, I will map out my vision for how this might happen. In the meantime, interested readers can find the full WEF report here: The Future of Financial Services How disruptive innovations are reshaping the way financial services are structured, provisioned and consumed.