Technology will revolutionize all traditional “offline” industries.
At this point, it’s inevitable. We’ve already seen tech products and platforms revolutionize consumer-facing industries -- from fashion to finance and fitness to food. The revolution is the seismic shift in where, when and how consumers interact with the sellers and service providers in these industries. While some industries have already completely transformed and been subject to huge amounts of tech innovation and big-time financial investments, others are in various stages of technology transformation and the winners and losers of the revolution are not yet known.
When will the next revolutions occur in the remaining “vulnerable” industries? And which incumbent companies will survive the revolution?
I believe the revolution occurs when tech platforms introduce two key dynamics to an offline industry: personalization and symmetry.
They know me better than I know myself.
Consumer-facing industries transform when technology increases personalization -- the kind of personalization that surprises and delights the consumer, like when Netflix reminds you that you have new episodes of your favorite show available.
Personalization comes in many shapes and forms. But the revolution only occurs when products or services in the industry become tailored to the specific interests of different buyers. Buyers’ interests are often mined via advanced algorithms that leverage the huge amounts of data we’re constantly (often inadvertently) sharing; other platforms leverage the data that we purposely share in exchange for a perceived benefit.
Decades ago, large-scale production and national expansion of brands in offline industries led to mass marketing. Sellers used statistics to communicate broadly about their products and services, generally targeting the most "typical" consumer for their product. The problem is that no consumer is the typical consumer.
Take a look at a traditional offline industry: relocation. Moving companies, cable companies, utility companies and the dozens of other companies that you need to deal with when you move all traditionally mass-marketed to relocating consumers.
Today, consumers are far more comfortable purchasing products or services that they perceive to be suited to their unique needs and preferences. When technology introduces this dynamic to buyers, the revolution is near.
They’re on my side!
As a consumer, there’s an unfortunate dynamic when you buy something: The seller often has more information or control than you. The greater the gulf between buyer and seller, the more asymmetry, and the less comfortable the buyer is with the transaction. “Offline” industries transform when technology bridges the gap. New platforms don’t necessarily need to eliminate the asymmetry, so long as the buyer feels that a traditional asymmetry has been alleviated.
Consumers love products that make them feel that they’re engaged in a fair transaction, a symmetrical one. Products that revolutionize industries achieve this in one of two ways:
1.Technology helps the buyer make a more informed decision. Think about Kayak for booking travel: Kayak is on my side, helping me find the best flight at the optimal time and price. If I don’t like what I see, I refine the search and receive new options instantly. Think about Amazon for retail: Amazon makes me feel as informed as the sellers because I have all the key info right at my fingertips and can easily comparison shop.
2.Technology delivers transformative simplicity and efficiency. Think about OpenTable or Postmates: It has never, in the long history of me eating food, been easier to make a restaurant reservation or get food delivered straight to my door. This simplicity makes me feel that the transaction now has a more favorable dynamic. It’s become more symmetrical than the offline alternative.
Asymmetry occurs in various ways across a host of industries. In the relocation industry, for example, there’s asymmetry when a moving company provides a price estimate and the prospective customer has minimal insight into how that price was generated and the quality of the service relative to other moving companies. Additionally, asymmetry can occur when dealing with home service providers such as cable or satellite TV companies -- pricing is complex, there are often hidden fees and the consumer is unable to easily compare apples to apples across various providers.
You say you want a revolution.
Tech companies seeking to revolutionize an offline industry need to focus on promoting long overdue personalization and increased symmetry for customers. Once a platform genuinely delivers these dynamics, consumers will embrace the experience and come flocking. The goal should be to deliver these dynamics and, as a result, create an experience that consumers absolutely love -- and the consumers will then expect that same great experience for future transactions. To survive, sellers will need to go where the buyers are and adjust how they sell their products and services.
Incumbent corporations are increasingly recognizing the disruptive force of new tech platforms that can quickly change the paradigm in their industry. Many corporates have shifted their technology investments to the forefront of business strategy, and the number of active corporate VCs has exploded, growing nearly five times in the past 10 years. These companies are adjusting their strategies to be at the forefront of the next revolution, or at least own a stake in it.
Businesses that will survive a revolution must have a strategy that is not just about having a social presence or enabling online shopping. Rather, they need to recognize that the experience consumers now demand has radically shifted. In this new world order, the winners are organizations that are agile enough to respond to the new consumer demand and satisfy their needs -- either through their own technology or by working with new tech platforms.
Revolutions don’t just occur in consumer-facing industries. Of course, different dynamics lead to revolutions in enterprise (or B2B) industries, such as when new tech interfaces "consumerize" and simplify archaic processes. Similarly, robots and other forms of automation are leading to revolutions in heavy industry.
These technology revolutions, across all types of industries, present great opportunities for the companies that react quickly and get onboard, but can devastate companies that don’t.