Industries and Jobs Ripe for Disruption
Technologies disrupt the old and the new. Even those aware of new technologies and competitors are disrupted. This is true for companies, industries, and job fields (or collectively ‘Markets’). In this post, I want to explore a) types of disruption, b) determinants of disruptions, and c) markets primed for future disruption.
Types of Disruption
There are two types of disruption, 1) low-end disruption and 2) high-end disruption. 1. Low-end disruption occurs when new technologies are less advanced than existing technologies and do not initially meet the needs of most customers. These disruptors have a unique business model or technology that creates a significant price advantage. Classic examples are highlighted in minimills vs integrated steel mills and personal computers vs mainframe computers [1]. 2. High-end disruption occurs when advanced technologies exceed both the current needs and desired price-point of the market. As Jeff Dyer and David Bryce explained, these “innovations are “leap frog” in nature . . . [and] use technology to lower costs per unit of performance over time [2].” Tesla’s market entrance strategy is illustrative of a high-end disruption strategy.
Factors Leading to a Disruption
Earlier this year, Accenture Research published an article which discussed and presented a methodology to evaluate the disruption likelihood of an industry [3]. Their 2×2 matrix analyzed the ‘current level of disruption’ and the ‘susceptibility to future disruption’. Their four quadrants are Durability, Vulnerability, Volatility, and Viability.
Durability: Mature markets and incumbents with strong control over the supply chain, distribution channels, brands, and technology. Examples: Diversified chemicals, alcoholic beverages, and tires.
Vulnerability: Markets with high current barriers to entry; as these barriers erode, they are primed for disruption. Examples: Multiline insurance and healthcare distributors.
Volatility: High barriers to entry have been removed, they are in a state of disruption, and they may have continued disruption in the short term. Examples: Hotels, investments and brokerages, diversified metals and mining.
Viability: Markets where a high state of continuous innovation has become the norm and disruption ‘has become a constant’. Examples: Software, publishing, and telecommunications.
Markets Primed for Disruption
When evaluating attractive industries, job fields and companies, knowing likelihood for disruption is hugely valuable.
Industries. Accenture Research’s 2×2 matrix informs which industries are primed for disruption. Using this information, if a job seeker were looking for a stable industry, industries in the Durable category would be their best bet. If an entrepreneur were looking to create a unicorn, an industry in the ‘vulnerable’ may be an ideal target, as these industries have little current disruption but a high potential for future disruption.
Jobs. The jobs with the highest likelihood of disruption are those that will be (and are being) automated. In a 2017 Bloomberg Post, Mark Whitehouse and Mira Rojanasakul indicate ‘that nearly half of all U.S. jobs may be at risk in the coming decades, with lower-paid occupations among the most vulnerable [4].” Without access to the raw data, a visual scan and analysis confirm that lower-paid occupations are the most vulnerable, with jobs requiring no formal education leading the way. Jobs primed for automation include cashiers, waiters and truck drivers. There are a few jobs, however, requiring education that are likely to be automated. These jobs include accountants & auditors, loan officers, and credit analysts, among others.
Companies. The disruption theory has low-to-moderate application for individual companies, as their success is dependent on many volatile factors. However, knowing the likelihood of disruption in their industry and knowing which types of jobs they utilize can be valuable in evaluating their potential success. A VC firm such as Sequoia might use this information to realize that Accounting and Auditing jobs are primed for automation and disruption, and therefore they might look to invest in fintech companies focused on such.
Understanding disruption, the key factors leading to disruption, and industries and jobs primed for disruption can guide individuals and organizations as they seek to determine where to invest their future time, energy, and resources.
[1] https://hbr.org/2015/12/what-is-disruptive-innovation
[3] https://hbr.org/2018/01/how-likely-is-your-industry-to-be-disrupted-this-2×2-matrix-will-tell-you
[4] https://www.bloomberg.com/graphics/2017-job-risk/
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5 comments on “Industries and Jobs Ripe for Disruption”
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Thanks for writing this post. I very much like the idea of disruption in ‘classic’ human jobs such as accounting and auditing that you mentioned. At the same time, what are they not doing it? what stands between them and improving these heavy human depending tasks?
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That’s a great question. I know that many of these jobs are in the process of automation. I think part of it may be a cost/benefit of automation. As the Accounting/Auditors are very high cost and a large population, there is a pretty high reward for automation. Much automation has already been performed (think TurboTax for tax software), and I think we’ll see a tremendous amount more in the upcoming decade.
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Very interested in the idea of “constant disruption”.
On a different approach, do you think governance could be disrupted as well, as it happened to industries, jobs and companies? Isn’t it already happening?
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What kind of governance are you saying is happening already?
I think that the design of governance (determining regulations, metrics, guidelines, etc.) has a very low risk of being automated. At least in the near future. The management of these regulations, metrics, guidelines, etc., should be able to be automated. Seems like it can be managed by placing certain guardrails around the governance agreed upon and then manage by exception (any time something leaves those guardrails, some sort of consequence is implemented).
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It is great to see thoughts about markets primed for disruption. When thinking about disruption and disruptive forces I like to refer to the model of Porter’s Five Forces. A good set of strategic choices for an entrepreneur and company contains choices that make a business defendable and not easily replicable. Meaning the business will thrive even when exposed to internal and external forces. I always thought of the medical and legal industries as industries in which companies face high barriers to entry and thus being less exposed to disruptive forces. It is refreshing to see a lot of new startups in these spaces and disruption in this space might hopefully lead to better products and services for consumers, patients, and clients. Access to legal advice and high-class healthcare that is not limited to small groups are key factors of concern in this case. Let’s see if healthcare and legal industries will be disrupted in the future and if it will be leading to improved outcomes for the stakeholders.