Is It Smart for An Industry to Disrupt Itself?

When an industry is disrupted, it makes major waves and creates winners and losers. The disrupter and those who adapt can reap great rewards, and those who don’t can become extinct. In nearly every case, there is a clear winner overall: the customers. Successful disruptions happen because someone finds a way to make a product or service drastically better or cheaper. And we as customers love it.

Most disruptions take one of two approaches. Either a company within the industry creates the innovation, or a newcomer invades the industry with their innovation. Typically, when an experienced player in the market makes the disruption, the other companies can more easily see how to evolve from the old model to the new one, modifying their infrastructure, pricing, and production to stay competitive. However, when a company comes out of nowhere with a business model that is so drastically different it’s easier to start over (think AirBNB, Uber, etc.). This causes major chaos and generally shutters more existing businesses who now have major assets that aren’t compatible with the new business model.

But what happens when a sizable part of the industry works together to disrupt itself? While rare, this does happen. But why would a successful industry decide to disrupt itself and create major changes, additional costs related to adapting, and risk a business model that might not prove as profitable? There are actually a number of compelling reasons behind this, and if done right it can not only save an industry but bring it to the next level. Let’s dive in to see how and why an industry would disrupt itself.

Things Are Going Great. Let’s Change That…

It’s obvious that if an industry is dying out, the current players will take more and more drastic measures to change and adapt. This can be seen with many of the department stores like JCPenny, Macy’s, and Sears. However, the disruption caused by online shopping (among other factors) was too great for not only the players, but also the concept of a department store as we know it. Some still exist, but it’s doubtful they will see anything close to their glory days.

For a successful industry to consciously disrupt itself, there have to be one of two driving forces. First, the industry is able to predict its own obsolescence in the near future. Second, the industry has identified a new business model that could be a game changer, and it’s only a matter of time before someone outside the industry realizes it, makes it happen, and destroys the current players.

The best example of the first case is the oil industry. If you looked at the basic details today, you would be forgiven if you thought the industry was doing quite well. There are still over a billion petrol-powered vehicles in the world, and there are countless industries that burn or use oil for various reasons. Oil companies have posted record profits each year, with Shell alone posting an eye-watering $40 Billion (with a “B”) profit in 2022. For context, there are 101 countries with a GDP lower than this. So why would they have any interest in disrupting?

Because at some point down the road, the oil industry will become more and more obsolete. Oil companies have used the massive profit for decades to maintain dependence on oil, but no amount of money can delay this forever. With major climate change happening in real time, along with finite oil reserves, the globe will still need energy but it won’t come from oil. Because of this, companies like Shell are becoming more and more proactive to ensure they will survive the transition from oil to green energy, even as they try to push back when that will happen. Billions are being spent by oil companies to improve wind and solar power, with the hope that they can still corner much of the market with innovative green technologies. While there is still a great deal of criticism at how slow this process is happening, it is still happening nonetheless and is a wise move by oil companies whose attitude seems to be “if anyone is going to make us obsolete, it’s us!”

The second driver mentioned above, where an industry can recognize the threat of someone using a new business model against them, can be seen in the travel industry. The players in this industry are somewhat unique, as they come in all shapes and sizes. There is fierce competition to be sure, with hotel chains and airlines trying to outbid in order to gain customers, but there is also a strong symbiotic relationship. There are airlines, rental car companies, hotels, tours, restaurants, and more, but from the perspective of the customer there is one product: the experience.

The customer doesn’t much care who is getting the money, they just want to have a great and seamless experience. When travel companies work together to make referrals, bundle services, and organize travel packages at good prices, it benefits everyone involved. None of this is new, but the way these combined services are provided is a bit chaotic. Customers still have to search many different sites to find the best deals, and they don’t often get exactly what they want with pre-bundled deals. This may be changing soon with the advancement of an unlikely solution: blockchain. A consortium of travel companies are banding together through the Camino Network to create a major disruption by building a Layer-1 blockchain for the travel industry.

The blockchain technology has some major strengths that can be utilized in countless ways, with the only real limit being creativity. While most people think of crypto or NFTs, the ability for a blockchain to help the travel industry is significant. It is designed to create strong connections between members, offer up a democratized authority, and generate borderless common currency through the use of a token. These are all major needs of an industry that is spread across the globe, has countless independent members, and who value connections with each other to make the travel experience more attractive.

In this case, the Camino Network and its members saw that blockchain could disrupt the industry and could be done by a newcomer, putting them at a disadvantage. Instead, they worked to develop the network in order to create a consortium where members must be a player in the travel industry, and new members have to be approved by the consortium itself. This ensures that the network can’t be taken over by a non-travel tech company, for example, and that decisions that are made will be for the good of the industry and its customers.

Final Thoughts

Industry disruption is always a glorious, chaotic mess. It often takes time for the dust to settle before we can see who the winners and losers are. When industries disrupt themselves, they are preventing some of the chaos and working to ensure that after the dust settles they will still be there, stronger than ever. For customers, we just love when it happens because we are going to get something better or cheaper, which is always welcome.