Your Business Model Is About to Go Extinct

March 13, 2013 Krzysztof Piskorski

We’ve struggled for a few years figuring out how to make a decent phone. [Apple is] not going to just figure this out. They’re not going to just walk in.”

Ed Collingan, Palm CEO, in 2006 – one year before the iPhone launch, five years before Palm disappeared from the market.

In 1930s, millions of women across the world worked long shifts hunched by the imposing boards chock-full of plugs and blinking lights. Their labor fueled a rapid growth of the telecom industry. The America’s largest telephone company of that period, AT&T, employed 350 000 switchboard operators alone. Manufacturing, maintenance and installation of switchboards was an important part of the economy. Fast-forward fifty years. Today, this sector – one of the most important technology markets in the early 20th century – is all gone.

It was not the only one. Copy boys were replaced by e-mails, typesetters by DTP software, pinesetters by complex machines…

But this article is not about long-obsolete careers. In the last decade, we’ve seen many modern business models go the way of switchboard operators, as the time from one market disruption to another kept getting shorter.

Consider video rentals. This huge business occupied a period of time even shorter than the age of lamplighters or manual switchboards. It started in the early 1980s, when VHS players became mainstream, went on through the age of DVDs and ended abruptly when cloud streaming took over. In 2002, a market cap of the video rental chain Blockbuster was around $6 billion dollars. Netflix had a market cap of zero. Today, Netflix sits at $6.8 billion dollars, and Blockbuster was forced to file for Chapter 11 bankruptcy in 2010. This huge shift happened in less than a decade.

The brick-and-mortar electronic stores are another good example. Ten years ago huge Western chains like Best Buy, Circuit City or Comet (UK) posted record profits. Today, they desperately fight for survival, slowly smothered by a practice show-rooming. Smart buyers pop into a store to look at physical wares, then take out their smartphones, check prices and go for cheapest Web-based vendors. Best Buy is now fighting back promising to match the Internet prices, but time will tell if this strategy is economically sustainable.

Even the world’s largest companies can be caught by surprise. Nokia was left pants-down by the rapid shift towards the smartphones. It barely survived. Palm, as mentioned in the opening quote, didn’t. And Microsoft? In 2010, Microsoft saw its future in bright colors and tried to severely downplay the tablet market (as seen here). It supported Windows-based netbooks that were  supposed to become a 100 million market this year. Where are netbooks now? Gone. A huge category of devices, created just several years ago, is officially extinct.

Bookstores are taking a beating from Amazon. Expensive AAA games market is shrinking in favor of casual and mobile. Newspapers are dying by the hand of Internet publications.  Those are only the most obvious examples everyone can see. If you’re into a business of any kind, you certainly know about technologies in your specific sector that have been replaced in the last 10 years.

Considering all of the above, it’s safe to assume one thing.

Sometime in the next decade, the business model YOU rely on will change – or go the way of a dodo.

It’s not just my conclusion. Last year Ricoh performed a large study on 567 business executives from large and respectable companies. The whole report, a highly recommended read, can be found here. The common vibe was that until 2020 the technology will shift, changing businesses forever.

Of course, it won’t happen due to mobile / social / cloud / insert another buzzword here. That’s the technology wave we feel right now. What you really should think about is the NEXT wave, that’s still beyond the horizon.

And to help you with that, here are some predictions of technologies that loom just around the bend, and might in many surprising ways unhorse business leaders of today.

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Here’s the thing about Google Glass – the sci-fi looking eyewear from Google – everyone who tested it so far loved it. In the beginning, the idea that people will voluntarily wear something that makes them look like they escaped the trekkie convention seemed a bit of a stretch. But so far, Google does a remarkable job at making it appear cool.

Video after video, they show how a cheap, widely available AR can change our everyday life. At the same time, they’re distributing developer models to the best and brightest software creators around the globe. With people eager to pay exorbitant prices just to grab an early version of Glass from e-Bay, it looks more and more like an upcoming disruption-in-the-making.

Of course, the headwear by itself won’t disrupt much. The apps for it will.

Sure, smartphones have already seen the first wave of AR city guides and other software that displays data in the Augmented Reality layer. But there’s a huge difference between having your arm stretched all the time with your smartphone in front of your face, or having an AR display all the time, effortlessly, in the corner of your eye. A display that can feed you with contextual information, stream what you see, or even show you what someone else sees.

My prediction? Just like a couple of years ago EVERY company wanted to tap into social networks and Web 2.0, in 2014-2015 EVERY company will want to have an Augmented Reality component of their business model or strategy.

Shops will want applications that show visitors special promotions and info-pop-ups when they look at the wares. The first social network that allows you to see full profiles floating over your friends will become a new winner. Business applications that feature virtual progress bars and timers hovering over people’s heads or support coaching by tapping into someone’s eye vision are going to boom.  And if your business model depends on satnavs, tour guiding or contextual info of any kind, this might rock your boat hard.

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Meet MakerBot Replicator 2. With downloadable schematics and some basic knowledge of 3D design, it can do pretty much everything. Even another copy of itself that’s only lacking some electronic components. But electronics are not out of reach for cheap manufacturing robots anymore. A true Von Neumann machine is still quite a bit away but printing your own handy gadgets is very much possible. In fact, as I write these words, hundreds of people download CAD blueprints of real items from Thingverse, just like they downloaded music in the brave new era of Napster.

I realize 3D printing will never be as popular as inkjets or laser printers. The entry barrier is higher. It requires some very basic knowledge of 3D software, though clever companies have managed to make the process much more consumer-friendly.

But even if an average Joe won’t be able to print an assault rifle, the hundreds of tech savvy guys with a knack for business will. 3D printing and home manufacturing is just one of many improvements that should allow micro-entrepreneurs to do things previously reserved to large companies with more resources.

In fact, the RICOH report states that in the upcoming years micro-entrepreneurs will thrive thanks to new technologies. This will happen at the cost of less adaptable mid-sized companies.

Who will be most affected? Most certainly businesses that produce overly expensive replacement parts, gadgets, vanity items, memorabilia, toys, smartphone accessories and other plastic trinkets. As the power of home manufacturing solutions increases, small electronic gadgets could be next in line. Who will boom? Services and businesses that incorporate 3d printing into their strategies.

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Facebook bets its own future on new Open Graph social search. The idea is alluring and elegant: search for sushi bars in your city that your friend liked, buy games that your best gamer buddy recommended, see what movies your friends saw and enjoyed in the last week… The possibilities are endless, and it’s not hard to imagine why Facebook wants to embrace them. Sure, the company was wrong many times, but if the largest social platform in the world decides to do something, it’s safe to assume they did their homework and analyzed the idea well.

Right now, the Graph search is a bit underwhelming. The biggest problem is the dated dataset, corrupted by many “like to win” contests. Coupled with the Facebook fatigue that resulted in less legitimate “likes” floating around, this leads to poor search results.  It’s very possible that the Open Graph Search will die. But there are also scenarios where it may iron its kinks to become “the next big thing”.

Just think what would happen if Facebook partnered with Microsoft, turning Bing (that already has 16% of the search market) into a full social search engine. Google could be in trouble, the whole search structure could change.

Why am I talking about this? Because it will affect every business on the planet, just like the arrival of crawler-based search engines did. Whatever your business is, you most likely rely heavily on search traffic, SEO, , AdWords. Even if you’re a market leader in your segment, and your company pops up in the first 10 Google Search results, you might be eclipsed by a company that will position itself better in the world of social search. Soon everyone might be forced to start again on even footing, and all this time and money spend on SEO might go down the drain.

If Open Graph Search becomes the big thing, companies that embrace it have a good chance of becoming our new market leaders.

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In the early 19th century, English Luddites burned textile machines all over the country, afraid that steam robots will replace every single working class employee. It never happened – so far. But with recent breakthroughs in the field of Artificial Intelligence, the process of automation accelerated quickly. Today, even companies that rely on cheap Chinese labor are switching to fully automated production models. Info booth staff is becoming just as obsolete as switchboard operators. Armies fill up with autonomous robots. Self-driving cars spread from California.

Increasing automation was a trend that stayed under our radar. It was something obvious, acontinuous process that took two centuries, but we might feel its biggest impact soon, in the next decades.

The production staff, as mentioned before, was first to go. Now, technology might soon replace thousands of taxi and delivery drivers. Yes, that nice guy behind the wheel of your kid’s school bus is probably going where all the photocopy repairmen went before him. We should see more automated vendors, info desks, bank branches. Less humans – everywhere. Just check this list of 9 trades that might be soon replaced by automation.

Should you care? After all, your business is most likely a high-tech one. Still, even if you think your model can’t be invalidated by automation, you might be surprised. In 2004 analysts claimed driverless cars are just a mad sci-fi vision, that’s never going to happen, just like robot maids and antigravity shoes. In 2012, first driver licenses were issued to fully automated cars by the state of Nevada.

Automation has a way of catching people by surprise. My wild guess is that price comparison services, shopping services, content search and entertainment might become disrupted by Artificial Intelligence in the next few years.

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As you can see, our technology horizon changes every day. A month ago, the idea of investing in a company making high-tech geeky watches seemed smart. Then, Apple decided that it wants to disrupt this sector. Do you hear the rattle in the distance? That’s the watch maker stock prices tumbling down. It’s important to add that technology shifts usually can’t be predicted. I shared some of my guesses above, but I fully expect to be surprised, just as much as you might be. After all, attempts at futurology from past decades read like comedy fiction today, just like this vision of life in the year 2000.

One thing is certain. Unless you’re one of the largest companies in the world, it’s impossible to employ teams that could keep up with every new and emerging technology. It’s much better to leave that to IT companies experienced in doing just that, like PGS Software.

It may look like a shameless plug, but keeping a hand on the pulse was always important for us. In 2006, when we were starting our Big Data” went mainstream. We started to develop /contact-us/”>contact us.

Seeing what’s around the bend is one thing. Being prepared is quite another. The history of economics is full of businesses that failed to act until it was too late.

Take a page from the Ricoh report instead. Assume your business model will go extinct at some point and find a way to iterate.

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