Redundancy: The hidden strategic threat

For many years, corporate strategy has been driven by a focus on existing competitors, possible substitutes customers could use, and barriers to entry for new players. However, a new force has emerged that many leaders have failed to consider — redundancy. This is when your products or services are rendered totally redundant to the market.

You can be the most cost-efficient, have the greatest customer service with the highest barriers to entry — but you just become irrelevant.

For example, when you buy a ‘book’ on an e-reader such as Kindle, you are rendering the typesetting, printing, binding, packaging, distribution and retailing dimensions redundant. However good, cheap or fast competitors are, these industries are now irrelevant to the transaction. No amount of cost cutting will change this. The opportunity to render industries, products or services redundant is significant and growing.

Replacement

A parts manufacturer may feel safe — but 3D printing may allow its clients to make their own custom parts, eliminating the need for the manufacturer’s value-add services. Or, the product their parts go into may be made redundant, thereby vaporising that market. Even doctors are being supplanted by online medical diagnostic applications. As people have been shown to be more honest with a computer than with a doctor (less chance of embarrassment), the possibility for an application to give a better diagnosis exists. So even five-plus-years of medical education could be redundant in some situations.

Digitisation

The original examples of market disruption were where the product could be made digital — books, records, photos and films. Rather than produce the physical product, it was created digitally and all of the physical production products and services were rendered redundant.

Intervention

We now see standard services being disrupted by new alternatives. Taxis are replaced with private cars through Uber. Licensed accommodation premises replaced by private homes or flats through Airbnb. Banks are seeing online transactions bypass them. Non-banks like Paypal and now Apple are offering simpler, more convenient services. As banks offer little-to-no incentive to have all of your financial transactions with the one bank, they could well be picked off service by service.

The nature of the threat (or opportunity)

A technological threat does not come from a single technology. Technological threats come from new combinations of technology that change the game. Technology makes new things possible. What is made possible is in turn determined by what is feasible and the market’s readiness to adopt. The cloud, big data and 3D printing are all single technologies. They need to be leveraged into a process or a product to be a threat. Threats can also be opportunities IF you are in a position to exploit them, and see them coming before it’s too late. At any time, someone somewhere is trying to redefine almost every market — so you need to be vigilant.

Required response

To survive you may need to redefine your market or find new ways of delivering or positioning your goods or services. Physical books, for example, may evolve from printed stories into assets or collectables with short run editions sold at a premium. Every organisation needs to both review their market and their customers’ markets to identify areas where they can be supplanted or made redundant. You can’t stop it (ask the taxi or record industries) but you do need to respond.

Brainstorm – How could someone else undermine our business?

We say, ‘someone else’ as this removes your current constraints. For example, if you’re in banking, most financial transactions are electronic. What therefore does it take for a non-bank (like Paypal) to process financial transactions? If you’re in retail, why will people incur the time and cost to travel to your store when they can buy the same or comparable products online from the comfort of their own homes? If you’re in manufacturing, can your own or your customer’s products be supplanted? If your customers’ market disappears, so does yours.

Do you need to exist (in your current form)? Can your suppliers link directly to your customers and add value in the process? That should be a concern. What exactly is your ‘value-add’? Convenience? Aggregation? Lower costs? Expertise?

Extrapolate – How can what is happening in other industries be replicated in yours?

Most books now are electronic. Most records are downloads. Films are going in the same direction. How can your product or service be digitalised and substituted? Your product may not be substituted, but your supply chain may be. How would you (or anyone else) disrupt your supply chain? Can someone set themselves up between you and your customers and provide a better (or at least an acceptable) service?

Financial brokers have moved to become broking websites. Online markets have replaced newspaper classifieds as the place to sell and buy. And who buys airline tickets from airlines these days rather than from a ticket pricing aggregation site? No industry or service is safe. Someone somewhere is plotting to change each industry. Even food outlets are being supplanted by home-delivery services. Constant vigilance and the capability to respond fast and effectively are vital.

Are you looking or are you going to be made redundant before you realise it?