5 Disrupted Industries Under Threat
By Shlomo Maital
Only older readers will recall the slide rule – the way engineers made calculations, before the calculator, based on the logarithmic rule (the product of two numbers is the anti-log of the sum of their logarithms, and a slide rule can add two numbers…). The moment the calculator appeared, the slide rule became obsolete. The leading slide rule company never saw it coming.
Déjà vu. According to the Financial Times, there are five major industries, to which this may happen, as disruptive technologies emerge. Will their leaders see the light in time? Stay tuned. Meanwhile: My advice is: While others flee these industries, as sinking ships, you, innovator, think about how you can reinvent them and revitalize them. It can be done!
Here they are:
- “Industry threatened: High-street travel agents. Reason why: More travellers booking online. Tui is the world’s largest tour operator, running high-street travel agencies under the Thomson and First Choice brands, writes Murad Ahmed. But its chief executive Fritz Joussen says the “end game” is to morph into a different kind of business — less reliant on selling package holidays and more focused on owning and operating hotels and cruise ships.
- Industry threatened: Small component manufacturers and distributors. Reason why: Growing use of on-site 3D printing to make parts. Any concertgoer knows it is easier to print tickets than pick them up or hope they arrive in the post, writes Patrick McGee. Businesses will soon realise the same applies to spare parts, equipment and electronics. The explosion of 3D printers is expected to shake up entire supply chains, allowing companies to print much of what they need rather than order it, often from overseas. Bosch Rexroth, the drive and control unit of the private German electronics group, projects that in five to 10 years up to 40 per cent of the manufacturing equipment it uses could be printed instead of purchased.
- Industry threatened: Motor insurers. Reason why Fewer vehicle collisions with increased use of driverless cars. Imagine a future in which fleets of driverless cars move quietly and carefully around our cities and countryside, seamlessly picking up and dropping off passengers. There are fewer cars on the roads, and those that are there tend to have fewer collisions. For some, this is utopia. For the world’s insurers it may be just the opposite. Motor insurance is one of the mainstays of the industry. It generates about $260bn in annual premiums for major global insurers and $17bn in profits, according to research from Morgan Stanley and Boston Consulting Group. They estimate that the motor insurance industry has a market value of about $200bn. New technology, the analysts say, puts a big chunk of that under threat in a variety of ways. First, fewer cars and fewer accidents mean less demand for insurance. In mature economies the market size could shrink by more than 80 per cent by 2040. Second, the insurance that is needed will be bought by companies such as car manufacturers, rather than by consumers. And as carmakers and tech companies get better at collecting and using data, they may be in a stronger position to sell insurance than the insurance industry itself.
- Industry threatened Financial advisers. Reason why: Growth of automated financial advice websites and tougher regulation. Traditional financial advisers have encountered a blizzard of regulation in recent years and now face being usurped by algorithms. The profession began to run into trouble in 2006 when the UK financial watchdog announced a probe into how funds were being sold to retail investors. New rules introduced in 2013 fundamentally altered advisers’ business model, banning fund houses from paying them commission and increasing the minimum level of qualifications advisers should have. Liberatum, an association for financial advisers, estimates that 13,500 advisers left the industry following the introduction of the new rules, while the UK’s Financial Conduct Authority puts the figure at 2,000.
- Industry threatened: Car repair garages. Reason why: More drivers switching to low-maintenance electric cars. Electric cars are often marketed to consumers on the basis that they are cleaner and cheaper to run than petrol or diesel rivals, writes Peter Campbell. But because they contain virtually no moving parts — other than the wheels — battery cars boast another advantage: there is almost nothing to go wrong under the bonnet. While that may be good news for motorists, it spells trouble for the thousands of garages that make a living servicing and fixing petrol or diesel cars. The aftersales sector is not only a huge source of jobs within the industry, it is also one of the most profitable parts of the motor sector. “The business of selling cars is very low margin,” says Philippe Houchois, an automotive analyst at Jefferies. “But as long as we have cars with an internal combustion engine the repairs will continue to be the main source of earnings for dealers.” While an internal combustion engine in a car sold today may have several thousands of moving parts within it, an electric Tesla contains just 18 moving pieces, according to Credit Suisse. “Electric motors need virtually nothing doing to them,” says Steve Nash, chief executive of the Institute of Motor Industry, a professional body in the UK.”