Low barriers to entry are the cause of your disruption
There is a thought that startups are completely disrupting industries at mass - For example, a company like Casper coming in and stealing all the market share in the mattress industry. However, this is far from the truth. Yes, they are changing the way consumers shop and behave, but the reality is disruption is happening as multiple startups see an opportunity in an industry, leverage lower barriers to entry and enter a field at once - nibbling away at traditional market share versus taking one large bite. Disruption in the mattress industry is caused by dozens of new entrants nibbling up to 5% of the industry market share in a short amount of time.
This disruption is being fueled by reduced barriers to entry - providing a clean slate for anyone to start a company in practically any category given the right idea. There are several factors attributing to this in today’s business climate. Here are the main drivers:
Not only does technology deliver the platforms like e-commerce and mobile commerce to make physical retail stores obsolete, it also enables streamlined and flexible operations for any type or size of company. The expansion of digital technologies over the last 5-10 years has created a multitude of solutions for companies large or small to build a value proposition, produce and deliver products and services and enable customer service in a way that was once only available to large corporations. Technology is enabling massive disruption on many levels.
Access to talent used to mean that a company would have to recruit, hire, train and pay a full time employee to perform specific tasks. Now that we’re entering in the gig economy, companies (even individuals) can hire this same talent as a fractional contractor to do those same specific tasks in order to build or grow a business, without the overhead of a full time employee. Talent is now at a moment of on-demand distribution.
The biggest barrier to entry in the past has been the capital-intensive development and implementation of the supply chain needed to deliver a product or service. As technology and talent transform, they enable disruption at certain elements of the supply chain, including logistics, manufacturing, etc. Supply chains are now available to be rented or leased, making it almost turnkey for new entrants to get started.
“Rather than maintaining resources and capabilities in-house, companies can buy individual supply-chain functions as a service on a by-usage basis. Service providers’ greater specialization creates economies of scale and scope, increasing the potential for attractive outsourcing opportunities.” - McKinsey
Advertising is no longer viewed as a multi-million dollar, mass experience where a business builds a product and delivers it to the biggest audience it can through media. Attention is now at a micro, personal level, where startups and companies only need to deliver their message and product to the right people, not everyone. This success has been proven time and time again by new entrants to a marketplace. Attention in today’s economy follows great products, novel ideas and personalized experiences.
As technology and other factors are streamlining operations and commerce, the need for capital has drastically reduced. An individual can now bootstrap their way to become a disruptor in a category. But, on the other hand, venture capitalists in core sectors and categories are always willing to invest in good ideas and companies with high growth and disruption potential. There has never been an easier time to start or fund a good idea brought to life as a business.
The barriers to entry in particular industries are only going to get lower and lower. As incumbent and market leaders in those industries, it’s necessary to watch this space and continually innovate your business and experience to beat new entrants to the value propositions consumers might want or need.
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