Changes in our society—whether sudden like Covid or gradual like climate change—are happening all the time, and they have direct impact on the marketplace, posing a threat to sluggish incumbents and an opportunity to nimble innovators.
Change often creates a hole in the market, where a new need arises or a new solution to an existing need becomes available. Companies already in the market may not be prepared to embrace such change, because their entire infrastructure—staffing, technology, manufacturing and distribution—is geared to the way things were before. This is often a great opening for a startup which has no history or investment to protect. Of course, over time the incumbents can shift their resources, so the more sudden the change, the greater the upside for the innovative company which starts up or pivots into the new opportunity.
When Covid struck, thrashing seemingly invincible industries, like restaurants, airlines and hotels, a lot of companies withered, while others pivoted to address the needs created by the crisis. Cambridge Innovation Center, which depends on monthly rental income from tenants in their co-working space, was hit hard. In order to get their tenants back in the building, they started Covid testing in their lobby, which revealed a huge unserved demand for Covid testing—and later vaccination. To meet these needs, they used their staff to test and vaccinate the general public, and also contracted to provide these services to schools, hospitals and prisons throughout the state. Much to their own surprise, they quickly became the largest Covid testing and vaccination company in New England.
Levitronix is a hardware company that makes pumps for the life science market, but pumps cannot be manufactured by employees in their homes. When Covid hit, increasing the need for single-use pumps for bioprocessing, the Company couldn’t simply send everyone home. In order to survive, they had the production staff work more flexible hours to maintain social distancing, and they set up teams which worked in isolation from each other. Non-production staff was sent home with computers and engineering development hardware. The Company communicated closely with their customers and suppliers, finding alternate shipping methods, building local inventory and proving that they could be trusted in a crisis. They completed the year with no Covid transmission between employees and record product shipments.
While the surge of Covid testing and vaccinations will likely subside, other changes in society resulting from the Covid crisis may remain. People’s attitudes about business travel, online meetings, digital health and work-from-home will have ongoing repercussions which will open up new markets and threaten others.
Typically change happens more gradually than it did with Covid. One company I worked with, which makes equipment for skin rejuvenation, noted the trending growth in tattoos, and guess what market they entered? Tattoo removal. The more teenagers who get tattoos today, the more adults who want them erased tomorrow!
Large companies are renown for missing trends. Kodak created the first digital camera in 1975, but its employee base, knowledge, assets and profits were in their core market of analog film. By the time Kodak tried to compete in the digital camera market, a market that they had initiated with their own invention, it was too late. They filed for bankruptcy in 2012. This shift in the market from analog film to digital cameras didn’t happen overnight but over many years.
Some changes are not a simple trend but are cyclical, such as the semiconductor market, in which Levitronix also operates. The team does extensive in-depth analysis to understand where the market is within the cycle in order to remain fiscally conservative while using the downturn to hire from the competition and invest in R&D, thereby emerging from every downturn in a stronger position.
As we look to the future, changes abound. AI and machine learning will have broad applications, including self-driving cars, which will impact everything: where we live and work, and how we get around. We’re also facing an aging global population. With higher life expectancy and lower fertility, for the first time in history there are more people over the age of 65 than under the age of 5. These changes will obsolete some markets while opening up entirely new ones.
Change can come from new solutions that are intended for one purpose but have a secondary effect of enabling other technologies or business models to meet different market needs. For example, overnight delivery altered how we do business, like enabling Rent the Runway to provide subscription-based clothing by mail. GPS technology on our phones enabled Uber. Finally, the power and low price of the personal computer enabled Solid Works to come out with 3D CAD (Computer-Aided Design) that was much less expensive and easier to use. This growth in 3D CAD in turn enabled the emergence of 3D printing. When we started Z Corporation, 3D printers were very expensive and geared toward accuracy. We came out with an office-compatible 3D printer that made parts ten times faster at a tenth of the cost. Our innovation and growth depended on ink-jet technology as well as the growth in PC-based 3D CAD.
Driving or managing change requires an innovative culture and mentality, where employees have an entrepreneurial mindset. Diversity of opinion leads to the best decisions, so you want to hire people with complementary skills, interests and experience. Empower your employees to argue their points. Young people are a great source of fresh ideas, new approaches to problems and knowledge of the latest trends, technologies and business tools.
If your company is the one disrupting the market, you need to protect your position with patents, trade secrets and proprietary know-how. At Z Corp., we licensed our core technology from MIT. The MIT patents kept others from entering the market with this technology until after the patents expired.
When you are successfully growing a market, it’s easy to believe that you’ve found “the answer,” as if the world is suddenly going to stop and allow you to stay on top. Don’t kid yourself. Change is coming. You need to track new technologies, trending demographics, emerging startups and novel business models in order to lead the market in obsoleting your own product offering. The question is not whether or not your product will be obsolete—only who will obsolete it, when and how.
What successful businesses have in common is how they foresee and react to disruptions in society which create new needs or new solutions to existing needs. These companies seize the opportunity brought forth by change in order to re-direct. They are not simply reactive but also proactive.