How digital disruption changed 8 industries forever

25 Nov 2015831 Shares

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Eight industries that have been changed forever thanks to digital.

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While high street retailers anxiously anticipate seasonal footfall that may never arrive (um, because e-commerce), here are eight industries that have already succumbed to digital disruption.

During the week, someone in my Facebook circle shared an interesting slide from a conference that I found riveting enough to share further.

What I hadn’t expected was how quickly it would resonate with friends who normally don’t care so much about matters of the digital kind. The digital disruption has already happened and it got their attention.

The slide came from a presentation at an IBM for Entrepreneurs event by Sandy Carter (@sandy_carter), who is IBM’s leading executive for start-ups.

digital-disruption-ibm

It pointed out, for example, that the world’s largest taxi company (Uber) owns no taxis and the largest accommodation provider (Airbnb) owns no properties.

In one sense, this portends a frightening future for some, but it also unlocks wealth-creation opportunities on a scale never seen before.

So I decided to go through each of the points about digital disruption and offer my two cents.

1. The world’s largest taxi company (Uber) owns no taxis

In just a few short years, Uber has grown to become a ubiquitous app in cities around the world that allows consumers to order a taxi at the tap of their smartphone screen. Despite local battles with city councils and taxi unions around the world, it is estimated that Uber will generate $10bn in revenues by the end of 2015. The San Francisco-headquartered company is estimated to be worth between $40bn and $50bn. If valued at $40bn, that values Uber at 1.5 times the capitalisation of Twitter and gives it the same capitalisation as Salesforce.com, Delta Airlines and Kraft Foods. In July, it emerged that Uber is to create 300 new jobs in Limerick at a Centre of Excellence focused on next-generation services. While traditional taxi unions might rebel against the idea, services like Uber and Hailo are actually helping individual drivers catch business they might otherwise have missed.

2. The world’s largest accommodation provider (Airbnb) owns no real estate

Established in a San Franciso apartment by a group of friends who had the idea of creating a B&B using their only asset, an air mattress, Airbnb has taken the accommodation world by storm by enabling house and apartment owners to generate additional income by renting out their properties for nights and weekends. The idea has skyrocketed and Airbnb is now a popular alternative to staying in hotels. Valued at $25.5bn, Airbnb is estimated to be worth more than hotel giants Marriott ($20.90bn), Starwood ($14bn), and Wyndham ($10.01bn). Hilton Worldwide is valued at $27.7bn. Ireland has benefited enormously from Airbnb’s decision to locate its international headquarters in Dublin. Airbnb is expanding its Irish operation with the hiring of 200 people and the leasing of a new 40,000 sq ft office at Hanover Quay.

3. The largest communications companies (Skype, WhatsApp, Facebook Messenger, Viber) own no infrastructure

The most contentious battle yet in the telecoms space has to be the fact that while traditional fixed and mobile operators have invested in the underlying infrastructure to make broadband over computers and smartphones almost ubiquitous, the reality is consumers are using this infrastructure to make calls and send messages using services from Facebook, WhatsApp and others.

Known as over-the-top (OTT) platform providers, services like Facebook Messenger, WhatsApp and Skype are eating the lunch of telecoms providers all over the world who are struggling with the digital disruption that they laid the groundwork for. Skype was acquired by Microsoft two years ago for more than $8.5bn and Facebook acquired WhatsApp for $19bn. These services effectively allow consumers to make voice and video calls for free. As of September 2015, WhatsApp had over 900m users while Skype has over 660m users. Meanwhile, voice and SMS revenues that were a pot of gold for telecoms operators are steadily declining.

4. The world’s most valuable retailer (Alibaba) has no inventory

Alibaba can be considered China’s answer to Amazon. It was set up in 1999 by a former school teacher called Jack Ma, originally as a business-to-business portal.

By 2012, the site was handling more than $170bn worth of sales and by last year, when the company went public on the New York Stock Exchange, it netted $25bn in the biggest IPO in history. Unlike traditional retails chains, Alibaba doesn’t have retail premises and nor does it carry any inventory, rather it simply facilitates the exchange of goods for money.

5. The most popular media platform (Facebook) creates no content

That’s right. Facebook, which was established in a Harvard University dorm just 10 years ago by Mark Zuckerberg, is pretty much the front-page newspaper for some 1.5bn people around the world. Modelled on a hacker culture with coding at its heart, Facebook doesn’t create content but allows you – the user – to post content and any media outlet worth its salt is using it to encourage people to share content and drive traffic. In the company’s recent third quarter it reported revenues of $4.5bn, with the majority of this ($3.4bn) coming from mobile advertising. Every day, more than 8bn people are watching videos on Facebook. There are 900m people using WhatsApp every month, 700m using Facebook Messenger every month and 400m people on Instagram each month. Facebook doesn’t create content because you, dear reader, are the product.

6. The fastest-growing banks actually have no money

With the onset of services from Kickstarter (crowdfunding) to Apple Pay (mobile wallets) and society’s increasing use of e-commerce, the very notion of carrying cash is heading towards obsolescence. Among the many fintech trends emerging fast is the rise of peer-to-peer lending, where companies like Australian set-up SocietyOne allow savvy investors to connect with credit-worthy borrowers in a way that is cheaper, faster and more efficient for digital natives. In the UK, the first peer-to-peer loan provider was Zopa, which has so far issued loans to the amount of £500m to more than 500,000 customers. Assetz Capital, which started lending in 2013, has made the largest peer-to-peer loan in the UK to date, having made a £1.5m loan available for the development of student accommodation in Nottingham. Another player, Funding Circle, offers loans to small businesses from investors via its platform and has lent more than £200m so far.

7. The world’s largest movie house (Netflix) owns no cinemas

The old format of linear TV has been turned on its head by the onset of services like Netflix, Sky Go and YouTube – and lets factor in Facebook too – and even music has been transformed by streaming services like Spotify and Pandora and lately Apple Music. Netflix, which began as a postal DVD service, has developed into a fully-fledged streaming service with over 69.1m subscribers worldwide, including more than 43m in the US. This has led to a culture of binge-watching, where fans of popular movie series or boxsets watch one show after another. This is threatening the very foundations of the traditional TV business as well as movie rental businesses on the high street. For example, last week, Xtra-vision announced it is to close 28 of its stores in Ireland because of the continued decline in rental DVDs.

8. The largest software vendors don’t write the apps (Apple, Google, Facebook)

The onset of the iPhone in 2007 sparked the very revolution that the independent software industry had been waiting for and, just a year later with the launch of the App Store, software creators of games and productivity apps to name a few found a whole new revenue model had opened up for them. By 2014, Apple, which still makes its own operating systems for Mac, iOS and WatchOS, as well as proprietary apps and technologies, had become the single biggest economy for independent software makers and by 2014 revealed it had paid out $15bn to developers.

As of 2014, the App Store contained more than 1.2m apps, some 75bn apps had been downloaded and 300m people visit the App Store every week. To give you a picture of the impact of the Apple economy in Europe alone, an economic study last year revealed that the Apple economy is responsible for 629,000 jobs across Europe, including app developers and suppliers and people in retail. Apple pointed out at the time that 50pc of all direct and indirect app economy jobs in the EU28 can be attributed to iOS and said the app revolution has added nearly 500,000 iOS jobs to the economy in Europe since the introduction of the App Store in 2008.

Disruption image via Shutterstock

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Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com