The banking sector is an industry which is particularly susceptible to the threats of unconventional competition. JP Morgan’s ominous warning, “Silicon Valley is coming,” gives some indication of how seriously banks are beginning to take the threat of unconventional competition. “There are hundreds of start-ups with a lot of brains and money working on various alternatives to traditional banking,” he continued.
My colleague and banking trends expert Brett King agrees. King suggests that the banking industry will experience more disruption in the next 10 years than in the previous 300 years – and much of it from unconventional sources. “This will hurt,” he says.
Some leaders in the traditional banking and finance sector are waking up to this reality. One recent study found that 27% of senior bankers named tech companies as the biggest threats to their businesses.
Simultaneously, the rise of the ‘sharing economy’ has shaken the core of the travel industry in recent years. According to forecasts from PricewaterhouseCoopers, one of the biggest sectors to be impacted by the sharing economy is that of travel and tourism. This became personally evident to me when my wife and I sold some furniture over eBay. When the buyer picked it up in a car from the car sharing service, GoGet, to take it back to the house whose lower level she rents out through AirBnB, the reality of this new trend quite literally hit home.
In Australia, recent years have seen Airbnb go from being an accommodation provider at the fringes of the industry to pervading the mainstream market. Their partnership with Qantas allowing customers to earn frequent flyer points when booking through Airbnb was a symbolic move that rattled the travel industry, as was the more recent partnership with travel giant Flight Centre. What started as a cute idea by two young guys in San Francisco has become a serious threat. The fact that Airbnb is worth twice as much as hotel giant Hyatt and has over 4 million listings in 34,000 cities around world underscores how profoundly disruptive this one unconventional competitor has become.
However, it’s not just the hotel chains that ought to be nervous about the unconventional threat of Airbnb. The company’s recent initiative called Airbnb Trips is positioning them as a full-scale travel agency that will cater for every element of the travel experience – not just the accommodation. Airbnb is also looking to break into the flight-booking market in an effort to take on giants such as Priceline and Expedia.
There is an existential question that all banks and travel companies will need answer in the years to come. While there is no doubt that institutions of banking and tourism will be endlessly important in the future, there is a good chance that the kinds of institutions we are used to will not be the ones to endure. As former Wells Fargo CEO Richard Kovacevich admitted: “Banking is essential, banks are not.” The same goes for flight companies, hotels and travel agencies.
Having looked at the various ways that unconventional competition will change the game for businesses and industries in the coming years, the key question then is how to respond to it.
Ignoring, dismissing or discounting unconventional competitors is never the answer. Fighting unconventional competitors or trying to leverage your power to protect the status quo will only work for so long. Like holding back the tide, the pressure of change will grow to a point where you can contain it no longer. Added to this, nimble and creative startups have a knack for getting around the tools of established power.
The key is to remain alert. Businesses and leaders must be constantly scanning the horizon while also looking over their shoulder. And when unconventional competition emerges from the periphery, keep a close eye on it. Engage with, learn from and be sharpened by it.
In response to the rise of AirBnB, AccorHotels’ global CEO Sebastien Bazin is spearheading a major push into the private rental accommodation market with investments in platforms such as Onefinestay. In a revealing insight into the mentality that is driving Bazin’s approach at Accor, he said “Twenty-four hours a day I have my eyes open and I am listening. I want to find out what is it we don’t know and what can we do to create top line growth.”
It is this posture of alertness and the actions of adaptation which follow that are most important for any organization or leader today. While it is tempting to dismiss the threat posed by unconventional competitors, you do so at your own peril.
Michael McQueen is a trends forecaster, business strategist and award-winning conference speaker.
He features regularly as a commentator on TV and radio and has written 5 bestselling books. To order Michael's latest book "How to Prepare Now for What's Next", click here.
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