What trends and technologies threaten to upend established business models and wipe out slow-to-adapt companies, leading to the next generation of S&P 500 companies and IPO hopefuls?
You'll find no shortage of analysts and other experts ready to answer this question—and it's not just a tech utopian vision of the successful company of the future.
Here are six seismic shifts, from cutting-edge technology and workplace trends to consumer preferences, that today's company leaders need to be thinking about before it's too late.
—By Ilan Mochari
Posted 20 March 2015
3-D printed guns. 3-D printed vital organs.
"We get caught up in the end of the journey with 3-D printing," said Mike Walker, an analyst at market research firm Gartner. "The real opportunity isn't the widget. It's the intellectual property you're creating."
Plans for all manner of products, parts and supplies will become available for download, similar to music files (even suits based on 3-D body scans, as in the image here). Walker said the real business winners could be the designers who stand to earn royalties for each download in the same way the IP owners of songs and movies do.
The question is, What designs will be commonly downloaded and printed, not only by consumers but also by businesses? That's where things get interesting. There are sure to be plenty of everyday items, but you can't rule out a future in which automakers download and print out cars and surgeons print plastic medical models on which they can practice complex procedures.
So you might be wondering why Microsoft spent $2.5 billion to buy the maker of video game Minecraft.
Here one reason: envisioning an entirely new and highly effective advertising opportunity in games like Minecraft, said Forrester Research's James McQuivey, an analyst who tracks the digital disruption of traditional businesses. An automaker, for example, could create a Minecraft setting in which consumers design their own cars (complete with fun added elements such as cats or celebrities) or virtually experience cars built by other users.
In a game setting like this, McQuivey said, advertisers could potentially construct a brand experience and present it to prospective customers whose game-playing preferences make them likely sales targets. "Right now companies go into these [gaming] environments and put up a billboard," he said. "But that's not nearly as interesting as getting people to interact."
By interesting, he means not only effective but transformative: An audience will no longer be a passive spectator to an advertisement, but an active participant in it.
Researchers at S&P Capital IQ made waves when they predicted in a recent report that the common practice of getting health insurance through employers was inevitably going away.
Why is it inevitable? Mainly because employers stand to save a whopping $700 billion between 2016 and 2025 by shifting from employer-paid insurance to simply providing stipends through which employees can buy their own policies on independent exchanges made possible by the Affordable Care Act.
There's a big "if" looming in the Supreme Court decision over which the high court just heard arguments, but if the Supreme Court for a second time upholds the law, this trend will be analogous to the shift from employer pensions to 401(k) plans, said Michael G. Thompson, managing director at S&P Capital IQ.
"The government will change the rules, and the IRS will back down and allow stipends," Thompson said. The winners, in his opinion, will be the companies that figure out how to get a piece of the revenues that these soon-to-be-emerging health-care exchanges are bound to generate.
Like health care, education is an area rife with "bloated, rising costs, incredibly unchecked by anyone," Forrester's McQuivey said. In response, more current and future members of the workforce are "ridding themselves of the need to use the current systems," he said. In other words: You don't have to go to college to prove yourself as a programmer. Instead, you can save time and money by taking online courses.
And that's just one industry. Although Massive Open Online Courses (MOOCs) have been around for more than a decade, they continue to gain momentum as an alternative to the pricier and more time-consuming coursework of traditional education. While it's an exaggeration (at least, at this point) to say that the MOOC trend will render obsolete the prestige and connections that come from, say, earning an MBA the old-fashioned way, there's no question online courses are already saving time and money for both students and businesses.
Goldman Sachs, for example, has partnered with the MOOC provider Udemy to train and bring on board new hires. "From the firm's perspective, we can customize content based on what they already know and measure their progress, as well as the program's impact," wrote Jason Wingard, Goldman Sachs' chief learning officer, on Inc.com. "And when they finally do arrive on campus for orientation, participants are better prepared and thus start on a more level playing field."
In their new book, "Retail Revolution: Will Your Brick-and-Mortar Store Survive?", Harvard Business School faculty members Rajiv Lal and José Alvarez and former HBS research associate Dan Greenberg forecast hard times for one-size-fits-all brick-and-mortar retailers, including Wal-Mart Stores. "Wal-Mart is now buffeted by three sources of competition," said Lal. Those three are e-commerce companies, from Amazon down to one-product specialists; increasingly efficient and profitable supermarkets; and the growth of dollar stores. "Their business model used to work, but now it's under stress," Lal said of Wal-Mart.
That means the model for smaller brick-and-mortar retailers is in trouble as well. While analysts have predicted a brick-and-mortar apocalypse before, Lal and his co-authors say that today's online threat is different and more lethal than anything traditional retailers have faced in the past.
There are two habits in particular that smart companies are baking into their business models. First, there's the idea that millennials conduct online research before buying. This highlights the importance of credible customer testimonials, especially those shareable on social media. As an example, David Bell, professor of marketing at Wharton, cites the marketing efforts of Casper, a New York City-based manufacturer and online mattress retailer. Casper's product reviews are sortable by categories, such as whether you're a side sleeper and whether you sleep with a pet. "You can go onto their site, find a review by someone who's essentially a clone of your own sleeping type, and that can give you some confidence as a buyer," Bell said.
Second, and maybe because millennials trust so much in online information, they tend not to care as much about trying the physical product before buying it. Increasingly, consumers can buy a product first and easily return it if they dislike it. Casper and its competitors in the direct-to-consumer mattress space offer generous return policies with long trial periods.
Harvard Business School's Lal said he has seen this trend play out both in his research and with his own children, who are in their 20s. "When they think about shopping, they think about the Internet," he said. "It's the first place they go to. It doesn't matter if it's shoes or a coat. These are categories I would've told them, 'Try it out, see how it looks, how it feels.' Their response is, 'We'll buy three and return two of them.'"