New Markets and Geographic Disruption

Whenever new markets are created in an existing industry, a common thread that seems to runs across them is decentralization of an existing service in a geographical sense, which in effect causes people with far less money and skill to consume it than a previously centralized (relatively) service could allow.

To make sense of this, consider a pattern observed over and over again in various industries.


The way computing was done in 1970s was we had to take punched cards to a mainframe centre, wait for access to a machine and then use the help of skilled operator to run our problem. The first wave of technology to transform this complicated service to a more convenient one was desktop computers, which decentralized computing to our homes and offices; we no longer needed to visit a central location and rely on an expert to do the job for us, we could go home and do it ourselves. Of course, there still remained a much larger market of non-consumers for whom even Desktop was too complicated and centralized. Smartphones filled that need by bringing computing to us, in a much more convenient form.

Long distance Communication

The first wave of technology that enabled long distance communication was telegraph. A person would need to visit a telegraph office, where again a skilled operator transmitted the message using Morse code. Wireline phone brought this capability to our rooms and offices. Today, we have smartphones and applications built on top that gives us the ability to communicate with our friends and colleagues at any location. Each successive wave of technology transformed a centralized service to an ever-greater degree of geographic decentralization, which consequently caused non-linear surge in growth and convenience for end users.


The first wave of technology in Higher Education industry was universities, where professors dispensed their knowledge to students in a centralized facility. The Internet has enabled creation of online MOOC services, which brings courses to our homes. Smartphones today allows us to listen to lectures, podcasts and audio books on the go during commutes, hikes and exercises, vastly increasing the contexts where we can can consume knowledge.


In Medical care, before any industry emerged, we took care of our loved ones at our homes, often relying on folk remedies to treat health problems. Hospitals were the first wave of innovations that centralized the services of doctors and nurses and provide care. More convenient ambulatory clinics and doctors offices have managed to absorb many of the use cases that were once handled by hospitals. Today, smartphones and sensors are enabling services that are chipping away at many categories of diseases, providing diagnosis facilities to us at our homes. For example, Figure 1 is a photo-sharing app through which patients and healthcare professionals alike can share photographs and information about their symptoms for both learning and diagnosis purposes

Examples abound in almost every industry, but they can all be abstracted to a common theme:

1. When modern industries emerge, the first wave of technology brings to bear an order of magnitude improvement in quality in consumer lives. But implementing the technology is so expensive that the economics mandates centralization of the service.

2. The cost and inconvenience of these solutions acts as an impetus for innovators and entrepreneurs to make these services cheaper and convenient. The most disruptive of these innovations often tend to be those that decentralize the place where customers can solve their problems.

3. Smartphones have been an enabling technology that has accelerated the decentralization of so many services. Rather than taking our problems to a centre to resolve them, smartphones have enabled all kind of solutions to go at the point where the problems arise.

An unfortunate (depending on your perspective) implication of this cycle is that incumbents that offer centralized services in the first wave of tech often don’t succeed in servicing the new market that requires decentralized service. This is often because the needs of the new market are often so different from the needs of customers in the original value chain. Creating such a service also requires innovators to create the product or service at a massively reduced cost compared to the previous product. The incumbent business model often collapses in the face of these requirements —for a manager that has to make the decision between doubling down on the more profitable current market vs diverting the resources on a new market, the innovator dilemma kicks in.

The net outcome of this cycle is that customers become much better off. Greater convenience and lower costs brought by decentralization enable many more people to have access to products and services that could once only be consumed by the skilled and wealthy. There still remain many industries and problems where service is only available in complex, high-cost institutions. All of them remain vulnerable to disruption by technology that can remove the geographic barrier and enable people with much less skill to do progressively more sophisticated things in less expensive settings.

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