In industries with "sweat assets" which require substantial capital investment upfront, and also tend to be highly regulated, there is a natural barrier to competition entering the market. This often means that Asset Intensive enterprises are insulated against market change. However, the nature of exponential change and advent of a platform approach means that, eventually, your enterprise will potentially be undercut.
Consider the taxi business in New York, an asset intensive business that saw the cost of taxi medallion – the means by which you could operate a yellow cab on New York streets – rise to over $1million, making it inaccessible to your average operator.
Along came an upstart digital platform provider called Uber. At first, it did not represent a threat, but their unique digital business model has totally transformed the ride-hailing and public transport industry, as well as the labour supply for the taxi industry. Taxi companies have been forced to improve their digital operational model with ride-hailing apps and new forms of payment.
The risk that other asset intensive industries run, is that similar upstart models – that view their business from a completely different perspective and are unencumbered by existing capital investments – turn your industry on its head.
Adopting a platform mindset, that leverages a digital business model, may the key to stemming upstart competitors, as well as the impact of exponential change, and its effect on your long-term viability as an industry.