FinTech and the Buggy Whip

I read an article in the NY Times about the fable of the buggy whip manufacturer. We were all taught in business school that buggy whip companies were wiped out by the auto industry. Had they only seen themselves as part of the transportation industry they would have adjusted and survived. The article makes the point that this is not the case.

First off, many makers of horse carriages did survive by making things for the auto industry. Things like seats, ball bearings, brakes and so on are needed on both buggy’s and cars. As you saw your sales to carriage makers drop you quite naturally would look to adapt your product to automobiles.
The challenge for buggy whip makers is that cars have no obvious analog for the product. Buggies needed a long flexible whip to get the horses going…cars don’t. Viewing themselves as part of the transportation industry wouldn’t have changed this fact.

I would still guess that many of them figured out how to make something useful. It might have been in the auto industry, some other existing industry or a new one, but I have not met many business people who simply throw up their arms and give up.

I think we can see this in modern markets. Right now, for example, we are seeing the rapid evolution of the financial system, especially with regards to payments. While there are established fintech firms, rapid growth in electronic payments (some of it driven by the pandemic) has drawn the attention of many other players.

Banks and other traditional institutions see the threat and are adapting. Unlike the buggy whip makers, they can continue to play a role in financial transactions even in the virtual world. There are no doubt opportunities for them to take a greater share of the electronic wallet.

Competition though is not limited to just existing fintech firms and traditional financial institutions. Many other firms are looking for a way into this lucrative market. Essentially any firm that has a large customer base (especially a large engaged base) sees an opportunity to take a bigger share of wallet.

The challenge is figuring out the opportunities best suited for each firm

The carriage industry faced a similar challenge and had to make tough decisions largely based on their gut. Modern firms often rely on market research to make more reasoned decisions, but a dynamic industry like this challenges what traditional market research can do. That’s why you need something that goes beyond the traditional.

At TRC we have helped many clients navigate these waters. Only through carefully constructed real time surveys can you learn from consumers how they view the market, who they are using, why they are doing so and what opportunities will shift them to a new offering. Most important, you need to continue to measure this over time. You need to understand how the market is shifting if you are to be prepared for it.

I don’t know if market research could have saved more buggy whip companies…but I know it can drive success in this new challenging market.