New entrant: Prepare for a dramatic new entrant
In this scenario, a dramatic new entrant with a proposition that is powerful enough to dominate against today’s incumbent firms enters the market with force. The threat is very real, with recent history demonstrating that longstanding and profitable businesses (such as HMV and Kodak) can be devastated by developments in technology or customer preferences they failed to recognise, responded inadequately to, or decided to ignore.
A company from a different sector, with ambitions to diversify its business model to fuel continued growth, might see the profit to be made in the most valuable parts of the insurance or banking value chain and try to seize them.
The options for incumbent firms come down to either waiting to see what happens – risking the erosion of shareholder value and loss of customers - or leading the charge by building on their knowledge of the sector, back book and sheer volume of data to partner with an innovative business to create a new offering.