A recent article by Geoff Williams in Entrepreneur.com lists 10 industries that will be extinct in 10 years. Among them are: telemarketing, used book stores and camera film manufacturing — just to name three.
Interestingly, however, he does not predict that most will be 100% gone. Rather, he predicts that most will be in the final throws of a steep decline in 10 years. They will still be around in some form, although mere shadows of their former selves.
That rings true to me. I sometimes read predictions that unrealistically decree the overnight demise of this product or that industry. In real life, industries rarely disappear overnight — in fact, I’m hard-pressed to think of a single example. Usually it takes a number of years — sometimes decades — during which the industry shrinks and dies an agonizingly slow death.
Sales slow down, every year getting smaller and smaller. Customers gradually move on to some new solution that meets their needs or desires better.
Some businesses in declining industries remain profitable for years — just smaller.
The proprietors try to keep them going as long as possible and milk the cash cow. They tighten their belts and shrink expenses to stay in line with shrinking sales, as they ride the downward trend.
They know that some level of market demand will linger for a long time. Because even while droves of customers may move on to the latest and greatest replacement, human behavior is such that consumers do not move at the same pace. (Ever heard of early adopters, late majority, laggards?) And the same holds true for B-to-B markets. Just like consumers, business customers do not move to new technologies or solutions at the same pace, either.
Some businesses actually manage to achieve temporary growth spurts in the midst of dying industries. For instance, you may see consolidation plays where one player buys up other struggling players (say, to maintain economies of scale in production facilities) and milks the remaining years for every dime. Or the stronger players just out-wait the pack and gobble up the crumbs left behind as competitors go out of business one by one. Or sometimes businesses branch out to foreign markets where the rate of decline may be much slower.
Temporary growth spurts can mask long-term industry decline. That’s why if you are ever considering buying a business or investing in a franchise, make sure you understand whether any growth reflects long-term potential versus a temporary spike. The difference fundamentally affects the business’s value.
The smart companies in declining industries deliberately cannibalize their own businesses. As the old industry is declining, they invest in alternative business lines or disruptive technologies that are replacing it.
You see this happening right now with the yellow pages industry, where the players are investing in online initiatives through acquisitions and/or organic growth, even as their print books gradually decline. Smart companies don’t wait until it’s a dire emergency. The more strategically they think, the earlier they start. As soon as they spot the first signs of decline, they look for whatever else is blossoming and figure out how to make money in the replacement industry, even if it means a radically different business model. It can be a win-win for companies that have a foot in the old industry and in the new industry replacing it.