We hear the term “disruption” so frequently that it’s started to lose its luster. As a startup founder, I can attest to its overuse. But as Mark Andreessen quipped in 2001, “software is eating the world.” Incumbents are being displaced by software companies in industries across the globe, ours included, and it’s worthwhile to understand where our industry is in the process so you can adapt to ensure your lending business – and people – survive the process.
Former Microsoft executive Steven Sinofsky identified four phases of disruption that typically occur in an industry once new technology challenges the status quo: initial disruption, rapid linear evolution, convergence and, finally, a reimagined industry.
Disruption is subtle at first. With profitable businesses and large customer bases, incumbents barely notice. If they do, they’re dismissive – remember the industry reaction to “Push Button, Get Mortgage” in 2015? The disruptor finds an underserved niche in the market and builds a small customer base. Look at Uber, which launched in June 2010 in San Francisco as an SMS-based black car service targeting Bay Area techies, costing nearly twice that of a taxi. Taxi companies paid no mind to the startup touting “your own private driver.”
By the second phase, disruptors are laser-focused on product development and pleasing their small, loyal base. They view the industry through a new paradigm, prioritizing “low-hanging fruits” that were too small or unprofitable for incumbents to touch. Incumbents are still skeptical; those that do react mount a weak defense. They believe disruptors are fighting a losing battle.
I believe we’re already witnessing the second phase of disruption. We’re seeing a simultaneous surge of point solutions alongside broader, end-to-end platform plays. Like Uber and Airbnb, successful disruptors find real pain points to solve and then leverage their platform to disrupt from a new angle, inviting early adopters to ride their wave of success.
For incumbents, it’s imperative to act before the third phase of disruption. In 2013, Uber entered markets in Europe, China and Africa and unveiled UberX to provide a cheaper, more consistent transportation experience. That same year, many taxi companies released their own apps or banded together on platforms like Taxify, but the damage was done. Scenes of taxi cabs blocking streets and lobbying local governments seem like dying gasps for air to customers who, by 2019, view taxis as a relic of a bygone era.
This is the crux of the “innovator’s dilemma” – an incumbent fears hurting their core business and thus fails to evolve to meet customer demands, making it easier for the disruptor to poach their customers once markets converge. As Netflix CEO Reed Hastings noted when they made the risky leap from DVDs to streaming, “Companies rarely die from moving too fast, and they frequently die from moving too slowly.”
Luckily, the mortgage industry is early in the disruption cycle, and there’s still time to act. Quicken Loans founder Dan Gilbert once called Rocket Mortgage the “iPhone of home financing” but, as more technology disruptors enter the space, their digital-or-die approach might itself be disrupted.
We built Maxwell on the premise that the human relationships at the center of the mortgage loan are the most valuable part of the process, and I’m unconvinced that an entirely digital experience can supplant our need for a personal touch. As software “eats the mortgage world,” we must protect what’s valuable as we ride the wave of disruption (or risk getting crushed beneath it).
It’s not about overhauling your process; it’s about embracing the opportunity to participate in disruption. I’m immensely grateful for our customers who guide our efforts to build software that meaningfully impacts their business. Some are eager disruptors; others treat it as an investment venture, experimenting, measuring and deploying as their investments bear fruit. Neither approach is wrong, and both allow for an enduring focus on their core while delegating the rest to specialists.
As an employer, you have the power to prepare your people for change. Some employees may lack the skills or experience to readily participate in this tech-driven evolution, but through education and engagement, you can ensure they get the necessary technical development and exposure to adapt to technology before the industry shifts and leaves them behind.
Don’t ignore the signs of disruption around you. It’s here and it will impact your business. Proactive measures now ensure that disruption’s impact on your business will be positive as we enter the third phase of disruption.
