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Interstitial Incorporated: The Phenomena of Undefined, Undetected and Ubiquitous Business Disruption
Interstitial entities emerge fast mainly due to a shift in the demand patterns caused by the new technology concepts, technology form-factors, platforms, processes or combinations thereof leading up to creation of new capabilities or business value.
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With ICT enabled transformations percolating fast across far and wide industry ecosystems globally, the age-old question of when an industry gets disrupted has found a new answer. Today, an industry starts to get disrupted as soon as it gets completely defined, as soon as its structure, characteristics and boundaries are relatively well set, and as soon as it delineates itself form the other industry spaces that exhibit either some common generic behaviours or complementary functionalities. This disruption goes deep, undefined and undetected, and is eventually ubiquitous.
Welcome to the Interstitial ubiquity- The word interstitial comes from Latin word interstitium meaning ‘in between’. Interstitial entities are largely undetected and undefined or cannot be defined from an existing industry characteristic standpoint. Interstitial corporations do not have industry specific manifestations because they do not bear any such identifiable characteristics alienating them from the defined industry spaces, hence they thrive undetected and grow uninhibited.
Shifting the balance of power in an industry: Interstitial entities emerge fast mainly due to a shift in the demand patterns caused by the new technology concepts, technology form-factors, platforms, processes or combinations thereof leading up to creation of new capabilities or business value. While business strategists continue to battle on with competitive tactics in traditional defined markets, interstitial entities are emerging almost everywhere creating new business battlegrounds and changing interrelationships between various industry stakeholders, even disturbing the balance of power.
Interstitial entities generally emerge around the periphery or even completely outside of the recognizable industry boundaries and create unpredictable scenarios. Just as an example, Britain’s oldest peer-to-peer lending platform Zopa has finally obtained a full authorization from the Financial Conduct Authority to operate as a P2P lending platform. When Zopa started its operations in 2005, such a platform could not even be attested anywhere close to the constituents of the industry it had started scaling up to. The regulators said that the peer-to-peer lenders were “testing the boundaries” of what was allowed under the FCA permissions they operate under.
Realignment of industry stakeholder interrelationships: Interstitial entities also emerge in the empty spaces between various fractions of an industry ecosystem. Boston based American Well is neither a clinic nor a diagnostic lab or a pharmacy, and certainly not a health insurance provider. The telehealth company does not belong to the traditional healthcare ecosystem rather it just fills the interstitial gap in between various elements of an existing industry ecosystem and changes the industry dynamics by realigning the stakeholder relationships by squeezing out the inefficiencies of resources distribution and providing a source of additional revenue and value to its associated stakeholders. Essentially, fragmented industry systems are more susceptible to such value extraction by interstitial entities.
Such instances are concealed in almost every commercial arena today. Spreadshirt found its business accelerating in the interstitial spaces between Merchandizing-Shops, Marketplaces and Personalization, hitting a global revenue of $102 million in 2016, printing more than 4.1 million 2 items, having over 70,000 selling partners and shipping to over 150 countries; defines itself as an innovative print on-demand e-commerce platform for spreading ideas on something tangible.
Abnormally high growth rates: Interstitial entities attain anomalous high growth rates. There are even some extreme examples like that of Groupon which was once recognized as the fastest growing business ever in the history. No doubt, it had grabbed quite a juicy interstitial space. So, what was so unique about GroupOn’s interstitial space? Groupon model exploited a multiindustry interstitial space which logically explains its initial abnormally high growth during the last decade. Interstitial spaces everywhere are waiting to be ‘encashed’ and for GroupOn it was an aggregation of multiple interstitial spaces resulting into abundant opportunities.
Fascinatingly, Interstitial entities also change the rules of the game beyond recognition. In case of GroupOn it brought strange phenomena like negative working capital, abnormal market growth and last but not the least a unique model of prompted consumer behaviour which catalysed the sales of items or offers which were ‘never needed’ at the first place. Interstitial entities also instigate new types of consumer behaviour. Group buying portals just like Reverse Auction portals exist only because of Internet based intermediation into highly potent untamed interstitial spaces.
Unlocking unusual business values streams: Safaricom’s M-Pesa which in no time made traditional banks in Kenya struggle to find their foothold was out of the preview of regulators for quite some time. While there are about 45 traditional banks in Kenya, none could venture into the interstitial space exploited by M-Pesa which now transacts well over 40% of Kenya’s GDP with its mobile based money transfer. M-Pesa was neither conceptualized as a bank nor as a currency replacement but has ended up becoming one as users started ‘storing’ money rather than only transacting.
Similarly, Kindle is not a book and Bitcoin is not a monetary authority issuing currency. Also, Zomato is not a restaurant but it impacts the fate of several established restaurants by becoming an authentic gateway through its discovery service. It is an interstitial entity that does not really belong to the restaurant business ecosystem but changes the equations considerably. Interstitial entities have remarkably different composition in terms of its people, process, technology, resources, assets and capabilities.
Unhindered by traditional competition: It is interesting to note that interstitial entities can create revenue or growth opportunities even out of existing crowded markets characterized by high competition, lower margins and narrow scope of differentiation and they even successfully manage to register presence in no time. New age companies like Tesla, Zopa, Airbnb, Uber etc are all interstitial entities not belonging per se to the industry ecosystem that they have started to disrupt
Business leaders and regulators are equally amazed by such interstitial entities and find it really difficult to address them systematically. European Courts of Justice have recently ruled that Uber is a Taxi company while Uber argued that it is a computer services business and is akin to an ecommerce company. Saul Kaplan also in his book, The Business Model Innovation Factory has well recognized that ‘Magic happens in the interstitial space between silos, disciplines, organization, and sectors’.
Emerging everywhere: Globally technology companies are fast acquiring Interstitial capabilities. IBM Watson is learning healthcare nuances and acquiring tacit knowledge, Da Vinci surgical system is helping surgeons to improve their dexterity and the Digital Twin companies are revolutionizing the heavy engineering sector and so on. Interstitial entities are found in consumer markets as well as institutional markets but a critical question here is why companies 3 like Ford, Honda, Toyota, Nissan etc could not do what Tesla did? Why Hilton, Rotana or Holiday Inn etc could not do what AirBnB did? Why major Taxi operators could not do what Uber did? Its all about how a business views itself - just as one player of a large ecosystem or an agile entity ready to traverse interstitial membranes.
Are the business leaders equipped? Interstitial Inc entity hypothesized here is a fast emerging dynamic concept which is not adequately recognized in the business management literature. While Interstitial entities are hitting every other industry ecosystem from various directions, there are no visible approaches or frameworks to recognize and address these interstitial interventions. Conventional management approaches are found severely lacking.
In most cases these ‘aliens’ are just waiting to be discovered before which they start obliterating the industry ecosystem causing dissolution of well-established economic models of any industry. Firms who have taken shelter under the edifice of industry-level tech innovations would see that all their cutting-edge technology infrastructure and advanced IT applications applied over the top of existing industry definitions will be of seriously limited value in this ubiquitous phenomenon. It is high time that the business leaders, theorists and practitioners recognize interstitial entities well and address how to deal with the phenomenon; compete or collaborate with them or become one. And doing this will need a radical shift in the thought process, from rational to generative, from just logical to synthesis based. Are the business leaders equipped? The businesses of tomorrow will flourish in the unforeseen but ubiquitous interstitium and the future evidently belongs those Interstitial entities. So here’s a call to action for the new age business executivesarise awake and discover your Interstitial Inc., well before the wave of economic model dissolution renders your industry landscape unrecognizable.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.