These companies are what we call “on-the-brink disruptors”—a term that first appeared in The Silver Lining, a 2009 book written by article co-author Scott Anthony. New research by Innosight, using a methodology from the book that analyzed data going back to 1980, has identified 10 such firms in 2023 that we believe will disrupt markets and outperform their peers, taking advantage of emerging trends and dislocations. If history is a reliable guide, these companies are well positioned to advance through economic headwinds they might be facing this year and going forward.
Whether it’s AI or other technological leaps forward, incumbents must recognize that innovation is more important than ever and consider bold strategic moves as they learn about their own vulnerabilities in a rapidly changing environment.
In alphabetical order, the 10 on-the-brink disruptors for 2023 are as follows:
- Faire – online wholesale marketplace
- Flock Freight – AI-driven shipping platform
- Monarch Tractor – agriculture technology
- Nuro – autonomous vehicle maker
- Oxford Nanopore Technologies – molecular sensing technology
- PathAI – AI-powered medical technology
- Sana Labs – AI-driven learning platform
- Twiga Foods – B2B online food marketplace
- Truepill – B2B digital pharmacy
- Virta Health – health care therapies
Conducting the Research
To identify our 2023 disruptors, Innosight first created a list of more than 100 potential disruptors by analyzing companies in the U.S. and other developed markets, as well as looking at some emerging markets. We scanned most-innovative company lists in a variety of journals and trade publications while assessing an internal database of more than 300 in-progress trends, leveraging insights from our two decades of consulting projects. This helped us narrow the list down to 20 companies that fit the basic pattern of on-the-brink disruptors and seemed well positioned to thrive based on our trends analysis. We then surveyed industry experts within Innosight to get their top choices.
These on-the-brink disruptors echo characteristics of our previous lists. We formed our methodology by doing historical analysis in 2009, showing that in the three major U.S. recessions between 1980 and 2001, the revenues of 44 on-the-brink disruptors (such as Intel, Southwest Airlines, Best Buy, Cisco Systems, Google, and Research in Motion) grew by close to 30% a year, significantly outpacing similarly sized companies. Focused research in 2020 and 2009 then prospectively identified on-the-brink disruptors that had three characteristics.
First, they display a pattern of disruptive innovation, either transforming their existing markets or creating new ones by making the complex simple or the expensive more affordable. Second, they are also all growth companies, many still emerging from their startup phases, with less than $1 billion of annual revenue. And, third, while they are not immune to today’s turbulent environment, and in fact some have been forced to scale back labor and other operating costs, we believe they have enjoyed enough early success that they will weather this and any future crises.
While it is too early to draw definitive conclusions about the performance of all these companies, most have generally performed well. Looking back at our 2020 picks, for example, Thrive Early Detection was acquired for $2.1 billion by Exact Sciences and Palantir has outperformed its peers. The financial services arm of the firm Grab and BYJU, a digital education content provider, meanwhile, have encountered stronger headwinds. Nonetheless, our basic premise, that on-the-brink disruptors are resilient during tumultuous times, seems to have held.
The 2023 On-the-Brink Disruptors
FAIRE. This U.S.-based online wholesale marketplace founded in 2017 connects independent retailers to small- and medium-sized brands. It has raised almost $1.7 billion in venture funding, enabling it to double its footprint to support more than 85,000 brands and demonstrating the potential to scale. The company’s machine learning algorithms leverage data to match brands to retailers, who can buy inventory and pay 60 days later. This enables retailers to return merchandise that does not sell without disrupting their cash flow.
FLOCK FREIGHT. Utilizing AI and machine learning technology to pool multiple less-than-truckload (LTL) shipments into one full shipment, this U.S.-based company can cut freight costs by 20% while also reducing greenhouse gas emissions. Because it minimizes handling, there is less damage to goods. Flock Freight was on pace for more than 300% year-over-year revenue growth in 2021 and was named to the Time100 Most Influential Companies in 2022 and CNBC’s annual Disruptor 50 for 2023, though reports indicate it made some staff cuts in the last year.
MONARCH TRACTOR. Founded in 2019, this U.S.-based firm developed an electric-powered tractor that can operate fully autonomously, conducting tasks with high levels of precision. With a user-friendly interface and remote diagnostics capabilities, the Monarch is equipped with a wide range of safety features, such as collision avoidance systems and emergency stop controls. Monarch, which has raised $87 million, produced its first MK-V tractors earlier this year and has also expanded operations to India.
NURO. This U.S.-based company developed an autonomous vehicle for last-mile deliveries that promises to reduce labor costs while streamlining processes for returns. The R2 is smaller than a traditional truck and operates at slower speeds on local roads. Having raised more than $2 billion, Nuro has partnered with retailers including Walmart and Kroger to test the system. Should it prove successful, it could revolutionize how companies from FedEx to Amazon operate, catalyzing new business models. Still challenges persist, as demonstrated by the startup’s recent decision to pause production and scale back commercial deployment.
OXFORD NANOPORE TECHNOLOGIES. Based in the U.K., this firm has developed the MiniION, a pocket-sized DNA and RNA sequencer that provides provide real-time, long-read data, which has the potential to democratize genetic analysis. The technology has many real-world applications such as disease surveillance, environmental monitoring, food chain surveillance, and even microgravity biology. The company, which was founded in 2005, went public with an IPO on the London Stock Exchange in 2021 and, while it has seen price volatility, its market cap still stands at more than $2 billion this year.
PATHAI. PathAI, which is based in the U.S., is an AI-focused technology company providing comprehensive precision pathology solutions from wet lab services to algorithm deployment for clinical trials and diagnostic use. Using data from more than 15 million annotations, its AI-powered models can be leveraged to optimize the analysis of patient samples to improve efficiency and accuracy of pathology interpretation, as well as to better gauge therapeutic efficacy and accelerate drug development for complex diseases such as cancer, NASH and IBD.
SANA LABS. Founded in Sweden in 2016, this firm’s platform provides AI-integrated teaching systems for workplaces. The system can collect data from workplace apps like Salesforce, email, and Slack, delivering it to users based on natural language inquiries. It also uses that capability to create, improve, and personalize e-learning modules for onboarding, training, and professional development, calculating students’ optimal learning patterns and predicting their performance in future interactions. The company has raised $81.5 million through six funding rounds.
TWIGA FOODS. Kenya-based Twiga is a mobile-based supply platform connecting small-scale African farmers to medium and small urban retailers, ranging from convenience stores to street-side tabletops and carts. The company has grown steadily since it was launched in 2013, establishing business with a quarter of small retailers across Kenya. Africa’s food supply chain is fragmented and inefficient, providing an opportunity for the company to scale its solution. While it could potentially scale beyond Africa, creating a system-level change, it is still perfecting its operating model, saying it laid off employees as it restructured its sales staff.
TRUEPILL. Based in the U.S., Truepill is a B2B platform that built its business by partnering with digital pharmaceutical providers like Mark Cuban’s Cost Plus Drugs, and GoodRx. Its web-based application programming interface (API) enables it to offer digital pharmacy services in real time. The company, which has received $256 million in investments, has built a nationwide network of pharmacies and fulfillment centers while also expanding into telehealth services. However, like other new entrants into the digital prescription space, it has faced recent scrutiny from federal authorities over dispensing of some medications.
VIRTA HEALTH. This U.S.-based firm founded in 2014 has developed a clinically proven treatment to safely and sustainably reverse Type 2 diabetes. Patients receive personalized nutritional plans and behavioral advice online, and medical supplies in the mail. The company partnered with businesses like U-Haul, which enrolls interested employees in the program at no cost. While the advent of Semaglutide medications like Ozempic, which also promote weight loss, might put a ceiling on its growth, it has received $377M in funding, putting its valuation at $2 billion when it raised capital in 2021.
Implications for Industry Incumbents
While not every one of these companies will become the next Intel or Southwest Airlines, each does provide valuable insights for industry incumbents. By studying disruptive organizations, including the 10 we identified this year, we can glean important insights into market trends and business models, information that is also crucial for incumbents seeking chart their own path forward. Some insights to consider include:
- A poor economy can be more disruptive than a good one. Some incumbents might feel safe from competition in times of economic uncertainty or crisis. However, these are moments where customers can radically shift behavior, accelerating adoption of disruptive solutions. For instance, Airbnb introduced its sharing platform just prior to the Global Financial Crisis in 2008, providing a welcome alternative for cash-strapped travelers amid the subsequent recession, and a way for homeowners with extra room to supplement their incomes. As Innosight has shown in prior research, disruptors will slowly steal low-end market share and then move up, catching incumbents off guard.
- Consider bold strategic moves. Incumbents can learn about changing customer needs and their own vulnerabilities from on-the-brink disruptors and make proactive moves to disrupt themselves. Downturns can be great times for established companies to make dramatic changes to their customer value propositions, their business models, and their operating systems. Scale and scope are advantages when a competitor is still small. The prominence of AI and machine learning helps demonstrate those opportunities for bold strategic moves as companies like PathAI try to redefine how an industry manages and analyzes data, for instance.
Downturns can be great times for companies to make dramatic changes to their customer value propositions, business models, and operating systems.
- Innovation is more important than ever. When faced with an uncertain future, leaders often focus on survival and stick to what their companies do best. They should prioritize innovation instead, to turn today’s ambiguity into tomorrow’s opportunity. They should be looking beyond a potential economic downturn, which ultimately will be temporary, and be disruption-proofing their portfolio. For instance, they need to make sure they are not so focused on their high-end customers that they cede the lower end. The question they must ask is: What products and new business models will help them stay competitive against these upstarts?
A driver of disruption is an upstart competitor bringing a simpler, cheaper solution to a larger market. This is one element of the innovator’s dilemma, as articulated by Innosight co-founder Clayton Christenson, as companies do everything that they believe is right, successfully serving their customers, but still lose market leadership to upstarts. Incumbents can lead from the future by investing in disruptive innovations when that option is still available. Our on-the-brink disruptors show that despite market turbulence, disruption remains alive and well. Incumbents would be well served to study the impact they are having and reflect on their own business strategies.
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