Disrupting the incumbents in a COVID-19 world

Some context: For years, TOEFL and IELTS have dominated the English test sector. You had to pay about $200 and travel far from home to go to one of their centers, so you could take the test. It's a high-margin model that the two companies behind these tests don’t want to change, despite the Internet making it easy to take tests remotely.

What happened: Because of coronavirus, governments decided to shut down everything except for essential shops.

Which means... that if you had to take an English test to prove your level of English, you couldn't.

A new entrant: This created an opportunity for Duolingo English Test, an online English test that allows you to certify your English proficiency from home at a more affordable cost than TOEFL and IELTS. Sounds great!

But... Launched in 2014, Duolingo English Test was struggling to compete with the incumbents, who had relationships with universities.

A door opened: The centers had to shut because of COVID-19. Students couldn’t take the English test. So, many universities and recruiters started accepting the Duolingo's online test. In the last few weeks, the number of people using Duolingo English Test increased 10 times.

So what? The lockdown created a market reset in the English test sector. Suddenly, a new entrant was able to compete with incubents who had established a dominant position for decades. 

Reading more: Finding new opportunities, such as market reset, is a topic I explore in the new book I'm writing. If you're interested, register here to get The Opportunity Lenses when we release the book.

Calling bullshit when we see it

What's happening: Since 2000, the way misinformation spreads has accelerated exponentially. We've all seen fake news spreading across the globe in a matter of hours.

So what? Last month, I mentioned the growing danger of misinformation (read it here). This month, I'm sharing a solution to train ourselves, so we can call misinformation when we see it.

A solution: The University of Washington offers for free the recording of course about debunking misinformation, called "Calling Bullshit". The lectures are short videos, full of tips to spot when people are lying or talking about something false they don't understand.

Where to find it?

• You can access all the videos here (link).
• If you prefer to read, here is the syllabus (link).

Now, let's look at an example of "bullshit":

Why did we face a toilet paper shortage?

What happened: The coronavirus outbreak led to toilet paper selling out.

Are people mad? What a strange item to stockpile when there's a deadly virus spreading out there.

Or is there another explanation? There's an interesting article (link) that highlights other hypotheses as to why toilet paper sold out:

• Toilet paper is high volume but low value, so the industry runs on extreme efficiency. It's a supply model that works only because demand is typically so steady.
• But demand shifted suddendly. When everyone stays at home, they don't use commercial toilet paper (from offices and restaurants), so they need more toilet paper at home and therefore buy more in supermarkets.
• It's not possible to sell commercial toilet paper in supermarkets. These are big rolls that wouldn't fit in people's bathrooms. And even... companies that specialise in commercial toilet paper would need to build new relationships with supermakets and negotiate distribution contracts.
• In theory, toilet paper manufacturers could invest in focusing more on the retail channel, but then they'll take the risk to overproduce and would need to change their supply chain again once people head back to work again. (That being said, we can argue that the office life won't go back to what it was before.)
• The cherry on the cake: All these factors were amplified by panic buying and herding behaviour. We all saw empty shelves and the media covering the news. So when you're about to run out of toilet paper, you stockpile.

To sum up: The toilet paper industry is extremely efficient. The unpredictable COVID-19 crisis stretched the supply chain beyond it's capacity, not because people went totally crazy about toilet paper.. but because just a tiny increase of demand put the whole supply chain upside down.

Another interesting read: Our weird behaviour during the pandemic is messing with AI models (link). It messed up with supply chain forecast and triggered security alters.