If you are in a market that is going through wild, disruptive change where nobody knows how it will play out, you might be thinking:

"We have seen this movie before."

You have.

Markets go through fundamental disruptive change in fairly predictable phases, albeit with subtle variations that make it interesting. Understanding what act your industry is currently in will help you figure out your own role, whether as employee, entrepreneur or investor.

Here are the 7 acts in the Creative Destruction play:

Act 1. The Old Guard Dominate

This is when a few big companies dominate a market that has not fundamentally changed for decades. Mergers, debt leveraged acquisitions and "roll-ups" have locked the old guard into behemoth structures. No entrepreneur would think of competing against these companies and, if they did, no investor would back them.

Act 2. Straws In The Wind

This is when a few visionary/crazy entrepreneurs see opportunity. Occasionally VCs get active at this stage, but all too often VCs are part of the established order and do not see enough reason to believe that the times are changing. It takes guts to see a few straws blowing about and theorize that this is caused by an invisible wind. The signs of change are far from obvious but "the answer my friend is blowing in the wind".

Act 3. Denial

The changes are now real and the old guard management can see it. But they don't know how to react, so they reach for creative accounting tricks to smooth out earnings and make it look as if nothing has changed. So, when the new numbers do finally appear, it emerges as a crisis, often with a restatement of earnings and a change of CEO. Short-heavy hedge funds do well here.

Act 4. Wild creativity

The crazy entrepreneurs who started at Act 2 are now gaining real traction and major amounts of capital. They are experimenting frenetically to find what is really sustainable/scalable. There are lots of stories in the media about them but, as the old guard numbers still appear to be OK, the accepted wisdom is still that nothing will fundamentally change.

Act 5. Blow up

At this stage the reality can no longer be denied and we see bankruptcies, Chapter 11 restructuring and fire sales.

Act 6. Reconstruction

This is when a new power structure emerges clearly. This is when we see IPOs from the visionary entrepreneurs who started in Act 2.

Act 7.The new old guard dominates

Many entrepreneurs make the mistake of seeing how quickly the new guard arose and think that they can also be deposed quickly. The entrepreneurs who made to this stage will be tenacious, paranoid and really hard to beat - until the next wave comes along.

Which Act Is Your Industry In?

Our focus will depend on which act the market is currently in:

• The pioneer markets such as music. We aim to learn from these to see how it might play out in other markets. We also look at new niche opportunities within the emerging new power structure.

• The entrepreneurial hot spots. These are the ones in acts 3,4 and 5. Money is being made by the pioneers who executed brilliantly as well as fast followers with a lot of capital.

• The untapped opportunities. These are in acts 1 and 2, are not perceived by many people as opportunity. Entrepreneurs who see a clear path to value will do very well.

Market # 1: Financial Services

We chose Financial Services as our first market, because there is an interesting debate about whether we are in Act 2 or Act 6. Conventional wisdom is that the financial services business is still at Act 1. In this view, there was a nasty moment in Sept/Oct 2008, but we got past that. Phew! So maybe we are at Act 2, as no industry can escape bits of destruction for long and there are some cool "finance 2.0" startups coming to market.

Our view is that Sept/Oct 2008 was Act 5. That means that we are now in Act 6.

If we are at Act 6 and conventional wisdom is that we are at Act 2, there is a ton of money to be made!

Beginner's Mind

This is not be an academic exercise. I will not attempt basic education. You can study the fundamentals elsewhere. Nor do I attempt to size these markets. All an entrepreneur needs to know is that they are "freaking huge". I do not want to get bogged down in debates about definitions.

What I will attempt is "beginner's mind". This is a Japanese zen concept: "In the beginner's mind there are many possibilities, in the expert's mind there are few". This means eliminating preconceptions, approaching it like a child, asking simple Pooh Bear like questions.

I hope and expect that experts will weigh in with comments; these are people who know way more than I do on these markets. I hope that these experts gain some insight from the “beginners mind” perspective of somebody who has seen disruptive change in other markets. I hope that the debate created on specific aspects will be helpful to everybody.

Who will find this series useful?

We hope that 5 types of people will find value in this series:

• Web Tech Entrepreneurs/Founders looking for where the value can be created.

• VC funds and Angel investors.

• CEO/Board of established companies facing disruptive change.

• Employees who need to refresh their skills for future employment opportunities.

• Investors in public companies that are impacted by these waves of change.

You may already be deeply involved in one of these markets. We hope you will weigh in with your real world experience to help educate the beginners mind. You may not know the market under discussion but have seen similar patterns in your market; please tell us what you see.

In each market there will be 5 posts in this sequence:

1. The current cash cows. These are the segments in these markets that may be vulnerable to attack by start-ups.

2. The current innovators. Which start-ups are making waves today?

3. What is the semantic future? This is when we indulge in some science fiction. Based on technology that is currently in early stages (beta, maybe academia), we posit what would happen to these current cash cows and current innovators if these new technologies become reality.

4. What have we learned in this "virtual workshop?" This post will be one month after the first three, after we have taken note of comments and contacted some of the people in the market.

5. Recap and summary. This will be like an executive summary with bullet point takeaways for different types of people in this market.