“I Coulda Been a Contender…”

OK, I’ll own up to re-quoting from the 1954 seminal work, “On The Waterfront”, in a tenuous way; however, the concept of contender or challenger competition is changing the way businesses view the whole commercial threat landscape.

Two key things have changed enormously in the last 100 years of commerce; the very largest commercial “Monoliths”, in many cases, achieved scale through diversification, but in the types of diversification that were at least initially allied to the core business competency.  I will use a couple of examples: Standard Oil for example, developed from the Rockefeller brothers into the Mobil Exxon of today, in terms of diversification, simply used geography.  With a simple beginning in the oil fields of the US southern states, diversification grew out of China and the Middle East.  In 2015 the corporate turnover had grown to circa $250 billion.

A similar model took place with some of the other traditional corporate giants.  GE for example grew from the days of Thomas Edison, through the glory years of consumer electronics, into gas turbines and corporate finance.  In most cases since the commodity-based giants, the lineage for diversification is pretty clear, and in both cases happened over decades into centuries.

So my interest was certainly sparked when I read this weekend that Amazon has just signed a deal to acquire 40 Boeing cargo aircraft.  This sends a message to a market!  We have seen how in recent years the competitive threat axis has changed enormously; the most commonly “trotted out” examples, (which I am also guilty of), are the contender companies, such as Airbnb, Uber and Apple Pay.  The move from Amazon, however, changes the “Contender” rules significantly.

In addition to the obvious threat that a fleet at this scale poses to their traditional airfreight suppliers, they can also change the rules in terms of cost, time to market and geographic flexibility.  In short, the real pain may ultimately lie with the retailers of many things.

So what do we learn from this?  When Amazon first set up, it was considered by many, that the most likely companies to feel the heat would be the traditional booksellers, such as Waterstones.  In real terms, they moved beyond that simple face off very quickly.  Amazon’s diversification has been allied to all their activities, but has been fairly vertical and ubiquitous.  The impact they have made on the cloud computing space has been game changing.  The impact they are making on retail, in all its forms, can be evidenced by diminishing profits for many of the middle order retail brands, and empty shops on the high street.  They have forced the successful to own and operate in either high or low end niches.  What I mean by this, is that companies such as Waitrose and Burberry continue to prosper at the high end, as do Poundland, (whose purchases will often be in cash), at the low end.  The speed and scale of this change cannot currently be fully estimated.

So this game changing play will have a number of other ramifications.  If you own an established business, such as a major retailer, what is the impact of this move for you?  We can all speculate.  Undoubtedly at scale they will have significantly moved the freight cost needle favourably.  They will have changed the “time to market rules” to some degree, and the biggest question of all is what will they do next?  Finance, banking, holidays, manufacturing, who knows?

So what have we learnt?  Amazon, due to their relative youth, is unencumbered by many of the legacy challenges that their traditional competitors may have.  An idea in the Amazon Board Room can be executed quickly and effectively, as they don’t have legacies to deal with, and clearly do have the finance, the passion, and the vision to execute.

So the perennial question, “What keeps your CXO level people awake at night?” should be this.  “Can we respond to a major competitive threat, and do we have the agility to innovate?” – I suppose that actually is two questions!

As most forms of innovation today pivot around IT solutions, this reality must be fully understood.

If your organisation is harbouring a legacy infrastructure and fails to change it, one of two things will happen: your direct competitors will do something about it, which would leave you at a financial disadvantage; or you will simply not be able to move fast enough to take advantage of a new opportunity.

We have reached a moment in IT evolution where those that fail to adapt will start to die out, as many have already proven: Blockbuster, Xerox, booksellers Borders, Blackberry, Nokia, Polaroid, to name but a few.  So in this age of Digital Darwinism, at Accordant, we are already working with organisations who want to be part of the survival of the fittest, where “fittest” refers to that which most adapts and fits to the current environment.  If you’d like to chat to find out more, drop me a line: david.leyland@accordantsolutions.co.uk