Aug 4, 2023 | Governance, Strategy
Every year the American History Business Centre a non-profit run by Gary Hoover, puts out a chart that updates the market capitalisation of Americas top 20 public companies.
The 2023 version has just arrived in my inbox.
I find the path of the evolution astonishing, even in the relatively short time since the turn of the century to now.
A few things that pop out, at least to me.
- The acceleration in the rate of increase since 2000
- The absolute dominance of the Tech giants Apple, Microsoft, Alphabet and Amazon, that has driven the market cap, especially since 2010. The growth rate is so fast that the numbers are already out of date. Apple broke the 3 trillion dollar mark, the first to do so, in January. It has bounced around that benchmark a bit, but is today is 3.011T.
- The emergence of Tesla from nowhere 5 years ago to 7th today, a market cap bigger than the other US carmakers combined, who outsell Tesla by a big margin. However, Tesla unit sales have taken off with the opening of Chinese manufacturing, delivering 710k units worldwide in 2022.
- The absolute contrast to Australia’s top 20, dominated by financial institutions and commodities.
Have a look at the graphs in the link, and consider the implications for the competitive position and ‘re-industrialisation’ of this country.
The most recent Harvard economic complexity report puts Australia at 93 on the list, bracketed by Uganda at 92, and Pakistan at 94. Stellar company indeed.
The government appears to be taking the problem seriously, with the $15 Billion National Reconstruction Fund announced in the October 2022 budget, but is it enough, and is the support the right kind of support required to stimulate the domestic economy to build the complexity that will act as an insulator to the types of global disruptions that seem now both inevitable and more frequent?
While we are distracted by short term political wrangling, point scoring and pushing of social agendas that are truly relevant only to minorities, the big-ticket items, those that will determine the shape of the country over the coming decades, go begging.
Our so-called leaders lack the vision, commitment, and coconuts to take a hard look at what needs to be done, and then get on and do it, short term political polling be damned.
Aug 2, 2023 | Change, Leadership
We live in a world of change, and the pace of change is accelerating.
Just think about the what has occurred over the last 50 years.
We have gone to the moon, created skyscraper cities, moved from manual labour to sitting punching computers, driving everywhere instead of walking, extracting multiples of productivity from mechanised farming, and polluting the planet in very creative ways.
Computer chips have changed us. Gordon Moore noted in ‘Electronics’ magazine in 1965 that the number of transistors in a silicon chip was doubling roughly every two years. This has held true for 60 years, becoming known as Moore’s Law. The smart money now is saying that after that geometric growth, we are reaching the end of the physical capabilities of the current technologies and materials, and something new is needed.
I keep hearing about quantum computing and neuromorphic chips. I have no real idea what these are, but it seems the experts are saying there are huge advances to be made, and the door is only just opening.
The impact ChatGPT has had since its public release in November 2022 is a case in point, proving Hemmingway’s notion that ‘the future comes slowly, then all at once’.
Genetic engineering has gone from a multi-billion multi-year effort to map the human genome, completed in 2003, to getting your own genome mapped in a week for a few dollars. The interaction of the genome, our biology and genetic engineering via another new technology, CRISPR, will change again not just us, but the manner in which we interact with the natural world around us. Early applications of this technology are fuels coming from algae, genomic vaccines for cancer and all sorts of human afflictions. Again, we are just at the door.
Material science is an emerging field compounding almost weekly. We have all sorts of carbon fibre composites in many applications, a range of durable, biocompatible materials for human parts replacement from joints to teeth and heart stents, and almost daily hear about advances in honeycombed graphene, ‘flow’ batteries, and flexible display materials.
I guess you just have to look at the drop in price of solar panels and the impact that has had on the generation of power to see the power of this branch of science. It takes a while to get started, to generate early economies of scale, then compounding really kicks in.
Wrights law at work.
While this is happening around us, the lesson is that it will change the world. Being prepared to accommodate the changes is way better than trying to adapt after the environment has changed, when you are chasing the ball, instead of being in front of it. The fact that change is uncomfortable for most is both a barrier and an opportunity.
Jul 31, 2023 | Innovation, Strategy
Strategy development is driven by the need to make difficult choices with less than complete information. The successful see a problem to solve before anyone else realises there is a problem, and reap the rewards.
When you think you have all the information you need to make a risk-less choice, my advice would be to look again. Either the path you are contemplating is tactical rather than strategic, or you are simply following some orthodoxy that will not lead you anywhere new or different.
The great and unusual skill is in nurturing the capability to generate an insight that makes a difference. It is challenging to see a situation as presenting a problem to be solved that others did not see, until you have solved it. Then they rush to follow, often commoditising your insight in the process. The classic case here is iTunes, a solution to a problem nobody saw until Apple made it obvious there was a goldmine hiding behind the fence. Apple built a first mover advantage, and by not stopping the innovation process, ensured competitors followed without catching up. Competition just added to the breadth and depth of the market Apple continues to dominate.
Every major behaviour changing innovation I can think of has solved a problem that either nobody else saw or had failed to solve. In the latter case, Thomas Edison and the light bulb are the classic case. Many people had been working on solving the problem of the filaments burning out with a flash when a charge was applied, but it was Edison who came out with the solution first, and is therefore remembered as the ‘inventor’ of the light bulb.
Anybody for a faster horse?
Jul 28, 2023 | Change, Innovation, Strategy
So, Elon Musk surprised everyone, again, by killing Twitter and launching X.
Whatever X is.
Everyone in the marketing, strategic and management world generally seems to have had a go, except me, so here goes.
He must be effing crazy!
(Psst.. He is, but is it crazy smart or just crazy?)
Twitter had a range of problems, magnified since Elon sent the previous owners an offer to buy the joint for an absurdly large chunk of change. It was so large that the then board almost killed themselves racing to sign before he changed his mind and halved the offer. This might have been closer to the value, albeit still overly generous.
Having failed to wriggle out of the offer to buy, he then cut staff numbers 80% from the staff of 7500. Meanwhile ad revenue continued to tank, the rate just increased, dramatically.
Surprisingly, twitter still worked.
Estimates of the value of the twitter brand pre-execution vary a lot, but commonly vary between 5 and $6 billion. That is a lot to just flush down the dunney for no apparent reason.
Competitors must be rejoicing, particularly Meta that just launched ‘Threads’ as a twitter competitor, only to find the gorilla in the garden has been turned into a gnome.
Musk, and everyone else in this space has watched what WeChat has achieved in China, and into the Chinese diaspora, and wanted to emulate it. Given the original source of Musk’s wealth was PayPal, he would be in as good a space as anyone to make that happen. That makes sense, but why sacrifice twitter in preference to starting a separate company?
It simply does not make sense.
There are a few other things that do not make sense, until they did.
Re-useable rockets were not possible, until he did it.
Tesla electric cars at volume did not make sense until he did it.
Tesla as a public company would never make it, until it did. (Tesla now has a market value more than all other US manufacturers and Toyota combined, and continues to climb)
Gigabattery factories did not make sense until he did it.
Distributed recharging infrastructure did not make sense until Tesla reached scale and persuaded Detroit to sign up, a fortnight ago.
Based on his history, betting against Musk is a mugs game, no matter how little sense it makes to the rest of us.
Jul 26, 2023 | Change, Innovation
Differentiation has regularly been trotted out as the core of success. In the absence of some sort of differentiation to a target market, all you have is price. It is an argument that I have used for 50 years.
Problem is, it is only half the story.
Differentiation must come from somewhere.
Usually, we tend to stop at some sort of mechanical or electronic additional feature, seeing those as desirable for the customer. If we are to follow Clayton Christianson’s theories, the absence of those same features that just clutter up the product from a different but unrecognised market might be the key.
In either case, there is a missing element in the usual articulation surrounding the development of a differentiator that in some way adds value to a customer.
Insight.
What is it that makes us realise that the current product configuration, business or distribution model, pricing and feature matrix is inadequate?
From somewhere comes an insight: ‘a clear, deep, and sometimes sudden understanding of a complicated problem or situation, or the ability to have such an understanding’.
Fortunately for the few who are thought leaders rather than the followers of the newest model, idea or shiny thing, insight will not come from any of these. It may come from observing the behaviour of the real outliers, and an understanding of the unusual things that drive their behaviour, or it might come from a diverse set of brains coming at a difficult problem from a range of differing perspectives. It may come from connecting a few practises that exist in other places with an unmet need, or opportunity in an unrelated field. The point is, it will not come from an effort to collect and analyse historical data that is presented to a 3-day offsite strategy session as the basis for their strategic discussions, the objective of which is to produce a glossy strategic plan.
Insight. The question remains how do you mould the culture of your enterprise such that it is able to produce this usually hidden key to success?
Header cartoon credit: Dilbert and Scott Adams.
