2015 Technology Predictions: Empires Strike Back

Foodtech

When I first started talking about technology  cross-pollination in January 2014, I described it as “the biggest trend in technology.” I now see it not as a trend or a disruption but simply, the future.

Cross-pollination is the transformation of traditional industries by the convergence and application of technology to produce real, actionable solutions to customer problems. It is the use of technology to solve long standing problems in a fundamentally different way.

Technology has historically flourished as an industry by creating continuous substitutes for human processes and, lately, even for itself. Increasing compute power, storage and bandwidth, and the Internet itself, have helped us automate, accelerate and connect ever faster. One example of this is the evolution of communications, where phones and email eliminated in person meetings and letters, then they were disrupted by mobile, video conferencing and mobile messaging. Another example from Retail was the displacement of bricks-n-mortar stores by ecommerce sites like Amazon and eBay.

However, as I noted in Online vs In Store, it is not necessarily a digital disruptor take-all proposition. Success may lie in a hybrid approach. Just as Wal-Mart and Macy’s scramble to gain relevance online, Amazon and Google are busy connecting physical groceries and drugstores to users through innovative but very real world logistics.

If the last few years have been the “star wars” of digital disruption – Twitter, Uber, AirBnB, Gilt – the future will see traditional “empires strike back” as they too learn how to use technology to reinvent themselves and potentially regain competitive advantage. Companies like Disney, Nike, and Tesco who have vast resources, enormous scale, powerful brands and operational discipline are leapfrogging tech upstarts by adopting and integrating technology in their experiences and workflows, and showing that building long term sustainable value takes more than hot valuations and high priced engineering talent. And “first-generation” Internet giants like Google and Amazon are trying to show that they can disrupt themselves as much as they disrupted their competitors a decade ago. In the new world of nonstop change, the winners will be “master orchestrators” able to achieve huge scale as they capitalize on technology to rapidly advance and innovate with their systems and strategies.

Applications of Cross-Pollination

I have observed that the cross-pollination of technology into other industries tends to have four components:

  1. Applying technology originally envisioned for one application to a new large industry or market opportunity
  2. Developing new business models aided by the tech innovation
  3. Forming unlikely alliances between tech and traditional players to reach users
  4. Creating new competitive advantage and leadership in an industry

Cross-pollination tends to be driven by individual leaders, at first, who have the ability to do the following:

  1. See the very big picture while understanding the details of feasibility
  2. Recognize patterns across seemingly disparate industries and use cases
  3. Display the courage and patience to start from scratch, experiment, iterate and eventually reinvent themselves,
  4. Exhibit the conviction to inspire and convince reluctant stakeholders
  5. Build and trust a team of experts from both the “old” and “new” markets to transform products and culture


The evidence?

The very existence of segments like HealthTech, Retail Tech, FashTech, FinTech, AgTech, and FoodTech say a lot about cross-pollination. The flow of private equity investment dollars also show moves into these segments at a faster growth rate than traditional tech. While the data is not all in, expect to see 2014 follow the same trend as 2013 in a higher rate of growth of funding for tech businesses classified in “other” sectors …

Other Tech
Source: Parthenon Group

 … as well as bigger investment flows into vertical software sectors, traditionally thought to be unattractive for venture investment:

VerticalTech
Source: Parthenon Group

Finally, as we look to today’s top businesspeople and the companies they are leading, we see many of the success stories coming from the realization that technology is the best source of growth and competitive advantage for every sector in the modern era. For example, Fortune’s 2014 Businesspeople of the Year is full of individuals who achieved their ranking in some part by cross-pollinating technology into another industry.

  • Larry Page (ranked #1) could have stopped after building Google into the Internet’s most profitable business. But he is pushing ther company to explore and innovate by extending the internet to wearables, homes and cars. Most extraordinary are Google’s efforts to upend medicine by releasing glucose-monitoring contact lenses and building ingestible nanoparticles that would monitor people for diseases shows not only ambition, but the radically different way of thinking about traditional problems that can come through cross-pollination. And while not everything works the first time, Google innovates while still producing over 100% returns for shareholders over the last 5 years.
  • Bob Iger (ranked #6) has revitalized Disney as CEO in many ways, but his $1 billion technology investment to improve Disney’s theme parks and maintain the Most Magical Place on Earth is “a complete game changer.” A combination of mobile apps, in-park wearables and massive data collection and processing, not only make reservations and in park payments for consumers easier, but also allow Disney to determine when to add more staff at rides, what restaurants should serve, which souvenirs should be stocked, etc, all making “a more immersive, more seamless, and more personal experience.” Iger is also a big fan of accelerating digital distribution and enhancing animated films like Frozen and Toy Story. Shareholders in turn are a big fan of the 300% return Iger has delivered since he became CEO.
  • Jack Ma (ranked #10) has spent his entire career disrupting commerce in China through technology, and Alibaba’s IPO in September, the largest IPO ever, proved that he has been successful on a global scale. At roughly $240bn, Alibaba has a market cap almost as big as Wal-Mart. While Ma has used mainly technology from the West, it is the essence of cross-pollination, this time to a new market context (China).  For example, when Chinese users failed to adopt ecommerce due to concerns about credit card fraud, Ma developed a new secure payments system, Alipay, and a different returns policy suited to local practice, whereas eBay abandoned China, defeated.
  • Elon Musk (ranked #18, ranked #1 in 2013) was not content to just disrupt  the payments industry with PayPal. Instead, he continues to try and transform three completely different industries – space exploration, clean energy and automobiles. He has approached the latter, considered by many to be a dying sector in the US, with a holistic technology, business model and ecosystem view (see his 2006 Secret Master Plan for Tesla). His initial technology innovation was to apply lithium ion cells from mobile phones to electric cars, where battery issues were key impediments to distance and design. Because this was initially expensive, Musk created a product and go-to-market strategy around sports cars that targeted high end users, changing consumer perception of electric cars from boring to desirable. The result? Tesla is the first successful new automobile manufacturer in the U.S. in 50 years, and the stock is up over 450% since its IPO in 2011.


The fact is, we are entering a truly magical era, where “technology” changes are based not on just technical iteration and advances, but rather on the true marriage of engineering excellence with business model innovation and real life applications. This will go beyond doing things faster. People will be able to think differently and more creatively. They will solve bigger problems that encompass business, political and social change. With the widespread accessibility of technology innovation and talent, the quest for relevance, let alone growth, is limited now only by an individual’s or enterprise’s creativity and openness to change. We should all seize this opportunity to transform, evolve and redefine the way we live.

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