Can Low-Tech Companies Go Excessive-Tech? Sure, However It Takes A Mindset Shift

Share

Stuart Jackson is a Companion and former World Managing Companion at technique consulting agency L.E.Ok. Consulting

Over the previous 15 years, there was huge worth creation in digital and high-tech industries. As of this writing, simply 5 tech firms — Fb, Amazon, Apple, Microsoft and Google – have a mixed market capitalization of just about $9 trillion. On the similar time, the wealth created by these firms is being recycled into “unicorns” — firms that obtain a valuation of over $1 billion earlier than they even go public. The explanation for calling them unicorns was that reaching this valuation pre-IPO was so uncommon, it was unlikely to see greater than a handful. However as of January, there have been greater than 900 of them. The mixture valuation of those unicorns was $3.24 trillion.

So what do you do if you’re a extra conventional enterprise, a producer of shopper or industrial items, a delivery firm, a distributor or one other business-to-business companies firm? Are you able to aspire to comparable valuations? The reply is you have to look laborious at methods to carry new applied sciences to old-tech companies, not solely as a result of this gives alternatives for all kinds of recent worth creation, but in addition as a result of in the event you don’t, it is rather doable the following unicorn can be concentrating on your online business with a brand new tech-enabled enterprise mannequin.

A fantastic instance of a low-tech business that discovered a approach to harness know-how is the enterprise of train tools for gyms and houses. With a number of exceptions, this has historically been a troublesome enterprise with low margins, weak manufacturers and restricted product differentiation. Even worse, shoppers weren’t typically enamored with the merchandise the business produced. The joke was that a lot of the train individuals received from the machines got here from transferring the tools into their residence after which taking it out 5 – 6 years later after they bought it or moved.

Read Also:  When It Comes To Excessive-tech Electrical Autos, Lengthy Island Insurance coverage Is A Want

That every one received turned upside-down when a brand new firm, Peloton, entered the market a decade in the past with its interactive new product options. Right here was a enterprise mannequin with excessive product differentiation, excessive margins from a recurring income stream and, most significantly, prospects who fell in love with the product. In only a few years, the corporate went from nothing to being the very best income firm within the residence tools sector with income round $4 billion. A punishing 12 months has reversed lots of its features — stemming from a number of components together with prospects returning to the fitness center after a 12 months of pandemic lockdowns and admitted missteps on pricing that made its merchandise seem to be inaccessible luxurious gadgets. However the firm nonetheless has many benefits. Of extra significance, it opened the way in which for a brand new, technology- and experience-driven mannequin for health tools.

One other instance is logistics, an business the world has come to depend on greater than ever within the period of Covid-19. Logistics firms have been embracing a spread of digital applied sciences in recent times, significantly within the space of telematics. This refers to using linked sensors that present real-time data on the placement and situation of automobiles and shipments. Telematics can be utilized to offer real-time updates, make changes for delays and alter supply routes the place wanted. UPS developed the telematics platform ORION, which is claimed to avoid wasting round 100 million miles per 12 months, whereas additionally offering increased ranges of reliability and buyer data.

Read Also:  The Shift In Bills: Developing Higher Reports For All

There are companies in every kind of comparatively low-tech sectors equally embracing digital applied sciences to carry new performance and worth to their choices. That is taking place in each sector of the economic system. One in all my favourite examples is auto salvage, the place firms similar to IAA have shifted from a enterprise involving stay auctions of insurance-owned wrecked automobiles — bought largely to native sellers and salvage yards — to a completely on-line enterprise mannequin with digital analysis instruments and consumers from throughout the globe. (Full disclosure: L.E.Ok. Consulting has labored with IAA.) There have been comparable transitions in all the pieces from dental merchandise to storage containers, retailers to metals producers, industrial distributors to leisure merchandise. In some instances, working with a consulting agency may also help speed up the adoption of recent capabilities, however such accelerations can solely add worth after the corporate acknowledges the necessity for change.

Making the leap to embrace new applied sciences is the place most firms wrestle. For each success, we see 10 extra companies which are just too sluggish to vary. I believe a part of the reason being that over the previous 15 years, so many firms have been crushed down by calls for for cost-cutting by cost-conscious company buying teams or retail consumers and have grow to be excessively targeted on lowering prices. Beneath these circumstances, it’s laborious to embrace including value, which new applied sciences nearly at all times do, no less than initially. This reluctance to spend is what creates alternatives for well-funded new challengers to return in with a unique method.

Read Also:  Tech firm Dynamics bringing 3,000 information servers to Maine

These are thrilling however perilous instances. The alternatives for every type of firms to seize new development and worth creation from digital applied sciences have by no means been higher. However the dangers of obsolescence and decline for these too sluggish to adapt have equally by no means been extra harmful than they’re in the present day.


Forbes Finance Council is an invitation-only group for executives in profitable accounting, monetary planning and wealth administration companies. Do I qualify?