The Great Disruption
Pfäffikon SZ, Switzerland – Technological developments disrupt all sorts of business models – something which they have always done. It’s remarkable to see that this type of disruption seems to be accelerating and seems to have moved more towards the surface. The most tangible development is the change taking place in shopping districts where one retailer after another is biting the dust. The deflationary suction power has increasingly manifested itself as an aggressive whirlwind. That being said – the end of disruption is still nowhere in sight.
Laughable
The new year has barely started when, once again, several known retailers have bitten the dust. The arguments put forward by V&D, Macintosh and drugstore chain DA as the reason for their bankruptcy are laughable. I suspect that the process of pruning the shopping districts will continue worldwide for some time to come. It’s worth mentioning that a simple Dutch drugstore in Harlem has stubbornly survived for 166 years against all the technological violence and the power attributed to large retailers.
Sleepwalking
In the meantime the technological developments continue unabated and are about to crush many more business models. Many ignore this dynamic process and are sleepwalking towards the edge of the abyss. The disruption will affect many industries and this denial phase is remarkable. In the past, technology was primarily used to complete tedious or heavy tasks. After all, the horse was replaced by the tractor. The recent developments, however, go much further and are looking to replace the brains of mankind. In that vein, relatively increasingly complex tasks are increasingly coming into view.
Logistics
The reach of technology, then, becomes much greater, but also raises a lot of questions. This doesn’t mean that there aren’t many sleeping industries that are unaware of the forthcoming disruption. The logistics industry, in my view, is at the eve of a true revolution. Pesky truck drivers that are a thorn in the planner’s side seem to have had their best days behind them. Mercedes-Benz recently presented its autonomous truck where the driver becomes the passenger in his own truck combo.
In the realm of logistics, Amazon has been experimenting for years. The acquisition of Kiva Systems in 2012 has transformed the online retailer’s warehouses into technical strongholds in order to optimally scale. Amazon, however, wants to take it one step further. In the future, packages should be delivered to your door, by drone, within 30 minutes.
Video Rental Shops
Initially, the disruption was set in motion in the production sector. However, next to the retail and logistics industry, the catering, show business, health and financial industries are but a small selection of candidates next on the list of industries to be disrupted. I can still recall the day that video rental shops made their debut in the shopping districts. Trendwatchers predicted the end of movie theatres. The contrary turned out to be true. 2015 was the best year ever for movie theatres which sold a whopping 35 billion euro in tickets. In my view it’s a typical example of an industry which has responded outstandingly to the wishes of the consumer and has reinvented itself.
The great disruption is closer than you think. Denying or postponing this process is dangerous and unnecessary. After all, resisting the tractor or the train was also pointless. Repositioning your business model should take priority in 2016. It is the only way to embrace disruption as a true friend.
It remains for me to wish you a good weekend.
Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above mentioned shares and has no intention of doing so in the next 72 hours.
