News, Opinions and Discussion
As Alibaba and Tencent approach their twentieth birthdays will they be dislodged by the new generation of internet start-ups in China? Perhaps ride-hailing app Didi Chuxing, smartphone maker Xiomi or Meituan Dianping, which delivers food and other services may knock them of their perch.
As Chairman of Walpole Capital I am always looking at start-ups and given my nearly two decades of experience in China it seems a natural fit for me to look there as well. When I was last in China I was talking with some of the players there to see if there really was anyone that could take on the Big Two in China. And I came back with a fervent no to the question of the Big Two being knocked off their perch. So why is this? Well I believe there are three main reasons:
First, Tencent and Alibaba have assiduously invested in the next generation of technology companies: Tencent alone has a portfolio of more than 600 stakes and holdings across a range of sectors and industries. For Example with Didi Chuxing, the company that virtually kicked Uber out of China, has the Big Two both as shareholders.
Second, the giants have built not just conglomerates but ecosystems. Whether your app is selling music or restaurant reviews, you need traffic, which means plenty of start-ups are perfectly happy to work on their platforms. This symbiotic relationship is important to keeping start-ups on side, and turning them into revenue-spinners and investments. Ultimately, Alibaba and Tencent want to keep users on their platforms as long as possible – and the more entertaining apps they have, the easier that is to achieve. The power of the platforms can also be seen if they don’t support you. One of the reasons that Uber failed in China was that the Tencent platform didn’t effectively support it and lent it support instead to Didi – its own portfolio company.
Third is political. Beijing prefers to regulate a few big players rather than shoals of unruly ones. Peer-to-Peer lending, for example, offers a graphic illustration of what can happen when multiple players are unleashed: the sector has been hit by Ponzi schemes, evaporating funds angry investors. Hence, the People’s Bank of China continues to clamp down on the Fintech sector, moving last week to require balances held in customers’ electronic wallets to be lodged in a central custody account. Moreover Beijing also prefers a tight band of champions so that the country can forge ahead in areas prioritized by the state, such as artificial intelligence.
But one never knows – A wild card may still emerge! Having said that I am sure the duo look sufficiently entrenched to celebrate a few more birthdays as leaders of the Chinese internet!
Fifteen Chinese startups reached unicorn status last year alone; effectively 30% of the world’s new billion dollar companies were created in China in 2017. While the world was focused on the Orange Muppet and Brexit, China was focused on what is most likely to prove the most significant shift of this century. What I mean here is the transfer of global power from the west to China. China is busy re-shaping the world around economics and technology and placing itself at the centre of the debate in these issues. China is not focused on exporting its politics and ideology. It prefers to build, innovate and prevail through economics. It is building its ascendance through prodigious mercantile and technological change and influence. Whilst the West is dealing is with its decaying infrastructure and political systems China is using its one party system to plan projects that can be barely fathomed in the West. Just look at the Belt and Road Initiative. Even if they achieve half of what they say this will be one of the largest projects on earth.
China’s Long Term strategy coupled with its huge population means that it has a natural advantage in tech. It will lead the world in machine learning with its ambitious roadmap for AI published last year. It just has so much more information than anywhere else on earth and it has more people online (and mobile!) than anywhere else so will have much more data for the machines to learn from! It is focused on Blockchain which plays to China’s significant geopolitical advantages. And finally it will lead the world in electric vehicles. Just look at Didi alone that raised a further $4 billion to plough into AI, Electric vehicles and International Expansion. Didi today is also the world’s most valuable start up. Not only did it kick Uber out of China it also knocked it off the pedestal on the world stage by taking its title of the World’s most valuable private company. China used to be accused, rightly so, of stealing technology and building me too companies. Those days are over! China now is focusing on innovation rather than imitation! And having worked in China for nearly two decades let me tell you when they focus on something – they get it done! Anyhow I am looking at Chinese tech startups for Walpole Capital so watch this space for more interesting information!
This whole idea of, like, every time you want something, having to spend money, I mean, that’s kind of like an old-school idea. As a futurist, I’m of the mindset that you won’t really buy anything, and people won’t own anything and that’s just how the world will work.
Buying stuff? It’s so last century. The internet has made distribution so cheap and convenient, and made it accessible for so many more customers, that it has opened the way for models that sell access rather than products. Aaron Perzanowski, a professor at a University in Ohio and author of The End of Ownership, said: “There’s no doubt the notion of ownership is in decline, and we’re likely to see this trend continue.”
These forces have been at work for years. What has changed is that the psychological barriers that have long held them back — the fixation with ownership — have begun to crumble. This is partly due to companies simply getting better at offering compelling services. It is also about demographics. The biggest section of our Z Tyre subscription programme are customers are aged between 25 and 45 — Generation X and Millennials.
Meanwhile, economic needs have become more acute as the proliferation of smartphones has accelerated the death of old models. Why buy a morning paper if you can scroll through the news before you get out of bed? The question is, how widely those dynamics can be applied and how quickly they will take hold. Well let’s look at the entertainment industry which was transformed by the file-sharing phenomenon Napster. Spotify this summer announced that more than 60m people pay a monthly fee for access to its library of 30m songs. That surge has coincided with the revival of the industry. This year is set to be the first since 1999 — when Napster burst on to the scene — that the industry will actually record consecutive years of revenue growth. Netflix launched its film streaming subscription operation 10 years ago, and this summer it surpassed 100m subscribers.
Technology’s ability to bend the concept of ownership is seeping into other, unexpected corners of life — such as cars. The typical automobile sits idle 95% of the time, yet most people would rather it stayed parked in the garage than hand the keys to a stranger. Turo was founded to change that. The San Francisco company connects people looking for cars to rent with owners willing to lend. Nearly 180,000 people have put their cars up for hire on the site, up from the fewer than 5,000 it had lured in 2012, the first year of nationwide operation. Chief executive Andre Haddad said shared ownership helped to alleviate the cost of buying and maintaining a car. “We can make the car an asset for the first time,” he said. Last month, Daimler led a $90m financing round in the company — its bet on the future of car sharing. You have also many major car manufacturers, like Porsche and Hyundai offering subscription services for cars. And now not just cars but even tyres can be subscribed for with Z-Tyre’s world first tyre subscription service.
As technology becomes more deeply ingrained into products, the very notion of what a product is, and where its value lies, gets muddied. When Hurricane Irma was bearing down on Florida last month, Tesla made a striking move. It remotely lifted the battery-charging constraints on some of its cheaper models to help people who were desperately trying to get out of town before the hurricane hit. The cars all had the same physical batteries. What that showed is what’s important isn’t the product, it’s the code, and it also demonstrated that Tesla can do the exact opposite. If you haven’t paid your bill, maybe they cut back your battery capacity. Even with these things in our possession, we don’t have control in the way we might expect.
So if buying stuff is over then one has to wonder what Amazon, the biggest seller of stuff on the planet is doing about this. The answer – PRIME!! I see Amazon bundling more and more into Prime. The opportunity for Amazon is to get hundreds of millions of people, or even a billion people, paying $10 a month for a bundle of services and effectively controlling more and more touch points. And you know if Amazon is getting into it then it really is the future!
Recently I have been spending a lot of time in our Tech Centre in Madrid and been thinking about digital marketing. I thought I would share some of my thoughts with you.
I think that the most important part of any marketing, especially digital marketing campaign, is the ability to build and maintain customer loyalty. But in the age of digital marketing achieving that has become much harder. What does customer loyalty even mean in the digital world and how does one go about achieving it?
I think that the most important way to build loyalty is to focus on gratitude. From a psychological perspective this is the emotion in most humans that is the best indication of whether loyalty is present. How do you get to gratitude? This needs to come through reciprocity. You need to give things first to your customers for them build this sense of reciprocity. And this is not just free things but something that recognizes their value to you. So for example if you have 24950 air miles and to achieve the next tier you need 50 miles. The airline should just give it to you and not make you buy it. If they make you buy it then you will never be loyal. But if they gave it to you they make you feel valuable and you reciprocate through a sense of gratitude. Now once you achieve that sense of gratitude you need to ensure you get advocacy which is the final step in achieving loyalty. You need these grateful customers to go out there and advocate for your products. So how do you get the customers to advocate for you? The way to do this is to bring consumers into your ORBIT.
What is the ORBIT?
This is where the digital world is changing the way people transact. Old school marketers focused on the transaction and the BUY. We need to change this. We need to not focus only on the BUY but the entire relationship with the customer both before and after the BUY. Infact, especially with subscription businesses, the customer is not so interested in the BUY. The focal point for the customer is the entire experience. We have to focus on the entire customer journey and ensure that we keep the customer engaged throughout the journey. More importantly we need create a long term relationship with the customer and embed the transaction within the relationship. It is these relationships that drive the transactions and not the other way around.
Creating the long term relationship is also recognizing that the internet has changed the way marketing is done. In the past marketing was one way with the usual customer segmentation and targeting customers and sending them the message. Digital communication has changed that forever. Firstly through social media the audience now starts to talk back. Secondly they are also the co-creators of content (think of sites like YELP and Opentable reviews). So now the job of a brand is to empower and enable that connection and collaboration where people talk back and then are part of the process with you.
All these thoughts that I think of when I am sitting on these long flights are great but perhaps a bit theoretical – although I like the ORBIT one as it is very appropriate for when I am on the plane. So I think that for our ‘round, black and boring’ industry we need some practical applications for these thoughts. So what do we need to do with this information?
We need to build a sense of community through a shared purpose that has to be aligned with our brand DNA. We need to ensure that we have continuous engagement with this community and this is particularly important in the case of a subscription model where a lot of people only focus on the renewal. Finally we need to create a social currency that we can offer to our community to further bind it together.
So if you want to build a community the best way is to align it around a purpose. But in the digital world we have to ensure that it is the right kind of purpose; one that is built with our customers. We have to try and achieve this purpose together with our customers and use it to connect disparate groups of people together. In our case what aligns best with our DNA is the Zenises foundation. We need to build a community of like-minded people who see the value in a company that not only wants to change the world but also the way tyres are consumed. Secondly we are an automotive company and we need to engage a community around people who love their cars and want to engage more with others who share that passion. We have a lot of knowledge and passion about both subjects and could easily curate communities around those purposes.
We need to ensure that we are with them through the customer journey providing content, content and content on a regular basis that is outside the transaction but focused on the customer need. This is ensuring that the relevant content is provided both for the demographic as well as the time. So we need to provide specialized focused content for different demographics such as women, millennials, and Gen Z. Then we also need to provide content that is time relevant. This is ensuring that before the summer we provide relevant content for people who may be taking long drives. Or in the Christmas period we provide more relevant content to holiday makers or perhaps people going skiing. With regards to the content on the Foundation we need ways to provide people relevant content which may allow them to connect with the children directly. This could be interviews with the children or more details on the homes that we build. Also we need to provide them ways to get involved should they want to.
This currency is valuable to build engagement within the community and also provide a sense of gratitude. All companies today have big data on their clients. Using that big data to provide little data to customers costs little to the companies but could be of value to the consumer. For example a large electricity company started providing its customers with data on neighborhood consumption patterns in the customer bill. This helped many customers understand how much their bills varied from the average and then to take actions to rectify this. Whilst this cost the company nothing it built a sense of loyalty with the customers. We need to look at the big data we generate and see what we can offer the consumer throughout the relationship that will enhance his experience. The other great thing about social currency is that consumers should be able to freely share it. As such we need to provide the customer with things that he can easily share online with his friends and community. This allows him to feel more part of the community and also bring more of his network into our orbit.
All the theories here are fine but it really boils down to treat your customer with the same level of respect and dignity you want to be treated with and ensure that you are there with the customer for the long term for the good and the bad! At the end of the day relationships are relationships – online or offline!
With a loud Bavarian fanfare at the Frankfurt Motor Show this year, BMW pledged to build 25 – yes 25!!! – new electric models by 2025. Raising the bar amongst the traditional car manufacturers, BMW also plans to launch the third model in its electric ‘i’ series at Frankfurt. But it’s not just the Germans pushing ahead with electric transformation. Indian-owned Jaguar Land Rover has announced that all its vehicles will be in some way electric by 2020 and Chinese-owned Volvo will launch five new electric models between 2019 and 2021. So why does this matter to us in the tyre industry – these cars will still require tyres – right? So why can’t we just carry on with our steady evolution, making black, round things?
Well first of all that means we will again remain oblivious to the rapid technological advances happening around us! With electric cars there is a whole different design process that we, at Zenises, are now working diligently with many manufacturers. There is much to consider. Due to the large battery capacity, electric cars will need to carry more weight and be more evenly balanced than conventional cars – they are typically 20-30% heavier. Tyres for electric cars will also need much better handling characteristics due to increased torque and acceleration power. And finally (for now), rolling resistance will become even more important. Due to limitations on battery life, extending fuel economy (even in small increments) will be really important.
To match the requirements of the electric car driver, unique tyres will be needed for specific electric car models. For example in our conversations with the folks at Tesla, they want it all! I’ve already mentioned that smaller electric cars mostly care about rolling resistance to extend their journey range, but Tesla wants that PLUS good handling and grip PLUS low noise. But the Tesla is heavy, so you can’t just take a tyre off the shelf and expect it to handle the same. You have to reconfigure it to be able to absorb all those forces. So Tesla is demanding unique tyre requirements in sizes like 265/50R19. And it’s not just Tesla – the BMW i3 rides on 155/70R19 (a dimension that sounds rather strange to more traditional tyre people). In addition, for European tyre labels, the very top rating of ‘A’ wet grip and ‘A’ rolling resistance will become pretty much standard for electric cars.
But there is still one key element missing for our discussion that could add rocket fuel to the electric car revolution – CHINA! The world’s fastest growing and potentially largest automotive market has woken up to the potential of electric cars. Rumours abound that China is considering a total ban on petrol and diesel vehicles in the near future. Impossible you say – even crazy! But China always dreams big. And it’s now not just dreams, but action that could catapult China to the forefront of determining the industry’s future. Not only could electric cars help solve the chronic pollution in some of its major cities, but a determined focus on electric will allow Chinese car companies to leap forward over the inertia that old technology can entrench. What better way to take on the current global leaders – not on the battle ground set by petrol engines but in the new revamped arena that electric cars could require. And if this happens then the massive Chinese tyre industry will also start focusing on the needs of electric car consumers, largely ignoring the legacy strategies of petrol that the traditional European and American automotive giants have to still support.
This is such an exciting chapter in our industry’s history. There’s still so much to play for, but for sure it will be those in the tyre industry who embrace the technological potential and possibilities that electric cars will bring who will reap the commercial benefits for the decades to come. Simply making and selling conventional radial tyres is no longer the only future path for the tyre business. To stay ahead of the pack, you have to be nimble and aware of opportunities that our changing world will bring. Like BMW’s head of R&D said “We have become a tech company. Where once we were employing mechanical engineers, it is now about the software”. Maybe tyre companies need to start becoming tech/software companies too!
“I just don’t get China!”, “As a foreigner, how do you get anything done in that country?”, “How can you trust the Chinese?!!?” Having worked with China for nearly two decades now I get many of these questions from friends and colleagues. They realise the need to do business with China and are having some trouble navigating the choppy waters. So here are some of my thoughts – in the hope I don’t offend any of my Chinese friends!
Conventional wisdom and cross-cultural management studies often emphasise the collectivist nature of Chinese society. However, I’ve always maintained that the Chinese have the most individualist of behaviours. Chinese society is collectivist in that individuals identify with an “in-group” consisting of family, clan, and friends. Within this, co-operation is the norm. Outside, zero-sum competition is common. As a result, self-organised (as opposed to hierarchically imposed) co-operation can be difficult to achieve. In addition, zero-sum competition means that your Chinese counterpart may not believe in so-called ‘win-win’ solutions. One can observe this, for instance, in the tendency to re-open negotiations just as everything seems settled, especially if one seemed too ready to agree with the negotiated terms; one’s Chinese counterpart may interpret this as an indication that he or she has not bargained hard enough.
It is certainly difficult to gain trust in China. The Chinese tend not to trust until there is enough evidence of trustworthiness. Unlike in the West, the creation of personal friendship is a prerequisite of doing business. Building friendship takes time, which is another reason to avoid rushing into things. There are numerous invitations to events; I was once the chief guest at the wedding of the chairman of a tyre factory’s godson. The poor kid must still be wondering who the big guy is in the turban in his wedding photos! One major element in building trust is the long dinners during which everything but business is discussed. In these, alcohol plays an important role. Fortunately for me, my religion does not allow me to drink. This has saved me many times in China but also some people have refused to do business with me because they could not ‘trust’ someone who doesn’t drink with them. Their loss!
Company decisions are typically reached in a top-down manner, with only the very top of the pyramid involved in decision-making. Mistrust puts limits on delegation, and supervisory control at each level is high. Mid-level managers typically have little power to make decisions of consequence, and their main role is to pass on orders from the top and ensure execution. Be aware in negotiations that the decision is ultimately made at the very top. If your counterpart is not part of that group, he is typically not authorised to make major decisions but must report back to the top for instructions. Also, make sure your representative matches the status of his or her counterpart. Important dimensions of status are formal position, age, and education.
The Chinese are an extremely proud people. I’ve never known a person in China in my many years of experience to ever be wrong! The Chinese that I’ve dealt with do believe that they are a superior people (much like the rest of us!). One needs to recognize those sentiments and then ensure one defers to them if you want to get things done in China. For example, when I’m in China, I always wear a pin on my lapel with a Chinese flag and it’s always noticed and appreciated. In fact, one senior government official even told me that “You are wearing my heart on your jacket!” That meeting certainly went very differently after that comment.
Conventional wisdom holds that China’s governmental structure is highly centralised, with all key decisions made in Beijing. In reality, Beijing directs little of what happens throughout the country, especially in far-flung regions. To be sure, if Beijing truly wants something to happen, it will. At the same time, Beijing recognises that decentralisation of power plays an important role in taking economic reforms forward. By running things in a slightly different way, the thousands of localities throughout China constitute a large population of local experiments, collecting information about what works. From these experiments, the central government can select suitable future policies. Expect conditions to vary by province. In addition, to the extent you need to negotiate with government, it’s crucial to involve local government. Even if you have agreement from Beijing, if the local government wants to thwart you, it will.
There are so many more aspects about doing business in China which I would have to write a whole book to cover. All the usual statements like “In China you always have to have the long term vision”, or “Change is the only constant” or “The Chinese never say no directly and will always use the indirect route”. But the one piece of advice I want to leave you with is the one I find the most important about doing business in China. Nothing happens in China if you aren’t there! If you want to get anything sorted, get your ass on a plane and just go there!
Geopolitical turmoil, cyber hacks, Brexit and Donald Trump—many recent disruptive events have taken our industry by surprise. What is for sure more now than ever is that change is coming and it is coming fast. As such our industry needs to have new leaders, at all levels of the food chain, that can replace old thinking with new ways to innovate and manage that change. The old ways are going! The old channels are going! The old managers have already gone!
So what do our new industry leaders need? What does the industry need from our leaders?
We need leaders that can anticipate and drive change. This does not mean simply extrapolating today’s pace of change into the future. It means boldly imagining new possibilities—and understanding they will come sooner than expected. Leaders will have to get equally comfortable with what can be known and with exploring what is unknown. Today our leaders see future events as a new version of past events, presuming the pace of change will move in a straight line. In reality, growth is exponential and new variables—unforeseen technologies, for example—always enter the fray. In most organizations, the future is primarily projected through spreadsheets reinforcing a perspective that the world is an extension of what we know today. The problem is that the future is anything but that! Our new leaders need to get comfortable asking open-ended questions about unspoken assumptions to see new possibilities. They need to be curious about the future and blend imaginative practices of strategic foresight and science fiction design. But most importantly they need to ensure that this mindset permeates through their organisations.
In addition to imagining a range of new futures, our new leaders must also act as disruptors, discovering new ideas through open dialogue with all stakeholders and then ensuring a constant iteration of those ideas. Most leaders today are still primarily focusing on getting existing products to be better, faster or cheaper. But our leaders need to focus on the new breed of customer and invest in designing and developing new products and services to satisfy the emerging customer’s needs. They need to use human-centered processes, such as observation and questioning, to collect insights; and they need to embrace a growth mindset to test and gather evidence on what they’ve learned. Great leaders in our industry will do this continually, iterating over and over to uncover opportunities obscured by the fog of uncertainty.
As technology innovation accelerates, leaders have to understand which technologies will directly impact our industry and which will affect adjacent industries. Our leaders need to figure out fast how they can digitize, demonetize and democratize our products. Once we figure out how to digitize our products we can become an information-based technology and move to an exponential growth curve. Something digitized can be replicated and transmitted for a near-zero marginal cost. Once we have successfully digitized our products then we need to figure out how to demonetize them and eventually democratize them. In terms of demonetization one needs only to look at digital photography as an example of an industry that has demonetized. The first 0.01 megapixel Kodak camera is now generating a 10 megapixel image. The result of which is the complete demonetization of film photography. As products and services demonetize they become available to billions of users across the planet and this is the democratization of the product. This democratization now allows us a market size of not just one or several countries but the entire three billion people connected to the internet now and the seven billion potentially connected by 2026.
Now how do you digitize a physical product such as a tyre? We are not music or film that can be easily converted to zeros and ones. Well we can start by digitizing as many of the processes with the tyre as possible. Uber did not digitize the car – but it did digitize the taxi industry. Perhaps we have leaders in our industry who can figure this out. I am working on it with our teams both in the industry and in our venture capital fund. Honestly we have not figured it out yet but I can tell you we are having a lot of fun trying!
One of my recent articles, ‘How do we prepare our children better for the future?’, inspired lots of comments and questions, which I’d like to thank each and every one of you for. The main question that I was asked was how can we utilise the latest technologies in order to make the education process a personalised twenty-first century experience? How can we use robotics and AI to engage our children and inspire a sense of curiosity, passion and perseverance, those essential components of learning that are often somehow lost through the artisanal approach to the education process?
Having done some research on the subject and through conversations that I’ve had with some of the leading technological minds over in Silicon Valley, it’s clear that AI, virtual reality and 3D printing have a crucial role to play in the future of education. Tablets and laptops now sit on every student’s desk and have become as ubiquitous a part of the education process as the humble pen and paper. But if students also had 3D printers sat alongside their tablets and laptops, this would allow them to immerse themselves in subjects such as tech, science and engineering in a way that simply hasn’t been possible before. Just imagine the possibilities! Instead of simply reading or learning through a visual presentation, kids will be able to literally print out an object and study it in its physical form, thus making education a truly engaging and immersive experience.
Research shows that human beings learn best through action and simulation. The current education system still relies on visual and audio learning, so when we consider that we only remember 20% of what we hear and 30% of what we see, it’s of little wonder that many students are left feeling disengaged and under-stimulated in the classroom. But we remember up to 90% of what we do or simulate, which is why virtual reality is one of the most effective technologies for engaging our kids in the learning process.
Sure, hearing about the very depths of the Pacific Ocean and imagining what it might be like is interesting but imagine if, through virtual reality, teachers could simulate actually being there! So rather than learning about the respiratory system through words and images, students could take a virtual tour around the human body and experience the world as if they were a blood itself on its journey to becoming oxygenated. Combine virtual reality with augmented reality and suddenly the student becomes an active participator in the learning process, rather than a passive observer.
The other great thing about machine learning is that it can be adapted and personalised to appeal directly to each individual student, no matter what his or her learning style or educational background. AI teachers for example, unlike their human counterparts, will be able to use global networks and sensors to share and access unlimited information and intellectual resources such as interactive video content at lightning-fast speeds. They will be able to monitor our kids for signs of frustration or boredom and will adapt the model accordingly to ensure that every child gets a personalised, immersive learning experience that takes them far beyond the confines of textbooks and stuffy classrooms. So in a very real sense, such technologies could serve as a much-needed equaliser, creating a system where every child has equal access to education and therefore equal chance of unlocking their full potential.
However, from what I see happening across Europe and the Middle East, whilst such technologies are undoubtedly crucial to updating the education model for the twenty-first century, what seems to be missing both in education and in business is a tolerance for failure. So what we really need is a mind-set shift and we only need to look to Silicon Valley for inspiration. Because here, failure isn’t only expected but welcomed and embraced because they recognise it as being a critical aspect of the learning process. In fact, many investors won’t fund your business unless it’s experienced some kind of failure. This is a difficult lesson to learn and a difficult lesson to teach. But in some ways, helping our kids develop a tolerance for failure is even more important than ensuring that they have access to all the latest technologies.
We only have to look at the Millennial generation to see that the current approach to education is in desperate need of updating. Because it seems that rather than raising a generation who are adaptable and resilient, we have coddled them to the point that many now have such a strong fear of making mistakes and of being perceived to ‘fail’ that they have been crippled into complete inactivity.
The fact is that our kids need to be able to deal with criticism. So the best way to prepare our children for the inevitable changes to come is by teaching them that learning is by its very nature a process of trial and error and that being able to recognise the value of failing is a crucial ability, in life as well as in education. Because this is the only way that they will learn, grow and ultimately survive in what is becoming an increasingly competitive world.
So I have to start with a big ‘thank you’ to everyone for your comments and questions on my article, ‘Who Will Disrupt the Tyre Industry?’. Most of the questions and comments were focused around drone technology and flying cars. Since I was asked by many of you to write further on this topic I thought I would oblige and write an article on some of the developments in this emerging technology. Now, to the main question that you all asked me – will drones and flying cars disrupt the tyre industry out of existence?
Well simply put – I don’t think so! Although I think that this emerging technology will undoubtedly bring massive incremental changes, these changes will be innovative rather than disruptive. And to understand why it won’t be the disruptive force that many people imagine, we first need to look at the technology itself.
If you happened to have read some of the recent headlines in the world’s media, you’d be forgiven for thinking that we’re all going to be travelling about in flying cars and that the skies are going to be full of passenger drones by this time next year! In the US, we read that Uber have just hired an engineer from NASA to lead their flying car project, while in the Middle East, The Roads and Transport Authority in Dubai in collaboration with the Chinese company Ehang, are due to launch an autonomous passenger drone in Dubai this coming summer. And let’s not forget Airbus who aim to have their flying car prototype ready by the end of the year. So there is clearly a lot of innovation happening within our industry and companies looking to collaborate with one another, but such stories can be misleading in the sense that they can make it appear as though this emerging technology is much further along in development than it actually is.
To get a more realistic sense of both the strengths and limitations of this technology, we need look no further than the recent collaboration between Matternet and Mercedes-Benz, who have utilised both drone and van technology create the Vision Van. So “M and M” have equipped self-driving vans with drone delivery systems, so the van does most of the journey and the drone acts as a ‘last-mile solution’. Whilst this is rather innovative it also serves to highlight the biggest problem currently facing the drone industry. Because although drones are brilliant for getting to inaccessible areas, they simply don’t have the power capacity to travel across long distances without running out of charge and dropping right out of the sky, which is a pretty major drawback! So “M and M” have created an elegant workaround to a problem but not really disrupted anything. When they solve the battery problem, that’s when things will get interesting!
The other important factor to consider is regulation. Implementing safety regulations and building flying car and passenger drone transportation routes in the sky isn’t one of those things that simply happens overnight. The logistics of creating a system that is safe and efficient enough to convince people to abandon their traditional cars in favour of a flying equivalent is complex to say the very least. In fact Elon Musk is worried about people not maintaining their flying cars well and hub caps falling out of the sky and killing people. So that futuristic ‘Jetson’s-like’ world of drones and flying cars that many of us have been envisioning is unlikely to become a reality for a while now, by which time we may have discovered an even better way to travel.
How can I be certain of this? I know that we’re not even close to seeing drones and flying cars become the everyday norm because of what I see happening in the tech startups that we invest in through our venture capital fund, Walpole Capital. Whilst I see great innovation happening, we are nowhere near close to solving the battery problem or implementing the regulations and safety measures that are necessary to make this technology a dominant commercial force within our industry. In fact, even the engineers from NASA are yet to find a solution to these problems! Although the way things are today with the NASA bureaucracy it will be that 14 year old I mentioned in my last article that will beat them to it!
So tyres aren’t going anywhere soon! But this doesn’t mean that we shouldn’t keep abreast of all the developments in flying car and drone technology so that we know who to partner and collaborate with. Because as we’ve seen from the partnership between “M and M” progressive incremental changes within our industry are inevitable and happening as we speak. And by collaborating with other companies, we can be involved in defining those changes rather than risk being left behind by them, and ultimately in the long-term our industry can only gain and be bolstered by this. We need to stop this fear in our industry of change and see new technology as the opportunity for progression and innovation that it is. And who knows the more we innovate perhaps the less we are likely to get disrupted!