“Who controls the past controls the future: who controls the present controls the past,” (1984, George Orwell)
The article below was published in Info, the monthly magazine of the French Chamber of Great Britain. The November issue was “Disrupt or be Disrupted” and coincided with the Disrupt or be Disrupted Conference held in London.
Who controls technology, controls the future.
Everything used to be cheaper. I still remember paying 5 Francs a café in Paris. Today, it’s at least 2 Euros, almost 3 times more! Everything seems more expensive today, except when you’re a tech entrepreneur. If you’re in tech, everything is much cheaper – even free sometimes… Case in point: when we launched Ukibi in 1999, our first $2m were spent to buy Sun Microsystem servers and Oracle licenses. This was a necessary cost to launch an Internet business. Today, how much would it cost? Nothing. Nada. Rien. Today, we wouldn’t buy any computers or pay for expensive software license, we would rent all of it from Amazon Web Services or Microsoft Azure, and be charged on a “pay as you go” basis.
So technology is much cheaper than before.
It’s also much more powerful. Of course, we know that computers are faster and faster because of Moore’s law – which is why my smartphone is as powerful as IBM’s Deep Blue, the supercomputer that beat Gary Kasparov 20 years ago at an alleged cost of $100m. But for the last few years, the technological progress has been properly mind-blowing: only 3 years ago, Google’s voice recognition engine didn’t recognize 1 out of 4 words. Today, it understands as well as you and me… And it wasn’t long ago that we saw self-driving cars as a distant fantasy. Uber has now started to test them in Pittsburgh.
These examples might seem like anecdotes from the startup world or for gadget lovers, but they actually reflect one of the most important trends in our world: the emergence of technology as a new power. In number, this trend is undeniable. Consider that 20 years ago, the 5 largest companies in the world by market capitalization were General Electric, Shell, Coca Cola, NTT from Japan and Exxon. 10 years later, the Telecom and food industries were replaced by software and banking and the top companies were Exxon, General Electric, Microsoft, Citigroup and Gazprom.
And today? You guessed it. Everybody is out, and the Tech companies are masters of the universe: Apple, Alphabet (Google), Microsoft, Amazon and Facebook…
How come that technology companies are so dominant? I would argue that the answer is very simple: they have a good understanding of technology, and technology has become an incredibly powerful weapon.
But of course, all companies are not tech companies, and what lessons could be learnt for the corporate world in general?
First, technology cuts costs. We hear a lot about Artificial Intelligence, Super Intelligence, the rise of the robots, but in my opinion the most important trend is just called “automation”. In some way, this is a familiar story, because there is a very strong parallel between the impact of technology today and of globalization 30 years ago. With globalization came offshoring and significant cost reduction from moving Western jobs to low wage countries. With technology comes automation and significant cost reduction from moving human jobs to computers.
But if offshoring was for the CEO the equivalent of driving the carriage faster by giving vitamins to her horse, automation puts in her hand a new bizarre vehicle with an engine – in other words something that she is not familiar with, seems very powerful, but also very hard to control…
And that’s the main challenge that many CEOs are facing today. The business world was a world of horses, where the winners were those with a large stable and professional jockeys. But now some renegades have started to compete with a car – not a big car yet, but enough to be scary – while some big horse owners are also trying to fix an engine on their carriages…
In other words, the rules of the game have changed. In the old world, the main levers for a CEO were money, people, brand, distribution network, etc. Today, I would argue that technology has become incredibly important, sometimes more than money or people (which of course raises many questions about the society we’d like to live in).
Going back to the example of my startup, we could almost say “CAPEX is dead, long live OPEX”. Which means that capital, the privilege of large organisations, and one of the main barriers to entry for smaller competitors, becomes less relevant. And that’s why new challenger banks are being launched in the UK with less money than the investment I had to make in computers 15 years ago. And why in all sectors hundreds of competitors are emerging, many with very little resources, but with incredible products.
But in a world where tech is power, one of the main threats for large organisations doesn’t necessarily come from startups, but from other giants. When we know that it took more than 10 years for the largest money market funds to reach $100bn of assets, who would have guessed that Alibaba would do the same in 9 months? And just a few more months to surpass JP Morgan, the third largest in the world?
Large companies are now therefore facing the threat of new entrants – small or big – who have a better grasp of technology, and can therefore offer more innovative products, but perhaps more importantly benefit from much lower costs.
And that’s perhaps why the biggest companies in the world are tech companies, because their CEOs and boards are fluent in tech, and today tech is power.
The original article in INFO can be found here. The Disrupt or be Disrupted section can be found here, with very good articles from Arnaud de Puyfontaine (Vivendi’s CEO), Christophe Chazot (HSBC’s global head of innovation) and EDHEC about disruption models.
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