“Real Threat”… is how Warren Buffett summarized his thoughts at the six-hour 2014 annual meeting of Berkshire Hathaway, his flagship enterprise. These two profound words are in reference to one of the most memorable comments at the event: continued advancements in cutting edge technology – and it keeps Mr. Buffett awake at night.
Clearly the world trend today is towards hyper connectivity – connecting everything to everything with new technology or the ‘internet of all things’. The best estimates are that by 2020 fifty BILLION “gadgets” will be connected to each other everywhere. Connected devices followed by enormous data harvesting will result in an explosion of further technological engineering; continuous attempts at developing new ways to help companies earn more revenue, cut costs and hopefully increase profits.
On the surface, this would seem advantageous as technology is known for creating efficiencies and reducing costs in many ways for many businesses. But, as Buffett highlights, it doesn’t always guarantee increased profits.
To illustrate his concerns, he gave as an example the advent of self-driving cars that combines many technologies into a single product. This advanced collaboration of technologies potentially poses a threat to one of his business units – GEICO.
As an insurer of vehicles, Buffett predicts there will be fewer accidents with the adoption of self-driving cars which will result in lower insurance premiums and therefore lower profits would follow. The ‘Real Threat’ according to Buffett? Lower profits!
While his scenario suggests how external improvement for customers can in fact become a consequence for a business, technology can pose a real threat in numerous ways. Most CEOs are quite satisfied with assuming that the usual advances in technology will give them a competitive advantage over time. The associated risk is amplified when the focus instead remains on selling price considerations, best service levels or other tired concepts that are not distinguishable between vendors, product or service.
To complicate the issue further, a great amount of advanced technology is accomplished in an uncontrolled manner – a company may become significantly impacted without warning. Will your business model be prepared for the next big thing, or will it crack under pressure?
An advantage is only realized if you know how to use technology to become truly unique and competitive in your space. One must remain abreast of new technology that will be available to their industry in the future, spend time considering how everything can and should connect within the business, and how it connects to other businesses. If you think this applies to the big guys with lots of money, vision, and IT capability – think again. It’s the nimble, little companies that will capitalize on the opportunity.
This concept of hyper connectivity is the way life and commerce will grow. These changes can potentially shrink the lead you currently have on your competitors overnight.
Will you be ready?
Action Item: Become more aware of the technological advances in your industry and learn how to take advantage of the advancements to help you and your customers develop greater competitive advantage as well as helping your customers become more competitive with their customers. This is the most effective way to provide value in your role in the supply chain.
How: Read, establish Google alerts on technology topics in your industry, attend conferences, talk to vendors, share information with your LinkedIn connections and participate in discussions in your online groups.
» For more information on how you can become ready for the Internet of Things (IoT) and develop a true competitive advantage send me an email at norris@rredinc.com and I will send you my 7 point outline on How to Become an Industry Leader in the Next Industrial Revolution.