Dean Barber

Digital Darwinism at Work

In Corporate Site Selection and Economic Development on January 9, 2017 at 10:06 am

Admittedly, they are not in not the same industries, but they are both old names in the annals of exceptional American companies.

Sears, Roebuck & Company, founded in 1886, might be in a slow death spiral, while conglomerate General Electric, with roots dating back to 1889, continues to invest in digital transformation in order to adapt and outperform peers.

If this smacks of Digital Darwinism, well, welcome to today, an era where technology and society are evolving faster than some businesses can naturally adapt. This will mean new business models to come, which some companies can pull off and others cannot.

When I speak at conferences, I harp on this to both companies and economic development organizations. You have to embrace digital transformation, not fight it, if you want to remain relevant.

That entails looking beyond the world as you know it, observing how things are changing on the outside, and then changing your own philosophies, models, and systems on the inside in response.

GE has been successful at doing this. Sears not so much.

At GE’s recent 2017 outlook event a few weeks ago, CEO Jeff Immelt was asked how he can get investors to appreciate the company’s new digital transformation and 3-D printing investments. His response: It “makes a shitload more sense than Six Sigma did.”

Indeed.

The Trip

A few months ago, I was an old port city on the Ohio River. The reminders of the old industrial revolution were evident, but surprisingly, it was here where I encountered a small digital company, a defense contractor, doing some seemingly out-of-this world stuff.

And when I say out of this world, I mean it. Because when I put on a virtual reality headset, I took a trip and didn’t leave the farm.

Besides being safer than psychedelic drugs, which I do not advocate, what would be the practical use for virtual reality? Certainly, I do not have all the answers, and it is safe to say that virtual reality (VR) technologies are still lagging behind the visions that people have for their use.

The Possibilities

But I can foresee the day when it will be commonplace in real estate, construction, economic development and site selection.

Donning headsets in a client company’s office in Chicago or New York, a senior executive and I can tour spec buildings in the Southeast or the Southwest. Nice high ceilings, don’t you think? Let’s go outside and look at the surrounding area. Hmmm, curb and gutter, sidewalks and landscaping, too. Not bad.

How about we go downtown and then look at some residential neighborhoods and then pop over to the local community college?

If it sounds a bit far-fetched, then slip on a VR headset for a few minutes and ponder the possibilities. From what I can tell, most VR companies are working to come up with better displays, wireless, and less bulky designs. They are not quite there yet, but they are getting there, along with a whole onslaught of other things related to the digital revolution.

The Promise of 3-D

On the digital side, GE announced in September that it would buy two 3-D printing companies for a combined $1.3 billion.

The move “adds to our strategy to become the premier digital industrial company,” Immelt said on a conference call with analysts. “These two companies bring, in addition to just equipment, a number of ideas in terms of what we can do in the future.”

If that sounds like a company leaning forward, well, you’re right.

GE believes it can sell $1 billion worth of additive metal manufacturing technology by 2020, while using the 3-D printers to drive its own costs down by as much as $5 billion. That beats Six Sigma hands down.

3-D printers build objects by fusing together thin layers of materials such as plastic powder, metal or liquid resin. The parts, built from computer-drawn blueprints, can be used to make products ranging from car parts to surgical implants.

The global market for 3-D printing is growing as companies increasingly use the technology for production of commercial parts. The aviation industry has been an early adopter because it enables more complex designs and lighter parts, cutting waste of expensive materials on factory floors. GE said it expects to print 40,000 fuel nozzles for jet engines by 2020.

Sears was The Disruptor

The news is not so positive for Sears, which announced last week that it will shutter another 150 unprofitable stores, including 108 Kmart and 42 Sears stores in order to curtail losses. How many years now has Sears been closing stores?

But at one time, Sears was the big disruptor, and changed the landscape of retail. In the late 1800s, people began moving to the suburbs and out of the inner cities. Richard Sears believed local supplies were too costly because de-urbanization had caused consumers to disperse; perhaps people would be comfortable with ordering, by mail, products they’d bought in the past at retail stores.

Sears used the railroads and post office in ways no one had, disrupting the status quo, with distribution tactics that resembled the ecommerce experience we know today.

Sears used to charge a fee for access to its mail-order catalog. If that subscription model sounds a lot like Amazon Prime, well, it was.

Now It’s Amazon

But times change. Today, Amazon is worth more than Sears, Macy’s, Kohl’s , JCPenney, Nordstrom, Best Buy, Barnes & Noble, Dillard’s, Gap and Target combined.

Overall, Amazon’s share of the 2016 holiday online market share was 38 percent. Best Buy was a distant second, at 3.9 percent, Target at 2.9 percent and Walmart at 2.6 percent.

Amazon’s largest share of online retail hit 47.8 percent on Dec. 18, 49.2 percent on Dec. 19 and and 48.2 percent on Dec. 20, according to data from Slice Intelligence. On Christmas day, Amazon’s total share of online sales shot to 46.1 percent.

Department stores up and down the price spectrum are under growing pressure to show they can still be relevant, and 2017 will be pivotal in which retailers plow ahead in the internet era and which get left behind. Digital Darwinism at work.

You, Too, Can Be a Futurist

Last month, after giving a speech to a group of stakeholders to an economic development organization, the local ED guy said I sounded like a futurist. I took that as a compliment (and I think he meant it as such.)

That’s what I have to be, and I submit that is what economic developers and company executives have to be. You don’t have to be a computer whiz. You do have to have an imagination.

I believe we are in the early stages of a digital revolution that will both destroy and create jobs. That requires us to lean forward and imagine what could be or what should be if our companies and our communities are to remain competitive and ultimately relevant.

Yes, you, too, can be a futurist. If you want, I will send you a secret decoder ring to make it official.

I’ll see you down the road.

Dean Barber is the president/CEO of Barber Business Advisors, LLC, a location advisory and economic development consulting firm based in Dallas. He can be reached at dbarber@barberadvisors.com or at 972-890-3733. Mr. Barber is available as a keynote speaker.

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  1. Very good Dean- well said. Happy New Year to you!

    Charles L. Smith, CEcD
    Executive Director
    Main Line: 903-572-6602
    http://www.mpedc.org

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