Leveraging existing assets for disruption

Let’s compare two ways big tech companies are differentiating themselves this week: using contrarian marketing angles and using existing assets to enter new markets. We’ll look at four stories of disruptive moves. A common strand we find in each of them—whether a move of market enhancement or market extension—is the value of low-cost infrastructure and a large-scale customer base for continuing disruption.
Two of the stories involve going at competitors from a different angle:

And two of the stories involve using built-out infrastructure to enter a new competitive niche:

T-Mobile using a new technology
T-Mobile is known for disrupting the market for mobile service on a price basis. This makes sense given that the company hasn’t historically been known for being first to market with the highest-speed networks. Now, however, T-Mobile is an early adopter, rolling out a new technology that should significantly increase the consistency of call quality within its LTE network.
Gigaom’s Kevin Fitchard had a scoop on the story last June, but he was able to get confirmation on the deployment this week from Mark McDiarmid, the company’s VP of technology. The 4-by-2 multiple input-multiple output (4×2 MIMO) technology uses multiple antennas to send twice as many transmissions to a phone as is usual in  LTE (2×2 MIMO). While this doesn’t crank up network speed, it does improve transmission around obstacles or at the fringes of a network.
Amazon challenging online grocers
On Wednesday, Amazon launched Prime Pantry, which unlike its Prime Fresh service doesn’t compete with FreshDirect, Peapod, or Instacart on speed of service. However, Gigaom’s Laura Hazard Owen, who had the story and has already done price comparisons with FreshDirect, Instacart, and local New York City grocers, has found that Prime Pantry clearly undercuts its competitors on price. The service allows customers to mix and match small quantities of low-cost groceries for a combined delivery charge of $5.99 per 45 pounds of product.
Amazon using its own trucks
No, there’s no need to look overhead for the drones quite yet, but Amazon is testing the use of its own trucks for ‘final mile’ package delivery in San Francisco, New York, and Los Angeles. The company is moving to vertically integrate its supply chain by supervising contractor-supplied trucks and drivers. This trial does compete on speed of service, as it enables same-day delivery of packages that FedEx, UPS or the U.S. Postal Service can’t match. These trials were started late last year, following an earlier rollout in the UK. But the Wall Street Journal has the story, reporting that last year’s Christmas delivery snafus with the usual carriers created a greater sense of urgency for Amazon to control its last-minute delivery.
The move can also be seen as an effort to counteract the advantage that brick-and-mortar retailers like Wal-Mart have in providing same-day, local delivery in combination with the proficiency they have now also achieved in Amazon’s online turf. However, Amazon’s scale of delivery and prowess in logistics present a direct threat to the traditional package delivery services.
Facebook filing to provide online banking
Fortune this week picked up on reports earlier this month in the Irish press of Facebook filing with Ireland’s central bank for an e-money license to provide its own Bitcoin-like currency. With approval possible within the month, Facebook would be able to provide the service across Europe.
In leveraging its customer and technology network to provide a form of payment services, Facebook would be joining non-banking companies like Google, T-Mobile and Sprint that are similarly looking to leverage their technology platforms in financial services. Facebook’s approach is slightly different, however; and with its services and reach, the company may be especially suited to serving the many under-banked customers in developing markets.
The value of low-cost infrastructure
A common strand in all of these moves—whether market enhancements or market extensions—is the value of low-cost infrastructure and a large-scale customer base for continuing market disruption. In that sense, this dynamic is just a modern update to the manufacturing advantage that the Japanese automakers used successfully against Detroit in the 1970s and 1980s.
While Toyota and Honda initially competed against the American car manufacturers at the low end of the market, they used factory automation, in part, to gain a cost advantage in producing small and simple automobiles. Having solidified that niche in the market, however, they were able to leverage that same technology to provide better and better made cars. First they were able to establish a quality advantage, then they moved up-market to producing larger autos. Finally, they were able to disrupt the luxury segment with their Lexus and Acura brands. (Even earlier, Honda had been able to leverage its manufacture of motorcycles and motorcycle engines to get started as a low-cost manufacturer of autos.)
The implications for enterprise IT
The implications of this dynamic for enterprise IT are pretty clear. A low-cost technology delivery platform becomes a vessel for delivering more, new, and better products both within traditional markets and beyond. Companies that have achieved a common, low-cost and flexible technology platform are in a position to roll out new competitive offerings, enter new markets, and counter competitive challenges. Those that have not are sitting ducks for sharp-shooting competitors within their own markets, as well as for hunters from neighboring or foreign markets—or putative partners within their supply chains.

3D Printing: hype, hope or threat?

Anyone who reads the new Gigaom Research report, 3D Printing: hype, hope or threat?,  will be taken through a deflation of the hype to the hope of the technology, likely wondering:

  • Is the technology and the market really that problematic?
  • Is the impact really that far off, if so many industries have already found practical application?

But after he awakens his readers to the scope of the disruptive threat with actual examples across industries (after general prototyping, he sees logistics, toys, apparel, autos and electronics among the sectors being hit first), analyst Adam Sinnreich ultimately rewards them with insightful concluding recommendations, including the following:

  • Embrace the makers. That is, be like Nokia and offer the early 3-D geeks in on the potential to include your products when possible in the 3-D hackers’ world. Further, if possible, try to hire such a geek internally, as part of your technical team.
  • Give consumers the best of both worlds. That is, look to use the technology to enhance and augment your traditionally-supplied products.
  • Don’t just sell. Look to the experience in the entertainment sector to realize that you will likely no longer be selling products as much as services and experiences, with a transformation of what business you are in.
  • Protect (and grow) your assets. 3D printing creates all sorts of opportunities to lose–or gain–control over your branding and image.

The battle of bricks, clicks and logistics

Retailing is becoming a multi-front war, with online retailers adding on-the-ground capabilities such as same-day delivery, while brick-and-mortar merchants ramp up their online efforts.

Expansive thinking on 3-D printing

3-D printing technology continues to mature rapidly, and expansive thinking on its application is called for in practically any industry. The strength and accuracy of 3-D-made products was demonstrated this week by Solid Concepts, a 3-D engineering firm that demonstrated the range-worthiness of a metal gun requiring seven minutes of assembly after its parts were produced.

Last year USC professor Behrokh Khoshnevis presented a TED talk on building a 3-D printed, 2,500 square foot concrete house in approximately 20 hours that has neared a million views.

Forward thinking on the technology’s application should be considered not just in manufacturing and construction, but on the horizon for any logistics, distribution, facilities, or global business environment.

Here are a couple of relevant Gigaom Research reports on the topic:

http://research.gigaom.com/report/retails-reinvention-technologys-impact-on-todays-supply-chain/

http://research.gigaom.com/report/sector-roadmap-hardware-design-innovation/disruption-vectors-and-company-analysis/additive-manufacturing/

Ozon.ru gets $100m to prove it’s the Amazon of Russia

Russia’s biggest online commerce company, Ozon, is about to get bigger thanks to a huge injection of cash and ambitious plans to take its business to the next level. But is it biting off more than it can chew?