As you indicate, I believe that NCR will not find growth in the ATM business. You present compelling data to show the decline in cash purchases across many geographies, and even though the need for cash and ATMs may persist in certain areas, I don’t see a reason to think the need will actually grow. I do not think, though, that this is a cause for concern for NCR as a company. As Kathryn points out, NCR is now the world’s number one POS software provider for the retail and hospitality industries.  This is a telling sign, that NCR is evolving with the times and looking to create a new value proposition that aligns with a growth market. Moving POS capabilities from human-enabled, to truly automatic, is a trend that is expected to continue. Consider the kiosks and machinery that have sprouted up in grocery stores, other retail aisles, and in airport check-in lines. I expect that same automation will be enhanced further and brought to the hotel check-in experience, cafeterias and fast-food restaurants around the world. NCR is latching on to an industry expected to grow, and this is reflected in the company’s stock price. As of January 2017, the stock price had increased 112% over the past year, which is well above the 38.5% growth in the computer-integrated systems market as a whole.  This suggests that the company is pursuing the right growth objectives and that they’ve convincingly proven their ability to do so effectively. An ATM hardware company would have reason to worry, but NCR has become much more than that and appears poised for sustainable growth.
This is a fascinating example of how the government and regulation can have a major impact on your business, even when you feel like you’ve done everything right. We have seen plenty of cases in TOM this semester that have taught us about maximizing plant efficiency and maximizing profits. The success stories have been tied to being located near suppliers and customers, developing a strong culture where issues are raised and resolved quickly, and creating the most efficient assembly process. Even if you do all of those things perfectly well (which is hard to do), and you provide 30% of the UK’s automobile output, your model can still suddenly become unsustainable. I think the most jarring part of this story is that the implications were not driven necessarily by tightened regulation developed by a government agency focused on rational, fair and transparent practices. These implications arose largely due public opinion of an issue (Brexit) that may or may not have been fully understood by those going to the polls. Friends of mine in the UK voted for Brexit, admittedly without truly grasping some of the consequences. As a result, the best laid plans for a highly efficient operating model can become less than sufficient, and it’s hard to rationalize or predict.
I don’t think that this story should lead us to believe that it’s not prudent to commit to a country or geography. It does make sense to diversify somewhat, but there are also significant benefits associated with commitment. Nissan has fast and predictable delivery from suppliers, they have strong relationships, and they have Theresa May advocating for their interests. It seems that just once in a while, something happens that’s out of your control and that doesn’t fall in your favor. Now Nissan has to wrestle with whether they double down and find solutions in the UK, or pivot and make their next commitment somewhere else.
This was a very interesting read, so thank you for sharing. At first glance, it does seem concerning that an entire, critical industry could seemingly lose its dependence on human employees quite quickly. But, I dug further into one of your resources (the International Transport Forum report) and realized that there are potential scenarios where this transition plays out without too significant of an impact on truckers.
The report indicates that heavy truck driving is typically done by middle-aged men. While 2.5% of all employed, US males between 45 and 65 years old drive trucks, less than 1% of those aged 21 to 30 do. In the last decade, the age disparity has only widened, with the 45-65 year-old age bracket being the only segment to increase as a percentage of truck drivers. The average age of a US trucker is 47.5. All of this support’s Peter’s recommendation that the trucking industry allow people to retire naturally, while not hiring new truck drivers to take their place. Depending on how rapidly autonomous truck driving becomes prevalent, the natural reduction in the supply of truck drivers may just coincide with the decrease in demand.
The report also reminds us that a trucker fulfills many responsibilities, beyond driving on the highway. An urban trucker, or someone completing the last mile of a long-haul delivery, is also accountable for choosing the driving route, theft prevention, interactions with the shippers and the customers, and loading and unloading goods. Overall, autonomous truck driving will bring greater efficiency and lower costs, increasing the demand on trucking as a whole. This would lead to more deliveries and more last mile activity. The increased job opportunities in urban trucking can serve as jobs for truckers to transition into if they are not ready to retire when autonomous trucking really takes over for long haul routes.
From my experience at a Fortune 500 insurance company, most customers view these products as commodities. I think there are a few areas for possible differentiation, which I will walk through briefly. These are:
A competitive price is critical since these are products that people never want to buy and which often don’t seem different from competitor offerings. However, unlike a tangible good, the actual “COGS” will not be known until the duration of a policy or rate lock has expired. Selling at an irrationally low price has allowed many companies to hit sales goals, but it has caused massive profitability issues just a few years down the line. Setting the right price is dependent on having great, principled underwriters and on having the right set of data that you trust. To this latter point, claims data is a differentiator and you need to rely on its efficacy. Pooling data removes both of these advantages.
EASE OF DOING BUSINESS
As you point out, this is also critical when you think of both the independent agent and the end customer sitting around waiting for quotes. Hastings needs a better, faster interface. They need to use their historical data to determine the smallest number of indicators that they can use to achieve efficient pricing. Then they need to make as many of these answers automatic as possible (like the origin of the building example used above), so as to come close to eliminating the burden on the customer. Hastings may be in a tough spot because they don’t have the money to make investments. But I’d also say that the internet start-ups you describe likely also need(ed) to raise funds to design their initial software. Ironically, the big companies are the ones that feel most hamstrung because they have their decades of data and processes locked up in legacy systems that have been combined through mergers and acquisitions over the years. The big companies have the resources, but they have a confounding complexity of existing piping that drives their business. Smaller companies may actually be in a better place to make the needed transformation.
An insurance product is nothing less than a promise. You can’t see it or pick it up, but people are paying money and giving their data so that you can fulfill a promise. If you cannot pay the claimant when they deserve it (say irrational pricing ends up bankrupting you), or if a consumer’s data gets in the wrong hands (if you pool inappropriately with external carriers), you have done a significant disservice to the people who were explicitly counting on you.
For all of the reasons mentioned above, I would not pool data with other carriers, and I would look for external funding to help us develop the quoting and service interface that will keep us competitive not only with our current peers but with the emerging ones.
As my essay was about the effect of Nike’s strategy on Dick’s Sporting Goods, I’m curious to hear more about how you recommend Nike partner with retailers even as they pursue going directly to consumers. I think it will complicated for Nike to arrange good in-store positioning and marketing from retailers who feel they are actively being squeezed out. One idea is to actually differentiate the shoes that go DTC from the shoes that go through retailers, meaning that each type of product has its own channel and conflict is minimized. A recent Bloomberg News article talks about how apparel companies like Nike use various retail channels to hit different price points. To your point, Nike could likely use the DTC model and high-end, fashion boutiques to carry customized shoes and limited edition models. They could still use mass retailers like Dick’s to supply the more standard fixtures like Air Jordans, at a lower price point. Another idea could be Nike partnering with Dick’s and offering a “Nike Lab” as an in-store experience. Consumers could try on shoes for the right fit, and then combine various colors and designs on an interactive screen. If the supply chain is enhanced as anticipated, Nike and Dick’s could promise next-day, free delivery on the customized order. This approach would allow Nike to benefit from a physical retail presence, particularly useful when considering kids and families who are going to the retailer to make multiple, simultaneous sporting good purchases and wouldn’t otherwise consider a customized Nike shoe to be affordable or accessible.