Interesting essay, it touches on both the topic of isolationism and challenge of digitization, and truly poses an “Innovator’s Dilemma” for the company – how to innovate and build new disruptive products while maintaining a strong core business. This challenge reminded me of the IBM case and the company’s aspiration to regain relevance in the high technology sector through investments in AI and digitization. While I applaud Infosys’s efforts on starting a VC-like fund, I think the challenge with this approach is that these investments will likely take longer to provide meaningful returns to the parent company.
In the near term, there might be potential to explore building a stronger base in markets less prone to isolationism soundbites like Australia, Canada, and Mexico, or focus on developing and quickly growing markets of India and China. While Infosys will likely have to settle for thinner margins in developing markets, this strategy will allow them to better weather the storm in the near term and provide meaningful work to their employees, bridging the gap between today and the promise of AI & big data payoffs in the future.
You raise an interesting broader question that many companies are facing today – does a company change their strategy to immediately accommodate major political changes or wait it out until the tides turn? In relation to Amazon and specifically their planned warehouse in Mexico, I think the answer depends based on how much warehouse capacity Amazon expects to use for the U.S. market vs. Mexico and other countries in North and Central America. While the options presented in the essay are binary (either go forward with building the warehouse or cancel the project), I think there is a middle group of building a portion of the warehouse in the near term that allows to serve domestic Mexican demand and potentially other nearby countries besides the U.S., leaving the option to build out the rest of the facility later on when there is more certainty of NAFTA policy changes. This strategy allows Amazon to preserve the momentum of expansion and leverage all the work done so far on this project, while hedging potential political risk.
Besides revolutionizing retail fashion concept with a subscription service model, Stitch Fix also innovated in the sector by enabling customers to access less-known up-and-coming brands, providing unique items to customers and constantly changing their inventory . In the age of Amazon domination and the convenience of getting majority of your products and services from one stop shop, I think Stitch Fix’s sourcing from niche labels is one of the most defensible aspects of its business model. Given that personal styling likely requires a human element to truly connect with the customers and build an emotional connection to the brand as stated above, I think Stitch Fix should invest more of their big data / AI efforts into identifying emerging promising brands to bring into their product offering to continue offering exciting and unique products (e.g., by following Instagram influencers and monitoring activity on their fashion posts, evaluating traffic of new labels of Pinterest, etc.).
Reading this essay made me think of Clay Christensen’s “Innovator’s Dilemma” that explores how an established company can still disrupt and innovate while maintaining it’s core business that is serving as a stable cash cow. While all things digital and AI are hailed as the next revolution and a lucrative business opportunity, there are very few players, if any, currently making money in this sector. Unfortunately for GE, this reality means that the company needs to keep heavily investing in the near future without any meaningful return. However, since hardware is becoming commoditized in vast majority of industries, GE likely has to pursue value-added software and digital offerings to stay relevant.
I think the most promising approach to tackle this challenge is to identify a business unit within GE that has mostly maximized it’s hardware advancements (e.g., wind turbines, etc.) and partner with established customers for the product to co-develop advanced predictive software that will provide additional value for the end user. Since GE as an OEM is often removed from the actual use / operation of the equipment (besides their maintenance contracts mentioned in the essay), I think it is critical for them to partner with equipment operator to identify additional opportunities for improvement. This surgical approach would focus of identifying and delivering concrete value for customers, as opposed to developing a single “fit all” platform, making it easier to monetize these products in the near term. Later, GE could distill and aggregate lessons learned from these individual AI endeavors, if it makes sense to generalize digital / AI offerings across multiple products.
I could not agree more with Alison’s sentiment – if I had one wish for the world, it’d be that everybody was vegetarian – better for the planet, their health, and animals.
While I applaud JBS’s sustainability efforts that undeniably increase their costs and squeeze margins in the world of 99 cent hamburgers, I think they will only bring about incremental, negligible impacts. You powerfully started your essay with the most important takeaway: “The ingredient list for your average hamburger includes 15 gallons of water, 14 pounds of feed, and 65 square feet of land”. And while JBS is undertaking efforts to make their operations more sustainable, I think it’s quite hard to make a meaningful dent in the sheer amount of raw resources required to produce beef.
Because of the resource-intensive and environmentally-damaging nature of beef industry, I think the only meaningful sustainable answer is to more aggressively invest into more sustainable protein sources, such as plant-based meat alternatives and lab-grown meat. Beyond investment in disruptive companies that are making progress in these sectors, I think a powerful player like JBS is well positioned to direct some of their lobbying efforts to proactively shape regulation and / or standards for lab grown meat. In addition to diversifying their current product portfolio, having meat alternatives will also make JBS more immune to financial impact of potential future climate change policies / regulations (e.g., a universal carbon tax that would dramatically increase JBS’s cost structure).
Reading this essay reminded me of our discussion in the IKEA case – and the conflict between profitability through growing sales of a fashion brand and sustainability of the business. As Lauren and Christine mentioned above, I don’t think that Zara’s existing customers would care about their sustainability efforts or would be willing to pay a premium for sustainably produced products. Additionally, I don’t think it’s in Zara’s best business interest to reposition their brand and make higher quality items that last longer, like Patagonia, since this approach would increase costs and will likely dramatically decrease sales.
Since Zara’s business model and customer promise are hinged on customers regularly changing out their clothes, I see the most potential for meaningful impact in initiatives that collect older clothing items and keep them out of the landfill. This initiative could be accomplished through different approaches, such as a subscription clothing service similar to StitchFix, collecting clothing items in clothing bins placed in stores, or pre-paid shipping for customers purchasing new products online to send in any old items. I think Zara can recycle these items and / or donate products that are in good condition to people in developing markets, where, coincidentally, Zara has majority of its manufacturing capacity, thus taking advantage of established distribution chain.