Boeing is trapped between a groundswell of “America-first” manufacturing sentiment at home, and a fiercely competitive environment in China—its largest growth market for commercial jets. How the aerospace juggernaut handles this politically charged opportunity will determine the company’s growth prospects [...]
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I also support Bismah’s skepticism of Nestle’s commitment.
Apparently, in 2008, Nestle Water Canada ran an ad claiming that “Bottled water is the most environmentally responsible consumer product in the world.” It also doubled down on the message that its plant-based plastics is less damaging to the planet than other types.
However, as The Guardian points out, only about 31% of plastic bottles end up getting recycled. Thus, it’s quite ironic that the poster child of environmentally friendly corporations actually creates millions of tons of refuse each year. Granted, in an industry like Nestle’s some sort of environmental footprint is necessary. However, is Nestle trying to capitalize too much from its actions?
It’s interesting that Boeing is pursuing this strategy at home, while it faces similar obstacles abroad. On one hand, it is interesting to see many commenters supporting US’s trade restrictions, but I wonder if the consensus shifts when people understand the reciprocal pressure that China places on Boeing. (1) In the last few years, Boeing has had to open up its first non-US manufacturing facility, and it may be induced to engage in technology transfers with China’s state-owned airplane maker. At the core of this situation, China is keen to acquire advanced technology and the United States is keen to protect its jobs — these two fundamental orientations define each of their protectionist policies towards foreign airplane makers.
To Lucas’s point, though Wal Mart may have strong point-of-sales data, this information likely isn’t tied to a person and the richness of his or her attributes. Whereas Wal Mart may know that person X love Colgate over Crest, and Fritos over Cheetos, Google likely knows that person X is a middle-class American from Baltimore. The magic can happen when Walmart and Google analyze their sales data and user attributes in aggregate! In fact, with the marriage of this data would likely be much more powerful than anything that Amazon has.
To Isabel’s question about Wal Mart potentially losing power to Google, I also wonder the same thing. At first blush, this seems like a pretty symbiotic relationship. From an economic perspective, comparative advantage would suggest that Wal Mart and Google may want and need to stay in their respective swim lanes. For Google to truly replace Wal Mart, it either would need to develop a new vendor partnership network, or it would need to slash its margins and invest in brick-and-mortar stores itself. For Wal Mart to replace Google, it would need to become a consumer data behemoth. From this perspective, it’d appear that there is enough inertia to keep both players safe.
That said, with enough sales data, there is a chance that Google, in the long run, could disintermediate Wal Mart entirely, and just work with manufacturers directly.
Adding to Noemie’s second point, I also agree that that cultivating a strong talent pool will be McKinsey’s biggest challenge. Up until this point, the Firm has done a marvelous job in crafting an organization that has healthy uplift and turnover. Through its up or out model, frequent review cycles, and clear criteria for promotion, McKinsey is a well-oiled machine.
However, I wonder how well this model can be adapted to a more complex org, consisting of UX Designers, Data Scientists, etc. Adding in the fact that tech firms often compete for the same talent with generous stock-based compensation packages, I am curious how McKinsey will deal with the challenges of assessment, advancement, development, and compensation.
Great article! I also liked Jonathon McCarthy’s point about the potential for this 10 percent improvement penetrating the entire mining industry, and the subsequent impact on global goods production. I finish this article feeling optimistic, yet curious about how it is to be done. I see two challenges in particular: implementation and successive roll-out.
In terms of implementation, I am curious how Rio Tinto would pursue this from a human capital, physical capital, and technological capital standpoint. I’d imagine that the firm doesn’t currently have the core competencies to execute on this successfully. Moreover, I’d imagine it is tough to attract the right talent internally for global deployments. Is Rio Tinto to work with tech companies or tech services companies? If so, what is the longer-term plan? Would Rio Tinto try to build competencies in-house? Either way, I wonder how this translates to the cost-effectiveness of this initiative.
And in terms of roll-out, what is the true cost of aggregating data at scale, when so many of these mines are in the most remote parts of this planet?
Again, I am so enthused to read about the potential of this initiative! I am curious how its implementation may translate to actual savings.
Building onto your first open question, I wonder if Coca-Cola is the right player to even test out IoT at scale. In some ways, there is a first movers *disadvantage* to innovating for a marginal improvement in one’s cost structure.
To this point, I am curious what Coca Cola’s business case for its IoT investments look like. Does the executive team believe that this will radically transform its cost structure, or does it believe that this will be a marginal improvement? If it’s a marginal improvement, perhaps Coca-Cola should not take on the risk of its endeavor. As “Test” mentioned, Coca-Cola may find it challenging to find the right challenge. Why not leave this challenge for someone else–perhaps a logistics company like Amazon, UPS, or Fedex–to perfect first?
That said, if Coca-Cola truly believes this can be transformative, it certainly makes sense to do this!
I am quite impressed with how aggressive L.L. Bean has been in digitizing their business model! I do wonder, however, what the incremental benefit of this strategic initiative is. This clearly is a costly initiative. It requires massive investments in technology and human capital. However, L.L. Bean is a private company. It does not face the same pressures of a publicly traded firm. To this end, I wonder what the true benefit of hyper-optimization is?
For large firms like Gap, I completely understand why this makes sense. For fast-fashion firms like H&M or Zara, I also understand why this makes sense. For a privately owned firm that could probably get by with just producing inventory for 80% of expected demand, and just running out of stock, I do wonder if this investment makes the most sense.
Great article. Rightly so, the author calls out the challenge of innovating against the backdrop of razor thin margins. However, I wonder if it is a safer bet to focus on the application of big data for cost reduction. A recent Forbes article describes the potential for smart sensors, big data, and predictive analytics to help with flight maintenance. (1) Given the aging US airline fleet, perhaps it makes more sense to focus more on cost savings, as opposed to revenue optimization. I wonder if the expected upside of cost reduction outweighs the expected upside of revenue optimization. Moreover, I wonder which of these two strategies would have the higher probability of success, and the lowest cost of deployment.
Great read! I agree with Toffel House’s concern about obsolescence. It’s often challenging for large-scale infrastructure projects to keep pace with technological innovation, by virtue of the sheer expense of ripping out and replacing existing investments. I wonder how long South Korea ought to keep its existing replacement before it makes economic sense to upgrade its infrastructure once more.
I also really appreciated the author’s point about cyber security! PLCs and other common aspects of “smart infrastructure” projects have been shown to be hugely vulnerable to cyber-security threats. I’d be curious to better understand South Korea’s broader cyber-security defenses, especially given that it has an adversary up north that has a formidable arsenal of cyber-weapons.
I also agree with Noemie and Michelle’s points: if “necessity” is the mother of invention, “adversity” may be the father of innovation. That said, I am curious to see how these environmental realities will jibe with the more “emotional” nature of the wine industry. In a world where the value of a French Bordeaux stems from the soil its grown on, how will environmental change impact brand perception and pricing? This calls into question a very fundamental concern — what makes wine, “wine.” Its soil and heritage, or its flavor?
Thanks Bismah & Tim,
You rightly pointed out that the structure of Boeing’s current plans for final assembly in China is through a JV with Comac, but I think the true test is whether they forge a deeper partnership that includes tech transfers. What characterizes the Bombardier/Comac JV is the extent to which Bombardier actually shared its core technology.