Vanessa, you did a phenomenal job of distilling Amazon’s drone delivery program to its core issues. Having worked to build out the drones program of a large company (AIG, insurance) over the last few years, I can really sympathize with the challenges you mentioned – regulatory requirements, ATC capacity, security, etc. A few thoughts:
To your question of whether consumers really need instantaneous delivery, I think the answer is a resounding ‘no’. That said, consumers want 30-minute delivery, and that fact alone is enough to provide the financial incentives for Amazon to build out a drone delivery program. The potential market size is huge.
Regarding security, I think most of the concerns you’ve highlighted are currently resolved by the FCC’s VLOS requirement. That said, many organizations have started to experiment with BLOS (beyond line of sight) flights. That’s where things can get dicey. Most drones flown commercially today are still pilot-operated, even in BLOS conditions. In other words, if anything does go awry (drone crashes, hacking, etc.), it’s easy to immediately address the mishap. The problem with this is that by using an operator, the labor requirement for delivery is quite high. As more of the process becomes automated, it becomes harder to control. Luckily, secure software systems to manage drone fleets are one of the fastest growing areas in the drone space today. The security question then becomes a standard cyber-security concern, which has been resolved in a number of ways in the past.
Tommy, thank you for sharing – this was a very thought-provoking and interesting piece. I am so impressed by Clever’s growth; half of US schools is no small feat, and the platform model of aggregating a number of different apps is quite brilliant. I think you’ve hit the nail on the head with some of the questions that you pose at the end of your essay. Regarding international expansion, the main problem I see is availability of data and internet. The fact that the US has taken on the initiative to increase broadband coverage is fantastic, but other parts of the world may not take the same approach for years to come.
To your question of whether Clever can adapt to new trends such as AI and machine learning, I am very optimistic. In my opinion, the most difficult part of the process is achieving buy-in from the customer (schools and students), since most decisions are made by teachers and school systems that are generally more risk averse and can be resistant to change. Clever has already far outstripped its competition in that regard. The remaining task is for it to continually challenge itself to push the frontier of innovation, and to constantly embrace new techniques and concepts. Given its track record, I have confidence that it can achieve its goals.
Caue, this was a great read and thought-provoking post. I’m quite interested in the 3D printing space; at face value, it has the potential to disrupt so much of traditional manufacturing, from small electronics and chips to giant pieces of machinery such as airplanes as noted here. It was surprising to me that the digitization of mechanical parts can have such far-reaching implications as a potential defense to isolationism in the international trade area. To your point about the increasing expertise and power of the network, I believe that as 3D printing becomes more common, it will produce a snowball effect; greater usage of 3D printing will entice technology companies to increase the pace of technological innovation on the equipment, resulting in price drops, which then incentivize customers to shift more manufacturing process to 3D printing, and on.
To the final question that you posed, I am fairly skeptical about the risk that government pushback against digital printing poses. Any issues of IP will not change, whether in a manufacturing plant or in a 3D print shop. And while local governments may not embrace the concept of fully-automated processes that may remove the need for traditional labor-intensive factories, I believe that it will be very difficult to pursue a regulatory response.
First of all, props on a very well-written essay and apt username – coffee really is life (at least here in business school)! I think your points on Starbuck’s efforts to increase sustainability are very interesting, and I appreciate that you highlighted both the efforts made so far as well as the challenges that the company has encountered. It’s heartening to see all of the positive changes they have made to date. On the flip side, though, you alluded to the palm oil issue, which I want to push on a little further. Starbucks has a financial incentive to buy the lower cost, less-sustainable palm oil. Going with the more sustainable option produces positive externalities, but will that be enough to overrule pressures exerted by investors and other stakeholders? Where does the balance between sustainability and financial prudence lie?
Your question “is any of this enough?” is so profound and thought-provoking. How can Starbucks bring other companies and organizations along in its journey toward sustainability? You mentioned that it is pushing progressive climate change policy by founding BICEP; that is a start. But from an economic perspective, my opinion is that other organizations will need more financial incentive to front the fixed costs needed to source new materials, kick off additional initiatives, etc. How can they be motivated to do so?
Extremely well-written and thoughtful piece, JS. While I agree with some of the earlier comments that the Trump is unlikely to affect changes in NAFTA that would materially impact our ability to trade with Mexico, I’d like to push back on Grant and a few others’ comments in that I think the potential downside is quite real and should not be ignored. My knowledge of natural gas pipelines and trade agreements is limited, but from what I understand, sourcing new international projects and constructing alternative pipeline options outside of North America are challenging tasks, to say the least. In addition to high upfront costs and regulatory uncertainties, the gradual global shift toward sustainable energy will also decrease the viability of natural gas pipelines in the medium to long term. With infrastructure and distribution channels already in place between US and Mexico, there are significant advantages to continuing the status quo.
That said, I think alternative energy is an area that the ETP should definitely consider sooner than later. As you mentioned, it’ll be tough, but as natural gas reserves are depleted and green energy becomes the standard, ETP will need to adapt to the changing marketplace to remain solvent in the long term.
Really excellent post on a fascinating topic, Julio! And I think the topics and questions that you raise are very relevant ones. Specifically, I’d like to dig deeper into the economic ramifications of these sustainability efforts. We’ve learned through some in-class cases that doing the morally “right” thing may not be equivalent to performing the action that’s best for profitability and for shareholders. In situations where the two forces are at odds, I’d be very interested to learn how stockholders would respond. As of last year, Starbucks asked investors for almost half a billion dollars (around $496 million) worth of bonds to fund its new sustainability efforts . Insofar as both bond investors and shareholders are concerned with maximizing economic value, I’d imagine that they would want some financial benefit from Starbuck’s sustainability efforts.
As Starbucks moves toward new agricultural techniques and partial vertical integration, it will almost inevitably suffer some growing pains in the process of building unfamiliar skills. Even long term, it is uncertain whether sustainable farming will achieve the same level of output as achieved by earlier methods. In the event that output decreases, will the positive externalities suffice to convince shareholders to stay, or will they demand change in the opposite direction?