
Breaking up Industries, Building New Walls
With major acquisitions in other sectors, the tech giants are creating new, closed ecosystems. All traditional industry leaders should be on high alert
By Natasha Friis Saxberg, Director, Atea Future Growth
Twitter was not late to react with a smile, when Amazon’s Jeff Bezos went shopping in June and announced the purchase of Whole Foods.
While Amazon’s virtual assistant probably did not have a say, the joke hit the crux of the matter. In buying the supermarket chain, Bezos establishes yet again that his gigantic ecosystem makes it possible to run all aspects of a business in-house, while driving an expansion that demolishes traditional distinctions in platforms, content and entire industries.
Apple cars and tv shows
A number of other tech giants are following suit. The many rumors about Apple’s secret car project were recently confirmed by Tim Cook, telling Bloomberg that Apple is building “the mother of all AI systems” for a new, automated electric car. Whether Apple can eventually put pressure on the big players like Tesla, or deliver a complementary system, is too early to say. But several analysts predict that Apple has huge potential in the field.
One of the biggest shake-ups of the moment is of course in the media and entertainment industry. Lead by Netflix’s astonishing transformation from mail order DVDs in red envelopes to global streaming platform and content producer — all based on algorithms.
In its major bet on unique quality content, Netflix has taken over both Apple and Amazon and now, the online platform possibly threatens the iconic cable channels. In 2017 alone, Netflix will double the number of Netflix-produced shows with a budget of six billion dollars. Netflix has app. 98 million users worldwide, expected to grow to 100 million by the end of the year. Apple is also realizing that unique content is key: They just hired two Sony Pictures presidents to oversee “worldwide video-related efforts”.
Winners and losers
These efforts combined form the beginning of what will change the way, we consume, transport and entertain ourselves. If Amazon chooses to use its new bricks — Whole Foods’ many warehouses across the US — to expand its grocery distribution, it can benefit consumers in both access and speed to fresh groceries. No one beats Amazon on last-mile delivery — with a Prime membership, Amazon can deliver in as little as an hour in major American cities.
The losers? Companies that depend on a traditional business model, eg. packaging and logistics providers — Amazon will most likely use its own labels. Certain job functions in the warehouses might be replaced by robots, and not all suppliers will pass Amazon’s algorithms for maximizing sales.
No doubt that retailers in the US are watching Amazon’s acquisition process closely. Combined with the Dash Wand ordering tool, Amazon Go stores without cashiers and applications for building drone towers, Bezos and co. will have all the tools to entirely change the purchasing process, and eliminate brick and mortar supermarkets in the process — just ask the execs of Barnes and Noble.
That a few visionary people and corporations can change the way, we live, is not news. But that they are simultaneously creating closed ecosystems with total control of both goods and supply chain is news — and should put all traditional industry leaders on high alert.
The original post appeared in Danish Finans.dk on August 6.
Translated and edited by Ulla Dubgaard
