Accelerate - September 2014

Tony Seba - The future is going to drive itself

open this image in new window: Accelerate Sep 14 - Tony Seba

Tony Seba explains why he believes self-driving cars will disrupt several industries in the next ten years and how businesses will have to adapt their strategies to remain competitive.

At a recent lecture at the University of Auckland Tony Seba spoke about how clean technology and the convergence of several technologies will completely transform the transportation sector over the next ten years.

Tony is a well-known author, Stanford University lecturer and a respected business disruption thinker who also held two workshops in New Zealand to help business owners navigate and successfully steer their businesses in a fast changing world. He took some time out to answer a few questions about the opportunities and risks businesses face in a disruptive environment.

Who do you think will be the biggest winners and the biggest losers in this future scenario? And how do you ensure your business stays relevant in a disruptive environment?

Over the next 10–15 years the electric vehicle and the self-driving car will completely disrupt transportation as we know it. Imagine the transition from horse-based transportation to the gasoline car a century ago and you start getting the picture. The whole transportation infrastructure will change, and the whole value chain that relies on that industry will be disrupted.

Cars are parked 96% of the time today. It’s such a waste of resources, not just the money that you waste buying the car, filling it up, parking it, insuring it, and so on, but also the money we as a society sink in building and maintaining highways, parking spaces, and so on. Now imagine that an entrepreneur creates a company based on a car-as-a-service model: you use an app to call a car anytime anywhere and it will take you anywhere you want to go securely and inexpensively.

Why would anyone own a car in this scenario?

Take that scenario to the limit and we will need 80% fewer cars than we do today. Autonomous cars would need to park just for a couple of hours per day, and when they do park they don’t have to do it in the prime real estate areas like the central business districts.

The car manufacturing industry would essentially implode, as we’d need only 20% of the number of cars that are manufactured today. The car insurance industry would also be disrupted for two reasons: there will be 80% fewer cars than today and those cars would be better drivers than humans are.

Then the whole value chain of the car industry, such as repair shops, the automotive after-market industry, service providers such as gasoline stations, and petroleum products for automotives would be essentially obsolete.

As for winners, imagine that this is 1994 and I’m projecting the rise of the internet and the mobile phone – and the disruption of landline telephony, film photography, and bookstores. Think of the huge opportunities that emerged in developing technologies, companies, and business models that replaced and improved on those legacy industries.

Google, Facebook, Amazon, eBay, Apple, created powerful new technologies and business models that not just replaced the old order but substantially improved on it. Neither the Apple iPhone nor the Google Android existed ten years ago, now they have become disruptive platforms that own more than 90% of the smartphone operating system market and have spawned completely new industries based on millions of mobile ‘apps’. From Instagram to WhatsApp to Uber, entrepreneurs have created billion-dollar global companies that emerged from these new platforms.

The clean disruption of energy and transportation will similarly provide opportunities for entrepreneurs to build new disruptive products, platforms, and business models that don’t even exist today.

What is your advice to New Zealand businesses regarding disruption – how can they prepare themselves?

New technology paradigms enable new types of products, services and business models by combining technologies in ways that may not be initially obvious. Think of a company called Waze, which created a social model for traffic and navigation, where users share real-time information and alert each other to traffic hazards. This is something that could never have been done before. So there are big opportunities in imagining innovative uses for the new transportation paradigm and re-imagining things we do today in completely new ways.

The interesting thing for Kiwi entrepreneurs to think about is that now that we’re all connected via the web, mobile internet and the cloud, these emerging successful companies could come from anywhere in the world, not just Silicon Valley. Xero is a good example of a company that used these technologies and developed a compelling product that they could take global.

The thing to remember is that many opportunities are not clear early on. You have to be in the space, develop technologies, products and services in the space, and experiment with new business models until you come up with a unique offering that makes you successful. Once the rules of the game are clear it’s probably too late for you to be the winner in that space.

Neither the Apple iPhone nor the Google Android existed ten years ago, now they have become disruptive platforms that own more than 90% of the smartphone operating system market and have spawned completely new industries based on millions of mobile ‘apps’

With so many technologies and the rapid rate of technological developments, when do you know a technology/technologies has potential to disrupt your business?

That’s precisely what my work is about and what I teach. You have to pay attention to the exponential improvement rates of a number of technologies, the business models that they enable, and the innovative ways in which you can develop new products and services by combining those technologies and business models.

The mistake that most companies make is to think of ‘direct competitors’ in their market and product space. The major problem with that is that new technologies enable capabilities that not just substitute for their products but totally rethink the usage.

For instance, the mobile phone is not just a substitute for the old landline model. At first, the advantage was just mobility but, by adding new technologies like sensors, cameras, GPS, and internet connectivity, mobile phones became platforms for games, traffic navigation, and social networking. These are capabilities that landline phone companies could never compete with.

By using the same disruption framework that I teach, you come to the conclusion that similar dynamics are happening now in the auto industry. Electric vehicles are not just substitutes for the gas/petrol car. EVs are computer platforms that can enable a million new capabilities that the old internal combustion engine car simply cannot compete with.

Any technological trends that you think New Zealand can take a lead position in?

I think the opportunities are boundless. There are probably a dozen technologies that will change everything, including sensors, solar, electric vehicles and self-driving cars, artificial intelligence, robotics, unmanned aerial vehicles, 3D printing, energy storage, the cloud, big data, the internet of things, and so on, that I pay attention to. There are many others that you can pay attention to, especially in biotech. Put it all together, and I think that the next 10–15 years will see the biggest disruptions in industry and society since the first industrial revolution.

From a country policy perspective, it’s important to stop subsidising and protecting old industries and investing taxpayers’ money, assuming that the future will be like the past. It’s important to invest in people: education, research and development, entrepreneurship, venture capital, and immigration.

From a corporate perspective, executives have to assume that their business will be disrupted. The only question managers have to ask is: who will do the disruption? Will it be you or will it be someone else? Choosing to wait is choosing to be disrupted.

From an entrepreneur’s perspective, this is probably the best time in history to be an entrepreneur, as the opportunities are boundless. The key to winning will be to focus on a pain or need in the marketplace, then develop a product or service by combining technologies and business models in unique and compelling ways.

Updated: 4 September 2015