Addressing Disruption in an Age of Technology & Science

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[Music] all right let's continue our conversation uh and tilt it a little bit towards emerging media with Jeff Cole who is an expert in that he serves as an adviser to governments and leading company around the world as they craft digital strategies he's here today to identify where the next wave of disruption in this highly disrupted workplace and environment will occur Welcome to our stage Jeff Cole thank you thank you wow what speakers and as I learned during the break what an audience and Randy what great perks as soon as I'm finished they're going to take me out there where all the exhibits are and give me new hips new knees new

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ankles so this whole conference is about change and I'm interested in how people respond or more often fail to respond to change and when you're talking about change there's two kinds of change there's Innovation which usually comes from a competitor and figures out a way to improve something and then there's this ruption which comes seemingly from nowhere turns business models upside down makes continuing what you've been doing almost impossible and that's what I want to focus on disruption comes from unexpected places we would have expected the disruption of the retail business to come from Walmart or Target not an upstart book seller in Seattle we would

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have expected the disruption of the taxi cab industry to come from Yellow Cab or Herz or Avis not a bunch of tech guys who knew nothing about transportation in the Silicon Valley and Automobiles we would have expected the disruption of the automobile to come from General Motors or Toyota not a South African immigrant who knew nothing about cars and let me talk about Elon musk for just a second we of course could do the whole talk on Elon Musk Elon Musk is a quadruple disruptor almost the Thomas Edison of the 21st century but if you look at musk as a quadruple disruptor I think what makes him unique is he's a genius he's a Visionary he's an [ __ ] and he's an immature brat and if you took any one of those pieces away the

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whole thing would collapse the [ __ ] is every bit as important as the genius and incidentally an apology to my mother I don't like using the word [ __ ] on stage in public but it's the only word that really describes him and and incidentally if you want to know about the immature brat if you don't haven't been in a Tesla go on Google or go online and say show me Tes Tesla's farting function Tesla has a farting well you can see it for yourself anyway the quadruple disruptor comes from first when he was at PayPal disrupting payment systems and making cash much less necessary and then Tesla has been a triple disruptor the obvious disruption the disruption of the internal combustion engine by electricity but it's also he's been a disruptor because

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Tesla sells its cars directly to Consumers disrupting the entire dealer Network we'll talk about that in a minute and it's also a disruptor because Tesla has become the biggest automobile company on Earth and has never spent a penny on Advertising that's pretty remarkable when you look at the billions Toyota and Ford in General Motors spent so when we talk about where disruption comes from my favorite quote on that came from Bill Gates not known for all of his great quotes but in 1998 Bill Gates was asked when he was the CEO of Microsoft who keeps you awake at night is it AOL is it Intel who really makes you worry and Gates very arrogantly and dismissively said I don't even think about those guys

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he said you want to know who keeps me awake at night and this was a remarkable quote although Gates didn't realize the power of what he was saying he said you want to know what keeps me awake at night it's two guys in a garage in the Silicon Valley and what he didn't know because there was no way he could have known literally as he was saying that there were two math excuse me computer science PhD students at Stanford who were in a garage creating a new algorithm for search that would do so much to disrupt Microsoft as well as the advertising business and television radio newspapers and magazines that would do so much to disrupt encyclopedias telephone books and a thousand other things well it turns out there are three garages in the Silicon Valley that are now historical landmarks

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the Sergey Brin Larry Page garage which belonged to one of the waji sisters in the late 90s in the 70s it was the Steve Jobs Steve wnc garage which belonged to Jobs's family and in the 30s so we're going way back 90 years in the 30s it was the huet Packard garage and huet huet Packard started their company David huet and William Packer started their company when they got an order for an oscilloscope from a guy in Southern California who started his company in a garage in Glendale Walt Disney well the importance of this is there's a lot more garages in the Silicon Valley and a lot more garages in New York in Israel and Australia and China and hopefully the

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next Innovation will not come from two guys it always seems to take a team but it will come from two women in a garage and so as we look and we're starting to see that incidentally so as we look at disruption one of the first things we learn is Le in the digital world is Legacy means nothing uh back in 2000 when Amazon was primarily a book company Barnes and Noble saw the threat they saw it much too late but they saw the threat and they decided to compete by matching Amazon on price and shipping but even when they offered exactly what Amazon offered people preferred to buy from Amazon it felt newer it felt fresher it felt more digital more cool AR Barnes &

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Noble learned a painful lesson that a 100 years of service in the bookstore meant nothing online and may have even been a liability banks are learning that as people move out of banks that the legacy of going into the branch means absolutely nothing so I said I want to look at how people react to change and as people react to change the model I thought that applied the best came from Elizabeth Kubler Ross the Swiss psychologist who talked about the stages of death and dying and disruption can be like death and dying some people say her work doesn't isn't relevant anymore and wasn't completely accurate I'll stay out of that debate there were Physicians here who can talk about that but when she talked about the stages of death and D dying she talked about denial oh I

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couldn't really be sick I feel great anger how dare this happen to me I'm a good person bargaining dear God let me get through this I'll be a better person I'll go to church more often I'll give money to philanthropy depression which speaks for itself and anger well as we look at disruption the first phase we see is to deny the threat and double down how could anybody challenge us we're so successful we've been around for a hundred years my favorite example of that is the music industry 25 years ago the business model of the music industry that most of us grew up on when we were buying LPS and CDs the business model of the industry was nothing short of EX abortion the industry said you like two

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songs great but you have to go out and buy 12 songs and spend $17 people didn't like paying for music they didn't want but there was no choice and had they been given a legal choice to buy song by song I think almost all of them there were always be people who will steal would have paid a dollar a150 per song but the there wasn't a legal Choice nabster came along let you do it illegally and people jumped on Napster not to steal but they didn't want to spend money for music they didn't want the industry rather than realizing The Jig Is up we've made hundreds of millions of dollars let's appreciate that and now we have to adapt they doubled down they went after nabster using

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use of the internet and tried to have their service blocked they had some of their customers arrested they fought this every step of the way until they began losing so much money and saw the sales of Music disappear that they finally made a deal with a guy who had been courting them for a couple of years Steve Jobs and moved into iTunes and incidentally iTunes where people flock to and didn't have to steal itself got disrupted a few years later by streaming in Spotify sometimes companies double down and are so angry they do something absolutely remarkable they try to have their competition made illegal taxi cabs rather than realizing they provided bad service they frequently had old cars you never knew when the taxi was coming and saw what Uber did that solved all of

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those problems and let you pay seamlessly rather than realizing we've got to up our game and change they tried to have Uber made illegal around the world and they succeeded for a number of years but there were more people who liked Uber than were threatened by it so then they held on longer than they should to the most lucrative Uber route or the taxi route taking people to and from the airport which has only become legal in some places in the last couple of years I mentioned Tesla and automobile dealers dealers went to court and have made it illegal in Six States to buy a car directly from a manufacturer simply because they want to protect their Turf rather than change and I'm sure most of you know if you go you can go to costco.com Amazon or Walmart online and

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buy a casket that can be delivered not to your home in seven days no one wants that but can be delivered overnight to a funeral home at an 80% discount so funeral homes have gone to local government and have tried to make it illegal to be able to buy a casket from anyone other than a funeral home that's a pretty good business plan the threat has come let's just make them illegal the second phase is you can buy up your disruptor when I was a kid there used to be conspiracy theories that someone invented engines for cars that you could put water or some kind of almost free substance according to this urban legend or conspiracy theory but the General Motors or Exon or some mysterious Force bought up this technology and killed it I don't think

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that was ever true but we do see people buying up their competition Apple the biggest company on Earth has never spent more than $2 billion on an acquisition when they bought beats the headphones and streaming company compare that to Facebook which spent a billion dollars for Instagram $2.2 billion for Oculus the headset company tried to buy Snapchat for Evan Spiegel for $3.3 billion but he wouldn't sell and then bought what's apppp for $24 billion that's buying up your competition third phase is sometimes you have to concede the business model doesn't work anymore Kodak 25 years ago one of the three best brand names on planet Earth was is there anybody who couldn't recognize Kodak from the orange

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and yellow packaging all of us in here over the age of 50 with a few exceptions and our lifetime has spent $50,000 on photography most of it going to Kodak on cameras film processing albums teenagers today will take 10,000 times as many photographs as we did and their total lifetime expenditure on photography will be less than $50 when that happens it's just over there's you just can't survive and Kodak still has some medical business but it's out of the consumer business sometimes the business model the music industry can't really sell you much music anymore the money is made through concerts goes directly to more directly to the artist and then the last phase of this is

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sometimes you can change sometimes you can disrupt yourself in photography Fuji the second biggest uh film company on Earth they F they got of course the same pressures and the same problems Kodak had but they moved into other businesses they discovered and this is an incredible story it's much too complicated to tell in a couple minutes but they discovered that the manufacturing process for film and the ability to create small technology was almost identical to the manufacturing process for weight for IT Cosmetics and Fuji became one of the biggest cosmetic manufacturers in the world they also moved into Health Care they completely disrupted themselves another example of that Best Buy Best

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Buy could write its own obituary it saw the death of its biggest competitor Circuit City Best Buy used to see people come into these big box stores with very expensive rent and expensive neighborhoods spend a half hour with their salespeople looking at televisions and sometimes their customers didn't even have the decency to leave the store before they went on their phones and ordered the television set from Amazon Best Buy brought in Intel Samsung Sony to take over sections of the store to pay the rent on those sections of the store those companies staff the employees Sony would pay for the employees or provide the employees to be in the Sony section Best Buy cut its cost immeasurably they're now building much smaller stores instead of 25,000

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Square ft 3500 Square ft the story isn't over but they should have been gone 10 years ago and they're still here the disruption at least has worked till now so what can you do if you're faced with disruption this of course we could take a week training Executives but the quick version is first expect to be disrupted the best example I've ever seen of this is Google when Larry and Sergey developed uh Google it was not the first S search engine there already was uh Yahoo alav Vista ask GES they just did it better so they were always aware that somebody else could come along and do it better than they did so for 23 years they expected we used to call this the

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schmole challenge that some company called schmole would come along and do what Google did better last year schmole came along it's just called chat GPT and they really weren't as ready as they should have been Google has issued a code red they've brought Larry and Sergey back to lead the challenge Google is not going to dis appear their problem is in every country in the world except three they have 90% market share I think the exceptions are Cuba Iran and North Korea when this all shakes out Google will still be there they've got barred there but they'll end up at 35% market share they're getting disrupted but you have to expect to be disrupted the second thing leaders of

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companies or countries or even individuals have to do is assess every element of your business from supply chain to actual retail if you sell to customers or B2B look constantly for change the weaknesses the third thing that people have to do to survive uh um disruption is to understand that you may not make as much money tomorrow as you did yesterday that's painful but Michael Dell understands that the laptop computers he sold you 20 years ago for $2,000 he now can only sell to you for $400 Sony and Samsung know that 20 years ago or 18 years ago the 46 in television sets that were this thick of going on

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your wall and sold for $6,000 are now $885 in this thick and sell for $700 so you have to understand that things don't always make as much money in the future as they did in in the past and the last stage is leadership very briefly because I know we're out of time when I was was working with banks that were being disrupted and Banks realiz I I discovered Banks don't really provide very good service they don't know much about their customers I put together a list of things I thought Banks had to do to survive I did that independently but then I went and shared it with the CEOs of some of the world's biggest banks and as I told them what I thought they needed to do they said you're right that's exactly what we need to do

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there's only one problem if we do what you tell us to do it will immediately cause a cessation of profits we will make no money for the next five to 10 years said keep in mind the average tenure of A bank's CEO is three years I will be gone long before anything can change the COO said to a person I have no ability to focus on anything other than the next 18 months and if you think about it the only real exceptions to that are mostly the tech companies where Google knows Larry and Sergey will be running the company for the next 40 years Amazon knows Jeff Bezos will be running the company even though he's he's is this rumored that he will come back to Amazon as soon as he

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finishes the world's most public midlife crisis uh but what a time um Facebook knows Mark zukerberg will be running the company and but for his tragic illness Steve Jobs would still be running Apple so it takes real leadership to understand and to deal with the threat and sadly we see all too few examples of that thank you very much what an honor to be [Applause] [Music] [Applause] [Music] here