Randy Thompson: Why 40 Percent of Today’s Top Companies May Be Doomed

Randy Thompson
Randy Thompson

As a member of Cushman & Wakefield’s Data Center Advisory Group (DCAG), I often attend educational seminars and events where I gain insights into where things are going in this critical, complex, and costly real estate segment. For instance, in December I attended the Gartner Group Conference in Las Vegas, and then in March I was in NYC for the Data Center Dynamics Conference. Although the two events differ in the audiences they attract, much of the messaging was the same at both. To me, this suggests the folks responsible for strategy (Gartner) and implementation/rollout/management (DCDC) likely have the same issues keeping them up at night.

Specifically, an overriding theme echoing at both conferences was that the American economy is evolving (or some might suggest devolving) into a digital industrial economy. That is, our factories that were once filled with hard-working, blue-collar, largely union-types are now filled with tireless, non-union hardware-types (i.e., robots) who are designed, installed, programmed and tested by white-collar, IT-types. I experienced this first-hand recently when my client put two Automated Guided Vehicles (AGVs) to use.

The AGVs transport my client’s manufactured products from the end of a highly-automated production line, cart it across the distribution center, and then deliver it to the intake lines of their third-party logistics warehouse operator. The only interaction the AGVs have with people is if someone gets in the robot’s way. In that case, the AGVs come to a stop and politely wait until the human-type moves aside. The AGV’s can operate 24/7, can drive themselves to the charging station when they get tired, and then can re-engage in the material handling process when output requires them to.

Expensive? Sure? But do they ever get sick, take lunch-breaks, go on strike, damage things on purpose, struggle with additions or depression or head outside for a smoke? No they do not.

The Internet of Things

Part of what is driving the above scenario is the second concept that was a scalding-ly hot topic: the Internet of Things (IoT). Simply put, almost everything with which humans will interact, from cars to hairdryers to coffee pots to toilets to lawn mowers are now—or will soon be—equipped to send data to and receive data from the Internet. Recall my April 12, 2013 blog where I wrote about the emergence of Data Center Infrastructure Management (DCIM) software. The IoT takes this concept to another level entirely, enabling all manner of devices to interact and communicate seamlessly.

For instance, say your car becomes aware of an engine problem, or perhaps routine maintenance is needed. Assuming the car is still under warranty (which the car itself would know, of course), it will check your Outlook calendar, see what your availability is, then contact the dealer, schedule itself a service ticket, add that appointment to your calendar, then send a text to your iPhone and an email to both your work and home addresses confirming the date and time you need to show up at the dealer. This sort of integration is coming quickly, and the sheer volume of data the IoT will be throwing off is going to border on unfathomable.

These two megatrends are leading to some very real stress within traditional U.S. IT teams. That is, historically, IT organizations and the infrastructure at their command must be bullet-proof. All hell may be breaking loose due to a tornado, a hurricane, an earthquake, or a military coup somewhere, but users had damn-well better be able to get to YouTube. As a result, IT organizations focused on process, methodology, documentation, and extensive testing before putting anything “into production.” These organizations are largely internally focused, slow to change, have a factory-oriented mentality (command and control), and must be ready for an audit on a moment’s notice.

However, the new economy requires IT organizations that are nimble, mobile-oriented, staffed with market-facing cross-functional tiger-teams that involve not only internal members, but—gasp!—they engage directly with customers in order to push out the latest app faster than their competition. And they’ll willingly do so whether an app is fully ready or not! These folks don’t have a factory mentality at all; instead, they have a laboratory mentality, where failure is embraced and learned from rather than sternly documented and filed into a personnel folder. And most IT organizations are ill-equipped to deal with this.

Dire Consequences for Status Quo

Steve Sassoon and his early-edition digital camera.
Steve Sasson and his early-edition digital camera.

Finally, one of the more startling comments Gartner shared was this: Forty percent of the current Fortune 500 companies will be out of business in the next 10 years. And quite frankly, that was something of a shock. But one reason given was that companies will not transform and embrace these new, digital economic realities.

To make their point, they told the story of the guy pictured here: Steve Sasson, who in 1975 worked for Kodak. The contraption he is proudly showing off in front of that Poindexter smile of his is the world’s first digital camera. Yep, a Kodak guy invented the thing. It used a cassette tape and took 23 seconds to record a single black and white image. When he showed his invention to the Kodak brass, their reaction went something like this:

“Well, jeez … uh, what was your name again, sonny?”

“Steve Sasson, sir,” he said, his goofy smile fading some.

“Okay, so Steve, listen. This box-thingy you have there is very interesting. But, um, here at Kodak, we’re in the photographic paper production and chemical business. Why in the world would we, or anyone else, ever want to take electronic pictures?”

At its zenith, Kodak ranked 18th on the Fortune 500 list (1989, 1990, 1992). It was dropped from the Dow Jones Industrial Average April 8, 2004, and on Jan. 19, 2012, Kodak filed for Chapter 11 bankruptcy protection.

The next wave is now crashing upon our economy. Gartner says 40 percent of our current top companies will go the way of Kodak and sink within a decade. Is it time to breakout the life-jackets? Unless you’re Michael Phelps, it may be.

Randy Thompson is senior managing director at Cushman & Wakefield Inc. Contact him at [email protected]

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