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New Tech Reshaping Old Industries

By Benjamin Shepherd on May 22, 2017

When the automobile first started motoring down the road, carriage drivers considered them a technological terror. Loud, fast and often navigated with reckless abandon, they scared horses, rattled teamsters and generally frayed nerves. Within a generation, though, there was nary a horse-drawn wagon on the road.

As with most new technologies, automobiles eventually become mainstream and “old,” requiring a refresh to remain competitive. In this case, old school internal combustion engines are transitioning to newer electric engines and even making becoming self-driving. Ironically, electric cars aren’t a new idea — in 1914 a Detroit Electric Automobile traveled 241 miles on a single charge.

It’s within this context that we address the big management change at Ford Motor (NYSE: F). The iconic automaker announced this morning that embattled Ford CEO Mark Fields would be replaced. Fields has been under fire for months as sales decline. Despite Ford’s investment of $1 billion into a joint venture with Argo AI, Fields also has been criticized for the company’s slow pace of integrating new technologies into automobiles. Since Fields took over as CEO, Ford’s share price has declined roughly 40% thanks to those worries.

Even more telling is the identity of Fields’ replacement. The board has tapped Jim Hackett, who has headed up the automaker’s Smart Mobility unit since early last year, to be the new CEO. Ford Smart Mobility has been working on developing technology for connected (think Uber) and autonomous vehicles, essentially making Ford’s currently “dumb” vehicles “smart.”

The fact that Ford’s board selected Hackett to head up the troubled automaker shows they clearly know which way the wind is blowing. I also wouldn’t be surprised if Tesla (NSDQ: TLSA) becomes the highest valued automaker in the U.S., even though traditional automakers have booked quarter after quarter of rising profits. Even if traditional automakers are more consistently profitable than Tesla and even if consumers have been slow to buy into electric automobiles, Wall Street is clearly rewarding those companies it sees as having a technological edge.

It’s not mere hyperbole: the day is coming when we’ll have to evaluate even old line industries in terms of the technology they’re creating and implementing.

Sticking with the potential of self-driving vehicles to reshape industries as an example, think about Waste Management (NYSE: WM). It doesn’t get much more “old school” than picking up and disposing of trash, but as autonomous vehicles become the norm, imagine the cost savings that WM could realize when trash trucks no longer require human operators.

That day will come — it’s a logical consequence of the advancing technology — and WM won’t have any choice but to adopt the technology if it wants to remain competitive.

Don’t be surprised by Ford’s choice for new CEO. We’ll see more companies faced with similarly tough decisions in the days ahead.

 


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Do nothing and suffer the agony of watching the profits you’ve accumulated over the years evaporate right before your eyes…

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