November 15, 2019 (Gunnar Ulson – NEO) – At first glance the Danish toy company Lego doesn’t seem to have much to do with paradigm shifts in technology. Yet a recent incident illustrates the march forward of modern technology and the threat it poses to not only well-established but inflexible companies like Lego, but to entire industries and their collective impact on global economics.
Clinging to Antiquated Business Models
Lego has recently mounted an intellectual property (IP) crusade against 3D designers sharing Lego-style creations on free online 3D model libraries. People download these designs and 3D print them out. It should be pointed out that many of these designs are highly unique and are not merely replicas of products Lego sells.
Some online 3D model libraries immediately capitulated to Lego’s legal notices to take down the various designs.
One online 3D model library, MyMiniFactory, not only initially ignored the take-down notices, it created a contest challenging designers to come up with an alternative modular building block system (like Legos) that would be open source and free for others to download or base new designs off of. The alternatives developed will also be free from Lego’s aggressive IP crusade.
ALL3DP, a 3D printing news website, reported in a recent article that:
The “OGEL” beyond the brick competition is a playful dig at Lego, which recently sent infringement notices to popular maker hubs like Cults and MyMiniFactory.
Lego will most certainly survive the OGEL competition but the fact it pursued an aggressive legal campaign alienating enthusiastic fans of its products suggests 3D printing technology may have been at least perceived as eating into Lego’s profits or impeding future growth.
Without doubt technology like 3D printing, especially as it improves and is more widely adopted, will pose as a growing problem for companies like Lego who produce relatively easy products to replicate. Lego’s instinct to attack rather than adapt is a mistake repeated by many companies who refuse to accept waves of change.
Technology Transforms Industry Dynamics
Before 3D printing, the Internet and file sharing transformed the media industry.
Movie studios and recording companies still claim to be making large profits after waging their own very aggressive legal wars and undergoing a painful, awkward transformation to adapt, but the fact is the Internet and file sharing has forever changed markets, consumer behavior, and the respective market shares of once prominent and uncontested media titans.
Yes, big-media is still making profits but the percentage of those profits versus the vastly expanded media market the Internet made possible is relatively smaller. It is a market where individuals can just as easily promote themselves and reach millions as any large studio. Big-media still has a large piece of pie, but the whole pie itself is much larger with many more people getting their own piece.
For-Profit vs. For-Purpose
As technology transforms different industries, large companies will have to accept that profitability and market share will shrink and the notion of perpetual growth for the sake of growth is no longer feasible. Profits are obviously important for a business but a business model that places purpose first will thrive as long as it is achieving that purpose and is profitable.
Such reformation will (and does) attract investors. These are investors who believe in the purpose of the company rather than see the company merely as a target to be strip mined until exhausted, discarded and moved on from.
Western corporations, having enjoyed supremacy in both profitability and market share, now face a growing number of similar businesses within their industries springing up not only in China but in virtually every developing nation as well. They face shrinking market shares, stagnant profits and stalled growth and because these three metrics define their purpose, they are panicking.
American auto companies, for example, who exist to maximize profits for their investors and just so happen to make cars as a means of doing this, should probably have been out of business years ago. Government bailouts have kept them alive artificially. But as nations around the globe begin making their own cars, the goal of perpetually expanding profits and market shares will no longer be feasible (and some can easily argue for Detroit, it already isn’t).
Newcomers leveraging the latest in manufacturing technology will not only shrink incumbents’ market shares, they will also outcompete them in a variety of ways.
A car company like Elon Musk’s Tesla has a purpose; to make affordable electric vehicles and to spur the adoption of EV’s worldwide. The company needs to make profits to survive and thrive, but Tesla’s purpose has been put first. Tesla can and does brag about profitability when it reaches various milestones, but it demonstrably doesn’t seek to achieve these metrics for expansion’s and profit’s sake, and especially so at the expense of Tesla’s purpose.
Each Tesla car model released is the result of groundbreaking research and development and a leap ahead of previous models, unlike Detroit which basically sells the same model of car for years at a time with mainly cosmetic changes made annually for marketing purposes.
Tesla may not achieve spectacular results in terms of growth and profits, but it is a more sustainable business because of its approach. Tesla is a business that attracts much healthier investment, investment that believes in the company’s purpose. As long as that purpose is being met, investors continue investing. Tesla also enjoys an almost fanatical consumer base because of these factors.
SpaceX, which is also headed by Elon Musk, is likewise a newcomer to an industry monopolized by deeply entrenched incumbents. The aerospace company went from going nearly bankrupt after struggling to get its first rocket into space to overtaking all industry competitors in annual launches.
SpaceX has not only outcompeted its competitors, it has developed innovations its competitors had declared “impossible.” This includes innovations allowing for the recovery and reuse of SpaceX’s Falcon 9 first stage rocket, a process that has become almost routine now and a process its competitors have so far failed to match.
SpaceX is not nearly as massive as competitors like Lockheed Martin or Boeing, both members of United Launch Alliance. Despite this, SpaceX is fulfilling its purpose, transforming the aerospace industry at a break-neck pace, reducing the cost of accessing space and is still profitable.
Again, because of SpaceX’s revolutionary approach, it has attracted massive public support, something competitors have attempted to do, but by emulating superficial aspects of SpaceX’s public relations strategy rather than adopting the for-purpose fundamentals determining SpaceX’s overall direction. Just as in the auto industry, aerospace incumbents who faced no competition and driven only by profit see the notion of investing heavily in innovation as a needless expenditure.
Complacency vs. Competition
As technology continues to advance, and the pace of advancement itself increases exponentially, antiquated approaches like hording intellectual property or placing profits ahead of purpose and innovation will increasingly threaten not only industries that continue to do so, but the local and national economies they reside in.
America’s long-established auto manufacturers, aerospace industry, IT sector and many more are facing growing challenges both from local newcomers and emerging competitors abroad specifically because of this. Since many of these companies also exert significant influence over US foreign and domestic policy, the undermining and erosion of their businesses will ultimately transform the nature of their influence and US policy at home and abroad in profound ways.
The few US firms taking up the challenge, like Tesla and SpaceX, prove America is still capable of incredible things, but will continue to suffer until companies like Tesla and SpaceX become the rule rather than extraordinary exceptions.
Developing nations abroad have a unique opportunity to take advantage of emerging technology and the feet-dragging of old monopolies in nations like America and level the playing field globally. Whether it is something as mundane as plastic building blocks or something as cutting edge as rockets and electric cars, significantly disrupting even the largest most established monopolies on earth is now a possibility.
Much of the tangible change we have seen from unipolarism to multipolarism is owed to nations doing just that.
Ulson Gunnar, a New York-based geopolitical analyst and writer especially for the online magazine “New Eastern Outlook”.