| | 1.2 Demand
03. Disruptive Technology | | |
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| 1.2.03 Disruptive Technology | | In the good old days a company would be proud to show a profit in its annual accounts. A modern company has no interest in profits - only long-term explosive growth. An objective is to ensure that every pound of income is correctly leveraged and invested to maximise growth. Where a company is to declare a profit and pay taxes on that profit, then the company is doomed to fail in the longer term. Every pound of profit and pound of taxes are lost investment opportunities, lost growth and a way for competitors to catch up. |
| New Era | | What most companies do is no longer cost effective and may not survive. | | A new era of disruptive technologies is enabling new companies to decimate established corporate methods of working. | | Old companies must continually aquire other old companies to be able to show growth on their balance sheet, but its imaginary growth caused by eliminating competitors. | | New companies are doing things in a very different way, doing things in a much more productive way and competing in an unbalanced way. |
| Examples | | Uber is the worlds largest taxi company but it owns no vehicles - old taxi companies that own vehicles cannot compete in a cost effective way. | | Facebook is the worlds largest public media owner but it does not create any media content - old media companies who do create media cannot compete. | | Alibaba is the worlds most valuable retailer but it does not own any inventory - old retailers holding stock cannot compete. | | AirBnB is the worlds largest accommodation provider but it does not own any property - old accommodation providers cannot compete. |
| Modern Business | | Do not own anything that may become a liability or need maintenance. Subcontract everything, do not own the office, do not own a desk and do not own a computer - this kind of fixed asset is a long term liability. | | Hire people as and when needed by the "job" and not by the "hour" - never employ a person for any reason. Only work with people who own their own company and are responsible for their own tax matters. Help people to create and operate their own family company and take full legal responsibility for their own family. | | Never pay the national minimum (living) wage - only pay by the "job" as an undefined and variable duration. Never pay holiday pay, maternity pay, paternity pay, pension contributions, health insurance to anybody who may appear as an employee. Hire people in all parts of the world on a ten-dollars per job basis - disruptive companies are bigger than any one country. |
| Company Valuation | | In the good old days, the fixed asset valuation in the balance sheet offered a good idea of the worth of the company. Old companies may have had a PE ratio of up to 15. | | A modern company does not have fixed assets, but has intangible assets in the form of intellectual property, patents, trademarks, design know-how and data. Data is the intangible asset that can see a PE ratio of up to 50. | | A disruptive company with only ten people can be valued at many millions of pounds after just a few years. Earnings per head-count become meaningless when disruptive technology is involved. |
| How to disrupt | | The average garage has fixed assets of more than five million pounds on the site in the hope that a stranger passing will call in and buy a car. A disruptive garage would not hold any stock, they will not expect customers to go to them, they will deliver the car that their customer wants to the customers home or office. | | The average dry cleaners invests in massive cleaning machines and hopes that total strangers will drop in and ask for something to be cleaned. A disruptive cleaner will know each and every one of their customers, will pick up and return their cleaning according to what the customer wants. |
| Retail has changed | | Retailers that buy goods in the hope that a stranger will walk into a shop to buy those goods is very high risk - it will not survive in the longer term because eventually stock will be purchased that cannot be sold. Retailers that imagine they can "sell" a stranger a product they happen to have in stock it is imagine that all strangers walking into a shop are fools. | | Customers have become "buyers" - they welcome accurate education about products and services, but they will resist sales and marketing hype. It is easy to disrupt any retailer, just provide good educational information about product-services and the best price for product-services to be delivered at an agreed date and time. |
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