by Gary Mintchell | Jun 9, 2015 | Automation, Marketing, News
What Does It Mean When An Industry Consolidates?
For companies in the control and automation space, as well as manufacturing in general, acquisitions power growth.
Rockwell Automation became a factor in process automation through a number of strategic acquisitions. Siemens fulfills its digital manufacturing vision through acquisitions. ABB, until recently, pursued a growth by acquisition strategy. Schneider Electric, keeping pace with European rivals swallowed Invensys—and much to my surprise seems intent on not only keeping but even building its software presence.
What is the result of acquisitions in an industry? Consolidation. And the result of consolidation? Less competition.
Writing in Industry Week Michael Collins, president of MPC Consulting, asks, Is Manufacturing Industry Consolidation Stifling Competition and Innovation?
That is a fair question. I have been surveying the industry in the two years after leaving Automation World (and Maintenance Technology, where I stayed briefly) looking for what’s new and interesting. The latest cool startup was ThingWorx, which sold to PTC. There are companies doing instrumentation, control and automation well, but not much really new or innovative.
Collins tries out a definition, “Capitalism is a free market system that is supposed to promote competition. In capitalist theory, competition leads to innovation and more affordable prices for consumers. Without competition, a monopoly, oligopoly or cartel may develop.”
This statement contains an amount of belief, but it does describe a market economy in keeping with the 18th Century “liberals” who valued “liberty” over government. The economic theory superseded mercantilism where the government picked winners and losers.
Wishing for more government regulation, Collins reviews history, “This formation of monopolies and oligopolies also occurred in the Gilded Age, when the robber barons controlled entire industries, including oil, railroads, steel and the telegraph. The consolidation did not stop until President Theodore Roosevelt broke up the monopolies using antitrust legislation.”
Today’s monopolies/oligopolies
Collins then surveys today’s consolidations:
- Airlines
- Banks–“In 1995, the six biggest U.S. banks had assets equal to 18% of GDP. Today, they hold assets of about 63% of GDP.
- Search Engines–The search engine business is dominated by Google, which, according to Forbes, owns 90% of the market in non-mobile search worldwide.
- Media Companies–In 1983, 50 companies controlled the vast majority of news media including newspaper, magazines, radio and TV stations, books, movies, videos, and wire services. Consolidation reduced the original number to 24 companies by 1992 and to six companies by 2000. Today, five corporations—Time Warner, Disney, News Corp., Bertelsmann (of Germany) and Viacom control the majority of the U.S. media industry.
- Hospitals
Manufacturing industries also have consolidated:
- Meat Packers–In 1982, the five largest meatpackers controlled 16% of the meat industry. Today four firms control 85% of the beef market, an oligopoly that includes National Beef, Cargill, Tyson, and JBS (which purchased Swift).
- Microsoft
- Intel
- Beer–At that time (1970s), there were 43 firms making beer, and the largest had 25% of the market. Today two firms—Anheuser Busch and Miller/Coors—own 90% of the non-craft beer market.
- Autos–The auto industry is now a global industry where five multinational companies have 50% of the world market. The top 10 auto manufacturers control 70% of the world market. [Note: and now the Chrysler CEO is drumming up support for a merger with GM.]
- Oil and Gas–Exxon merged with Mobil Oil and Conoco merged with Phillips. Along with Chevron and Occidental Petroleum, these four giants have 70% of all oil produced in the U.S. (1,919 barrels).
Collins concludes:
I think it is in the DNA of capitalism to create oligopolies and monopolies, and they can only be restricted by government regulation.
Gary Responds
Often consolidation is a reflection of a mature industry. Not much is happening. It’s an industry ripe for disruption.
A number of entrepreneurs are trying innovative airline models. Who knows when one will “take off”, so to speak?
Doctors are forming small companies, removing outpatient surgery and other services out of the hospitals.
Brewery consolidation means companies run by finance people rather than product people. While many will buy according to price even if the taste is not there, the interesting end of the market is now wide open among small craft brewers. When I travel, I always ask for the local beer.
Microsoft is being pressured by Linux in the enterprise and smartphone and tablet products in the low end. Google docs are a viable alternative to Office.
Intel is pressured on many sides with new competition.
Software as a Service models are pressuring the major automation software companies. And open source hardware and software threaten disruption of those markets.
Innovation often comes from outside the dominant market leader group. It is difficult to predict. But there is no doubt disruption is occurring. What’s that famous phrase? “The future is here, just not evenly distributed.” Yep.
by Gary Mintchell | May 26, 2015 | Automation, Commentary, Internet of Things, News, Operations Management
I saw some Google Internet of Things news on a new site called The Information. As the technology media consolidates and fights for page views in a fragmented advertising market, Jessica Lessen developed a digital site that is subscription only. No fighting over getting ads and eyeballs.
When I started this site two years ago, I gave some thought to ads. But that seemed like a losing proposition. So right now it’s free. And the newsletter is free. You can sign up for it by clicking the link on the sidebar.
Internet of Things
Everybody wants to get into the Internet of Things parade. The Information picked up on a new project at Google. Working through its Android software, The Information notes, “Google wants its software to power any electronic device that connects to the Internet, whether or not it has a digital screen.”
To that end, Google is working on technology that could run on low-powered devices, possibly with as few as 64 or 32 megabytes of random-access memory, according to people who have been briefed about the project.
The analysis is that the technology could make it easier for other companies to build everything from “smart” fridges and light bulbs to garden monitors. Note that this relates to the consumer IoT.
Keep in mind that ever since the PC-based control revolution of the late 90s, industrial automation and control have increasingly leveraged commercial technologies for industrial uses. If Google develops a low-power, low-footprint product, this will no doubt spur further development of industrial “things”.
And, this should have the twin benefits to customers of driving down costs and providing a more open ecosystem.
More from The Information
The project has been referred by the codename “Brillo” and appears to be separate from the upcoming release of the “M” version of Android. Like the open-source version of Android, Brillo could be more like a technology blueprint than a fully loaded operating system tied to apps and services, at first.
Google is expected to discuss the Brillo software, which is initially aimed at devices for the home, during the company’s annual conference for developers next week. Google last year offered a version of Android for smartwatches, called Android Wear, to certain partners.
Google considers Brillo to be a “platform” that will help streamline a fragmented market in which developers are creating or using lots of different operating systems to power Web-connected gadgets and sensors, says one of the people briefed about it. Because the software is so different from Android, Google hasn’t yet decided whether to fold it into the Android brand, this person says.
Having its software power a bevy of home gadgets would give Google valuable insight into people’s behaviors and habits.
Devices running the new Brillo software would be able communicate with devices made by Google’s Nest unit, which include a thermostat and smoke detector. Those have operating systems built using Linux software, and the thermostat is loaded with technology called Thread that could enable it to serve as a hub for communicating with a range of other devices.
Undoubtedly, Google also wants to head off efforts by Microsoft and Samsung Electronics to create similar software and hardware standards for connected devices.
Microsoft has announced a slimmed down version of Windows 10 that runs on a Raspberry Pi, a cheap microcomputer popular among device developers.
Samsung has Artik, a set of standardized circuit boards smart home developers can tap. It also bought SmartThings, which makes a $99 wireless hub and a free app to control compatible devices around the home. But developers have been reluctant to commit to the system because it depends on Samsung’s as-yet unproved ability build up a huge installed base of hubs.
by Gary Mintchell | Feb 25, 2015 | Automation, Technology
An article in today’s Wall Street Journal, Jobs and the Clever Robot, dredges up once again the debate “will automation take away all jobs”.
In typical modern journalism style, the article offers no conclusion. It’s “he said, she said” reporting. Let’s just go out and get a few quotes on each side and fill some space. “People are always interested in whether their jobs will go away,” I’m sure some editor told a reporter.
I, for one, wish we already had driverless cars. My trips to Chicago over the past 16 years would have been so much better if I could have read or worked rather than driving. No train or bus was a feasible alternative. I don’t really want to see truck drivers lose their jobs, but every time I’m on suspect roads (slush, ice, snow, fog) and have a semi rig pass me at a high rate of speed I’d love to see automated drivers.
The problem is, we cannot foresee the types of jobs and the changes in work coming in the future. Maybe we need some science fiction writers to tackle the subject and dream up alternative scenarios. What is manufacturing going to look like in 20 years? Can we automate any more of a refinery than we do now? Should we? That would give us more to think on.
Critical reading
Speaking of “he said, she said” journalism, take this article in The New York Times from this morning, Should Athletes Eat Fat or Carbs?
The writer says that most athletes believe in building up with carbs for a workout, but maybe fats would be just as good or better. Once again the methodology was to go out and interview a bunch of people, string together truncated quotes, reach the desired word limit, hit “send” on the keyboard.
There is too much of this writing. In B2B as well as mainstream media. Let’s take a stand, or at least give a reasoned analysis.
by Gary Mintchell | Dec 9, 2014 | Marketing
How do you get information about manufacturing/production and technology? Are you concerned with the influence of advertisers over editorial? Are you aware if the article you’re reading is from a supplier or “objective” reporter?
I have a friend who left traditional Business-To-Business (B2B) media to go out on his own (no, this isn’t about me in third person!). His mantra is “I don’t take advertising, so I can tell the truth.”
I have another friend in the business (as well as me) who says, “What? You think I don’t tell the ‘truth’ even though there is advertising on my site!?”
I say, “If you want to advertise, call me” 😉 But I’ll say what I want.
Oh, there’s a surprise at the bottom of the post.
Mixing Advertising and Reporting
The New Republic is a magazine with a 100-year heritage. It’s opinionated, but respected. It’s now disintegrating. Maybe.
The problem seems to be the new owner who suddenly wants to see a profit. When the sales department runs a magazine, a continuous tension between editors (who like to think they are independent observers and reporters of events) and sales (who think all articles should promote their clients) is inevitable.
The other issue is writing articles to generate online traffic. Utilize search engine optimization (SEO), the bosses say. Editors traditionally say, who cares. I’m writing the truth.
The New York Times has reported on the New Republic fiasco.
The quintessential social media mogul — Mark Zuckerberg’s Harvard roommate — buys the ultimate symbol of the old media, a progressive opinion journal that dates back to the Woodrow Wilson administration. What could possibly go wrong?
And so what started out as a fairy tale turned into a cautionary one about this fraught moment in the history of the media, when news meetings at even the most respected publications are increasingly taken up with conversations about audience development and search engine optimization.
[One contributor] said that though the values of the magazine, and its focus on long, thoughtful stories, were paramount, “the media environment in which The New Republic operates has changed.”
I don’t believe SEO is necessarily all that bad. My Website designer (Jon DiPietro now of Authentia] and I looked at the keywords that would relate to what I write about, studied their Google strength, and then built in an SEO component in the Website.
The problem occurs especially for The New Republic when sales begins ordering a change in the entire format of the magazine from longer, more thoughtful articles to short snippets designed solely for maximizing page views therefore maximizing ad impressions therefore maximizing the dollar value of the banner ads.
This, by the way, is a short-term strategy. It’s the last gasp of a dying model. But change will require a total restructuring of the model, the role of sales, the role of writers, the problems of suppliers promoting their products and services.
Marketers’ dilemma
Actually, still another issue is that marketers increasingly want to write articles that look just like editorial but are actually advertising. The idea is to trick readers into reading the article as if it were written by an “objective” reporter. Perhaps then, people will read and believe.
I guess that marketers believe that readers will not read articles written by marketing managers—especially engineers—because they are expecting nothing more than a sales pitch. And, we’re all tired of constant sales pitches.
But marketing communications people exist to get their message out in whatever way they can. And why do they think that their message is so lacking in substance that they must resort to trickery?
Solution?
In our industry, technology comes from suppliers. We live on technology among other things. We need to know about the new technologies—what they are and how they are used. This comes from suppliers and early adopters.
I tell marketing professionals when I consult with them (either for free or for a fee) to start a blog. They can get their message out in their own way. But, I always say, ensure that the information is clear, relevant, devoid of “marketing speak”—superlatives and other overboard bragging, and above all technical.
I will read supplier information if it meets those criteria. To be honest, I don’t read supplier articles in trade magazines—haven’t for 30 years. I have higher expectations for the level of content in a magazine. But that’s just me—and old, former editor.
There are a few supplier blogs that I know (if there are others, let me know) and follow for useful information:
Advice for a reader
- In all your reading and television/movie watching, be alert for subtle messages designed to sway you
- Don’t fall for link bait
- Take care passing along information as fact when it hasn’t been verified
- Find your trusted sources and support them
And finally, if you don’t like click bait, don’t click
by Gary Mintchell | Oct 14, 2014 | News, Organizations
What a year for media coverage of the controls, instrumentation and automation industry.
I left Automation World last year to try some new things. I just felt the itch to be creative again. Then Walt Boyes left Control magazine and bought the Industrial Automation Insider (subscriptions only).
Then, within the past two weeks were two acquisition announcements.
PMMI, the Packaging Machinery Manufacturers Institute, acquired Summit Media Group–owner of Packaging World, Healthcare Packaging, and, oh yes, Automation World.
Now an entirely different association, ISA, has acquired Automation.com. The latter media company is digital only with a highly visited Website.
PMMI is an association of OEMs. ISA is an individual member organization. They are different types of organizations. But I’ll be interested to see how an association handles being a publisher.
I should point out that the ISA acquisition simply returns ISA to what it was before it downsized several years ago. ISA and Automation.com have had a close relationship, with the latter serving as the digital publishing arm of ISA.
With me writing at this media outlet, Walt with his new gig, Greg Hale (former editor in chief of Intech) now with his entrepreneurial effort at ISSSource, maybe things will get more interesting for readers. I hope so.
