22nd November 2020 Evolution Partners Newsletter
“Put your best people on your biggest opportunities, not your biggest problems.” – Jim Collins
Hope you’re Thriving!
Last week I wrote about the absence of COVID-19 cases in Australia, and at the time I felt it was too good to be true. And sure enough, one day later there was an outbreak in Adelaide of around a dozen cases and they locked down the whole city of 1.7m people for 6 days – a hard lockdown, as in shut your businesses and don’t leave home.
As it turns out at a local hotel which quarantined overseas arrivals the quarantine procedures failed, and there was an outbreak amongst staff, including a security guard. Contact tracers had identified two hotspots, the hotel and another place, a pizza bar. This security worker said that he collected a takeaway pizza from the shop, and they determined that was the only connection between the two hotspots. Epidemiologists thought they were dealing with a new, mutated strain that could spread a lot more easily, being transmitted through the collection of a pizza, which led them to announce the severe lockdown. That is until the security guard admitted a few days into the lockdown that he also worked at the pizza shop off the books for cash, and had lied to contact tracers. The Government came out and lifted the lockdown early. Read the amazing story here.
Reset for 2021
But really, is anyone that surprised about the pizza story? It’s so representative of what 2020 has been on many levels. It’s been extreme and outrageous and unbelievable.
And exhausting.
Right now, I feel there might be an important job for successful leaders to start thinking about.
If your energy level was analogous to a fuel tank, how ‘empty’ is your fuel tank at the moment after everything we’ve been through in 2020? How about your team?
For many professional athletes, the most important day is the rest day.
For successful teams, recuperation and renewal is a part of their routine.
If your team comes back to work in January with a half-full tank, having not fully rested, how will that affect the success you have in 2021?
I believe the messaging that leaders must do now, in order to grow into 2021, is to help everyone rest and reset, and that it is so important, I made a 2-minute video about it.
Shopify, the genuine Amazon competitor
Speaking of growing, in the 1958 science fiction movie The Blob, townsfolk were battling an alien invader that resembled a slimy goo, that just kept growing, consuming whatever it wanted within its path, seemingly unstoppable. And for many, that’s what Amazon has felt like. A juggernaut that can’t be stopped, that consumes everything within its profit and loss, turning expenses into new business units, and turning sellers on their platform into competitors using a trojan horse strategy.
The Amazon Flywheel seems to build momentum continually and the level of success is concerning for many outsiders.
The Amazon Flywheel from Jim Collins.
So how can one compete against this success and momentum, with Amazon seemingly having such an effective strategy in place?
Rather than sell providers products on its website, Shopify provides tools to start, grow, market, and manage a retail business of any size. Instead of selling products for you, like Amazon, Shopify helps you to sell products on your website. So the Amazon Core Customer is the retail shopper, while the Shopify Core Customer is the merchant. As a merchant, when you sell on the Amazon platform, you think you own the customer, but Amazon also thinks they own the customer, trying to sell them everything they can.
So when we look at the Shopify Flywheel we see a very different model, based around their mission statement to Make commerce better for everyone.
So let’s take a look at a comparison of Shopify shares to Amazon shares, with 10,000 invested 5 years ago. As we can see that $10,000 would now be worth $341k if you invested in Shopify or $60k if you invested in Amazon, compared to $17k in the S&P500.
One of the key metrics in this area is GMV, Gross Merchandise Volume which is a term used in online retailing to indicate a total sales monetary-value for merchandise sold through a particular marketplace over a certain time frame. GMV includes any fees or other deductions which a seller might calculate separately.
For the first time, a few months ago Shopify overtook eBay on GMV.
Shopify GMV was $31 billion last quarter and was up 109% from the same quarter a year ago.
Amazon GMV was $96 billion last quarter, and up 200% year on year.
So, they’re not equal, but there’s a significant difference in strategy.
The point is that even if you are dealing with what feels like the blob, a huge competitor that consumes everything in its path, a good strategy will help you compete to be unique.
Shopify acquires the company no one has heard of
Last month Shopify acquired 6 River Systems for $450 Million, a 15x multiple of revenue (not EBITDA!) for a company with $30 million in revenue, which is designed to help create the Shopify Fulfillment Network, in order to help merchants automate their back end using AI and robotics.
This short explainer video from 6 River Systems is a fascinating insight into the current warehouse and logistics technology that is automating warehouses.
The robot dog starts work on the BP Oil Rig
Just like 6 River Systems is automating the warehouse and improving productivity, Boston Dynamics robot dog Spot is now working on an offshore oil rig.
Says Adam Ballard, BP’s facilities technology manager;
“Several hours a day, several operators will walk the facility; read gauges; listen for noise that doesn’t sound right; look out at the horizon for anomalies, boats that may not be caught on radar; look for sheens.
What we’re doing with Spot is really trying to replicate that observation piece,” Ballard said, adding that an operator could then review the information from a central location.
“We believe a lot of that up-front, remote work preparation can be done with a remotely-controlled robot… being able to pan, tilt, zoom and really understand the entire area in real conditions, real-time,” he said.
It’s interesting how robotics and automation is continuing to impact jobs in both of these areas.
Also interesting from this article is that Boston Dynamics owner SoftBank Group Corp. is exploring a sale of the company to Hyundai Motor Co., which could mean an upcoming mass production.
Read the article here
Would you rather think or get an electric shock?
Finally, from the wonderful world of research, this week I came across a research paper which identified that many people would rather administer themselves a painful electric shock, compared to sitting quietly for 15 minutes and enjoy their thoughts. But not a small amount, 67% of men, and 25% of women in the study would rather voluntarily give themselves a painful electric shock instead of having to sit and think.
But here’s the thing, multiple experiments have shown that reflection is a key to learning. For example, reflection increases retention (by 22% compared to just reviewing what you learned!) & leads to higher grades in school.
This week on The Growth Whisperers podcast
On episode 31 of The Growth Whisperers, Kevin Lawrence and I talk about the following.
What does it take to build an enduring great company?
In this cornerstone podcast, Kevin and Brad talk about what it takes to build an enduring great company.
They begin by discussing the definition of an enduring great company, and why that matters to you, and why it matters to both of them.
They define an enduring great company as:
A purpose-led company that grows and thrives via a sustained, competitive advantage over many decades
Next, they discuss the eight elements that are required to build an enduring great company.
Listen to The Growth Whisperers
On my website
Apple podcasts
Spotify
Or watch it on YouTube
From the vault
Differentiating activities – Jiffy Lube example
Founded in 1972 Jiffy Lube is a franchised drive-through oil change shop that changes your oil & filters, tops up your other oils and vacuums your car’s interior in less than 10 minutes and without an appointment. Unlike other motor mechanics and vehicle repair shops, Jiffy Lube is only focussed on fast oil changes at a low price and doesn’t claim to repair all problems with your car. However the items they do work on, they claim to know very well, use quality materials and provide a low price.
In particular, Jiffy Lube has 3 main differentiating activities;
- Only provides lubrication services – not other car repair services
- Retail high traffic locations – not industrial estates
- 10-minute turnaround no appointments required
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Keep Thriving!
Brad Giles
