Assets are Dead … Long Live Assets

We’re overthinking it. Business success is about making lives better.

Alan Amling | UPS

Are assets losing value in this age of platform-based businesses? Conventional wisdom suggests that asset-heavy businesses, which dominated the Fortune 500 list for the last century, are in decline.

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Asset-heavy businesses, which dominated the Fortune 500 list for the last century, are in decline.

Uber is on the rise despite not owning any vehicles, Apple is dominating music distribution without owning any record companies and Airbnb is disrupting the lodging industry without owning any real estate.

More examples are popping up every day. So are asset owners destined to become commodities in the new economy? I don’t think so.

What the aforementioned companies have done well is capitalize on an ideal that has little to do with assets. Instead, they found a gap in the market and filled it. While that sounds easy, it’s not, especially if you’re one of those traditional asset-based companies accustomed to your current profit stream.

When you have shareholders judging you every quarter, it can be challenging. That’s why established companies too often miss out on game-changing innovations.

An analogy from Theodore Levitt’s classic article “Marketing Myopia” provides a key lesson for today’s businesses. “Customers don’t want to buy a drill, they want to make a hole,” he said.

In other words, many companies focus on constantly improving their “drill.” That’s a good strategy – until it isn’t.

When an innovator finds a better way to “make a hole” for specific consumers as Uber, Netflix and AirBnB have done, your “drill” becomes less relevant. As Harvard Professor Clayton Christensen taught us, newness by itself doesn’t make a technology or business model disruptive.

Disruption occurs when you can help someone do what they already needed to do, only better or cheaper. When you can make someone’s life better, you will win. It’s that simple.

What’s important?

So what are asset-based companies to do? They should embrace their advantages – but never forget how to use such resources to make people’s lives better.

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Disruption occurs when you can help someone do what they already needed to do, only better or cheaper.

Making stuff is important. Transporting stuff is important. Offering a physical conference room where people can interact is important.

That’s not going away. Again, the key is to focus on the problem the customer is trying to solve, “making a hole,” not providing a new and improved “drill.”

Embrace what makes you great while recognizing that technology, business models and consumer expectations are always changing.

UPS has a world-class global physical logistics network with dedicated service providers. You may know your UPS driver by name. We enable global commerce and connect buyers to sellers around the world.

That said, the buyer-seller relationship is changing. The e-commerce revolution is the most visible example of this phenomenon. To make daily life better for more people, UPS has introduced innovations like UPS My Choice, allowing consumers to take control of their deliveries, and UPS Access Points, making it easier to receive those online purchases at a convenient point and time.

A market of one

We’re now seeing a similar phenomenon in manufacturing. The way “stuff” is being made is undergoing epic change. Jetsons-like, on-demand manufacturing is turning into reality with the rise of 3D printing.

Consumers want what they want, when they want it, at the lowest possible price. This doesn’t mesh with the mass-production model that dominates manufacturing today – think taxis.

3D printing promises on-demand production for a market of one. It also facilitates distributed manufacturing where products are economically produced in smaller quantities and faster and closer to the point of consumption.

If you could have exactly what you want when you want it, would that improve your life? The answer is obvious. But how does that affect a company with physical assets like UPS?

Making lives better

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If the history of technology has taught us anything, it’s that dramatic improvements are on the horizon.

Instead of viewing change as a threat, UPS is treating it as an opportunity. In 2015, we opened our first 3D printing factory, with our partner Fast Radius in the heart of our supply chain campus in Louisville. We’re treating the on-demand, custom production enabled by 3D printing as a supply chain solution, another arrow in our quiver to provide logistics solutions for our customers.

We’re wrapping our physical network around the new technologies and business models to create efficiencies throughout the supply chain. We’re making lives better.

The universe of parts and products that can be economically produced with 3D printing is relatively small today. But if the history of technology has taught us anything, it’s that dramatic improvements are on the horizon.

Consider the groundbreaking 3D printing technology from new companies like Carbon and industry titans like HP. They are creating dramatic improvements in the quality, speed and cost of 3D-printed items.

By embracing these changes instead of treating them as a threat, we’re ensuring this asset-based company will be the windshield, not the bug. More importantly, we’re recognizing the “hole” our customer wants to make while bettering lives.

At the end of the day, isn’t that what it’s all about? goldbrown2

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Alan Amling Is Vice President of corporate strategy. He previously oversaw marketing efforts for UPS's global logistics and distribution services.

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