On Friday we did our monthly two hour “deep dive.” That is when our entire investment team spends two hours going deep on one topic. This time we talked about how the Internet, twenty years in, has only really disrupted a few large industries so far and there are many that are largely operating in the same manner that they were operating before the Internet came along. Albert postulated that we are only now seeing these large industries be impacted by the Internet.
That led to a discussion about how to recognize the most interesting opportunities in these “laggard” industries. We went back and looked at our portfolio and what we have learned from that. I observed that many entrepreneurs look to use technology to automate a workflow as a basis to build a technology company, but we have learned that creating an entirely new workflow seems to produce bigger outcomes.
Albert brought up a famous Harvard Business Review article from 1990 by Michael Hammer titled Don’t Automate, Obliterate. In this article Hammer argues that reengineering industries using technology is much preferable to automating them. You can read the whole thing on the link above. It was written 25 years ago, but it seems as fresh and relevant today as it was when it came out.
So, to me, the thing to look for when investing in technology opportunities in “laggard industries” is entrepreneurs that want to obliterate business processes instead of automating them. That is hard to sell to the established companies. They will not willingly adopt an entirely new process. They will want you to automate it for them. So coming up with a back door into the industry is often better than a full frontal assault if you intend to use the obliterate approach.
Like most deep dives, we did not come away with a fully formed investment thesis. But we did come away with some important observations and words we can use to talk about them. Automate vs Obliterate is great and I am sure it will be quite helpful as we start looking around laggard industries for investment opportunities.
