As software-based efficiency cascades across the economy, every industry
Every company has to obsess over how it can leverage digital technology to improve quality, reduce costs, or create new products. But it also matters
This industry has always been challenging, because planes represent a huge fixed cost. The inventory–seats
Predictive analytic software has changed everything. Airlines can now predict with astonishing accuracy how many people will buy a ticket on a specific day. When you buy one, there might be a $50 difference between two seats next to each other—and the price will probably change tomorrow. Things are so rosy at American Airlines, thanks partly to technology, that the company’s CEO, Doug Parker, not so long ago boldly declared: “We’ll never lose money again.”
Such productive efficiency gains could go further. Airlines would love to customize pricing based on a specific person’s profile, including where they live. But for all the opportunities to profit
.Industrial and heavy equipment
Technology generates vast amounts of data that can
But there’s a potential negative consequence for suppliers: as technology improves the durability of its products, there may be less demand to replace older equipment. This
Back in the 1920s, utilities became America’s largest industry as electrification swept the country and drove the decade’s boom. Now, the utilities sector—including electricity—is in decline. The market cap of the entire industry is less than that of Microsoft. To survive, utilities depend on support from governments, which do things like guarantee their return of capital. But now utilities are highly vulnerable to technological disruption—especially machine-learning-based improvements in energy efficiency.
For example, Alphabet’s DeepMind Technologies uses AI to cut energy consumption at Google’s massive data centers, which require lots of energy.
Even as these efficiencies broaden, massive public pressure to reduce carbon emissions is likely to contribute further to reducing demand from both business and consumers. There’s little utilities can do, except be thankful for government.
The industry is being transformed—in good ways, and bad—by the emergence of tech-enabled services like Uber and Lyft. Personal cars
But this increase in car utilization isn’t necessarily good news for automakers or their suppliers. Here’s the main reason: once someone buys a car, they just pay for variables like gas, and maintenance or service. They don’t go back to an automaker regularly to buy anything else. Plus, car quality keeps improving. The average car in the U.S. stays on the road
What can the auto industry do? Not much. There isn’t always a growth answer.
Alec Ellison is a longtime tech-oriented investment banker and investor. Steven Gray is Techonomy’s Head of Content.