Big Tech can’t disrupt industry like it did consumer internet

Dartmouth’s Vijay Govindarajan has a new book that explores how companies are trying to copy Big Tech’s model, combining physical expertise with algorithms and AI. Pradeep Gaur—Mint via Getty Images

Good morning,

We’ve long known that companies like Apple, Amazon and Alphabet owe much of their success to the insights they glean when we use their products. All that data has made it possible for them to streamline strategy, plan products, and create new business models that can disrupt traditional players and disadvantage new ones. Vijay Govindarajan, a top management thinker and professor at Dartmouth’s Tuck School of Business, describes this pivot point as a “shift from product as sold to product as used.” 

“We gave these digital giants permission to collect data on how we live, transforming strategy in the consumer sector,” Govindarajan says. If you don’t pay, after all, you’re the product (although the European Union is trying to give consumers more competition and control with its Digital Markets Act that came into effect on March 7).

But much of that digital transformation has taken place in the consumer sector, where some would give up plenty of private data for the promise of a seat upgrade. What happens when Big Tech’s playbook becomes possible in the industrial sector—at the factories, farms, and other players whose business customers are often as complex as they are? That’s what Govindarajan explores in Fusion Strategy, a new book with Boston University professor Venkat Venkatraman that publishes today. As the title suggests, the authors examine companies that are starting to combine their physical expertise with the kind of algorithms, AI, and interconnected data sets that have made the consumer tech giants so hard to beat. 

I spoke with Govindarajan about why the industrial realm has proven to be tougher terrain for many of the tech companies to conquer. “In the first round, the digital giants won,” he said. “The movie studios, the camera companies didn’t take them seriously.”

“In the second round, it’s not clear the digital giants will win. Industrial companies make physical assets where domain expertise is very important; relationships with customers are critical.” 

With generative AI and machine learning, industrial players can increasingly connect with customers or partners in new ways to mine data for insights and customized recommendations. But industrial customers are not as willing to hand over that prized data as consumers looking for a bump to first class. The issues over data now being debated in Congress have long been table stakes in the corporation: privacy, transparency, trust, and compensation for the value created. More important, Govindarajan says, companies like Honeywell and Deere & Co. know how to fuse analog machinery and advanced digital technologies to create their own solutions.

To that list, let me add Collective[i], a B2B company that’s quietly amassed an impressive roster of enterprise customers who leverage shared data and the company’s proprietary platform to better understand buying and selling activity. The technology has taken years to build and was developed by a team of founders with their own deep expertise. CEO Tad Martin was COO of Overstock, while co-founders (and siblings) Heidi Messer and Stephen Messer created Linkshare. 

I spoke with Heidi Messer shortly after speaking with Govindarajan last week and was struck by the similarities in how she talks about the platform. Unlike in the consumer world, these customers don’t wake up to discover someone’s using their data. They know its value, and the even greater value of sharing it. That’s an interesting metric to consider as we look for the next generation of digital disruptors.

Diane Brady
@dianebrady
[email protected]

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This edition of CEO Daily was curated by Nicholas Gordon.