Just the announcement that Jeff Bezos, Warren Buffett, and Jaime Dimon will be entering the health care space has sent shock waves for industry incumbents such as CVS, Cigna, and UnitedHealth. It also puts a fundamental question back on the agendas of CEOs in other industries: Will software eat the world, as Marc Andreessen famously quipped? Is this a warning shot that signals that other legacy industrial companies, such as Ford, Deere, and Rolls Royce are also at increased risk of being disrupted?
Can Anyone Stop Amazon from Winning the Industrial Internet?
Digital natives like Amazon have already disrupted industries such as media, publishing, travel, music, and photography. But who is likely to assume leadership in creating and capturing economic value in Type 3 products (products which have physical components, “smart” components, and connectivity)? If digital natives want to develop software-enabled solutions that siphon off significant value from industrial hardware, they must overcome three barriers: the physics of the hardware, customer intimacy, and difficulty in sharing risks. Likewise, if industrial giants want to lead in the industrial internet they will need to overcome their three barriers: software talent, digital culture, and the incumbent’s dilemma. Among the tech giants, Amazon is a likely winner in the Industrial Internet, as it has successfully fused physical with digital. Amazon understands the economic laws of analog products and is not afraid of massive up-front investments and slower growth.