Big bold business of the future

All the big businesses of the future will have to be as bold or bolder than their smaller peers, writes Robert Armstrong, the FT’s head of Lex
© Martin O’Neill

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It is intimidating, even this year on my second go-round, for a mere analyst-turned-columnist to be on the Boldness in Business judging panel. Look one way, and there is the leader of the largest steel producer in the world, and the editor of the FT. Turn to the other and find a renowned money manager, three highly successful entrepreneurs and a distinguished professor and dean at Oxford’s business school. If anybody needs a pithy sentence written, or a quick cash flow model bashed out, I’m right here, guys. Otherwise, I’ll just keep the coffee cups full . . . 

Still, what an opportunity for someone interested in business. To discuss awards for boldness with this group is a chance to talk about the core idea that animates the FT’s Lex column. Note that the awards are not for the best businesses, or even achievement in business. The subject of boldness makes them explicitly about risk: how to take it, how to manage it and (most importantly) what is worth taking risk for.

In this context it might seem strange that four of this year’s seven awards, including person of the year, went to big companies. By popular conception, such companies are conservative beasts, content to milk their competitive advantages and political clout for all they are worth, while avoiding anything that could threaten the profitable status quo. The judges this year repudiated this view completely. The strong support for Andy Jassy of Amazon Web Services as person of year is the prime example. AWS itself was nominated for the Drivers of Change category, but the judges’ enthusiasm was such that Jassy — who founded this crucial division of Amazon — landed the biggest award. AWS and its parent went all in with a low-cost strategy against other big, well-financed competitors such as Microsoft and IBM. The result has been a business that is (as one judge put it) “everywhere”, supplying computing infrastructure to companies of all sizes. There was a distinct feeling that what AWS is doing to change the way computer power is bought, sold and delivered may be a revolution that is only beginning.

The other internet company on the list of winners, Tencent, is even bigger, with $15bn in sales. There was some debate about whether the company technology was as cutting-edge as that of some of the other nominees in areas such as encryption and biotechnology. Every judge, however, agreed that the company had done a better job at turning consumer internet apps, in areas such as chat — with WeChat — into hard profits than any other company; and that the internet portal’s WeBank division was applying technological innovation to a badly underserved segment of China’s economy, namely small and medium-sized businesses.

If Toyota, the world’s largest car manufacturer, is not a big, conservative company, what is? Yet it was precisely Toyota’s size that swayed the panel in its favour against some very tough competition in the Corporate Responsibility and Environment category — including Tesla, also nominated for making low-emission vehicles.

Kering’s decision to publish an “environmental profit and loss account,” totting up the luxury brand group’s externalised costs, was “absolutely huge”, argued a judge who pushed passionately for it to win, and who came close to carrying the day. But it is the ubiquity of Toyota’s Prius hybrid car, and its further commitment to the fuel-cell powered Mirai model, that won it for Toyota: the company made a low-emissions car that thanks to Uber, (honoured last year) everybody has now ridden in. Big company, big bet on a new technology, big impact.

It is perhaps natural, after the FT awarded its Business Book of the Year to Martin Ford’s semi-dystopian Rise of the Robots, that the judges’ attention in the Drivers of Change category was drawn to Fanuc, a robot maker and (with a market capitalisation of $30bn) another very large company. “Do we want to give an award to a company that takes away people’s jobs?” one judge asked. Others bristled a bit at the idea that the relationship between jobs and technology could be simplified in that way; another noted that the awards are for business, not job creation, which are two different things. There was no resolution on this theoretical set of questions. On another, however, there was robust agreement: that automation is, as FT editor Lionel Barber said, “absolutely one of the biggest stories in the world of business” and that the panel would do well to acknowledge the enormity of the changes involved. That would have not been enough, but Fanuc was driving change in more ways than one. As a long-established, wildly successful and admired company it could have stayed with the Japanese tradition of limited deference to minority investors, but in the last year it has taken the path toward openness, creating an investor relations department, promising cash returns, and higher transparency. The company took a decision that was anything but robotic, and could prove to be a leader for public Japanese companies across industries.

None of this is to diminish or minimise the achievements of the smaller companies on this year’s list. WeWork is developing a real estate model for a sharing economy that looks set to become more and more pervasive; Farfetch is helping small companies in the fashion industry compete with the big players by providing first-rate internet sales Minfrastructure; by way of M-Kopa, low-cost solar-power lighting could change the lives of thousands of the world’s poor (and the environment). This was not just the year of the big company.

Giving awards to some of the world’s largest companies struck me as fitting, all the same. Look at the products they were rewarded for: each is a threat to pervasive and profitable products, in transport, computing, communication. The big businesses of the future will have to be as bold or bolder than smaller peers, because they sit on the profits that innovators, entrepreneurs, and investors will use all their energy and ingenuity to steal away. Noting the boldness that the best big companies are displaying is, in that sense, a warning to lumbering incumbents everywhere.

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