Blog Michael Strobaek: Disruption is a Force that is Always There
The theme of this year’s Credit Suisse Asian Investment Conference is 'Disruption as Usual'. What does disruption mean to you?
Michael Strobaek: My personal view is that disruption is a force that is always there, driven by the wish to make products, services and processes cheaper, better, faster or more convenient. The digitalization trend has and is going to further change the environment we live in. It provides a new way of thinking about how customers can be served in a better and cheaper way.
Companies that have a digital DNA and cater to new markets or focus on changing existing markets usually provide better investment opportunities than companies whose traditional business suffers amid the digitalization trends.
Do you think disruption is the new norm? Why do you think that?
MS: Disruption was normal in the past as well. However, in the past it was more driven by real innovation in technology, e.g. the first TV, first video recorder, the first PC or mobile phone. Now, when we talk about disruption, we see that the expansion of the internet and the digitalization of our world have created a new environment within which you can combine existing (not really new) technology in new disruptive businesses. This environment has reduced the barrier to enter existing markets. Smart digital business cases do not need much money to start their services. So if we think it’s a “new normal,” we probably mean that digitalization provides many opportunities to change our world into a better one, one that can actually benefit humans.
Disruption: Friend or foe for investors?
MS: We can observe that companies that have a digital DNA and cater to new markets or focus on changing existing markets usually provide better investment opportunities than companies whose traditional business suffers amid the digitalization trends.
However, corporate investments in digitalization are growing and, in general, are a key driver of economic growth. McKinsey expects that digitalization can add 1.4% in economic growth alone, more than any innovation in the past. Hence, this kind of “disruption” is more positive than we probably think.
As digitalization paves the way for disruptive innovation, what areas represent the most compelling opportunities for investors?
MS: Demand for automation products and services remains very strong. There are also opportunities in the virtual and augmented reality space. Automation is transforming industries (e.g., self-driving cars), impacting business models of companies that have missed the trend (e.g., those that lack the necessary software capabilities), and lowering barriers to entry. As such, companies have to redefine their strategy now, and many have to invest both organically and inorganically.