Dec 30, 2015

Somewhere In The Middle

Change, nothing stays the same
- Van Halen

2015 was in some ways the year that the science of gene editing - or Crispr - came into the public consciousness. As part of that, large incumbent players made big moves. For example, this joint venture involving Bayer (a $40B company).

There were other examples of the “incumbents” in the health and medicine space making significant investments into innovation in 2015: Memorial Sloan Kettering Cancer Center built a $300 million, state-of-the-art outpatient surgery center that uses beacon based tracking of patients, HD based anatomical imaging, and an Xbox for fitness activities.

Yet, at the same time things are happening at the same or a faster pace at the edge - in a “bottoms up” manner - businesses and products that could potentially be major transformations. Amino is a desktop bioengineering system that will cost less than $700. There is also the frugal science movement, "the endeavor to create low-cost, easy-to-use tools that address serious problems."

This dynamic - with incumbents making what appear to be aggressive, risky and expensive moves and at the same time new entrants chipping away at the margins and edges - is also being replicated in other industries.

Take the beer business. On the one hand, the number of craft breweries in the U.S. surpassed the historic high set in 1873, topping 4,100 (see: America Has More Breweries Than Ever Before).

Then look at the M&A activity from incumbents in 2015 alone (from “Why 2015 Was Such a Historic Year for Craft Beer”):

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Business moving from the top down, and from the bottom up, simultaneously.

In the technology world things look the same. Google, Microsoft, Apple, Facebook, Alibaba, Tencent and Amazon, to name just a few, are moving on many, many fronts. “There’s one theme this year that seems to run horizontally across many of the top tech companies we cover: everyone wants to do everything” (Lauren Goode in the Verge).

Or, as Jeff Bezos, CEO of the “retailer” said just the other day: “We want to win an Oscar. Amazon has already won Golden Globes and Emmys. Our current target is to produce 16 home movies a year.”

But not only are the big firms expanding - dozens of new companies are being started yearly. In 2015 over $4B was invested in digital health startups alone by over 300 venture firms. Similarly, about $4 billion has been invested in VR in the past few years.

And while Silicon Valley is the gravitational center of technology industry, Stockholm is “the second largest producer of billion dollar start-ups after Silicon Valley on a per capita basis.”

What is going on here, is this anything new? Who knows, for sure, but I do think there is a potentially new dynamic playing out. That is, the terms “innovation” and “disruption” (as vague as they may be) have become mainstream, and are no longer the secret, province, or modus operandi of a smaller subset of businesses. As Jonathan wrote in an email to us the other week - the leaders of this era have been trained in the art of disruption.

This is a sign of market maturity but it also feels like something more - because while the players at the top move aggressively, the ones at the bottom do not appear to be slowing. To the contrary, they too are aggressively trying new models and businesses. It’s like full stack innovation being played out on a global scale. :-)

The next few years are going to be interesting.

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