AI, robotics, deep learning, automated delivery... how Amazon, Google, Tesla, and startups use these Edge Strategies to punish slower rivals

Plus eleven ways that firms with fewer resources can leverage Edge Strategies, too

Elon Musk (Tesla, Solar City, SpaceX); Jeff Bezos (Amazon, BlueOrigin, Washington Post); Mark Zuckerberg (Facebook); Larry Page (Google, Alphabet). All are CEOs. All are entrepreneurs. All remain disruptive. All are Edge Strategists.

Each operates a core business that has "about-faced" an entire industry ... or two. Each continues to invent at the Edge, ignoring old-fashioned industry boundaries. The "former Google, Inc." operates 11 core subsidiaries: Deep Mind, Access, GoogleX, Jigsaw, Calico, Google, G Ventures, Google Capital, Self-Driving Car Projects, Sidewalk Labs, Nest, Google, Verily. Entities like Youtube live beneath Google itself, two layers down. Google invests in and acquires startups -- like Deep Mind and YouTube -- to build this ecosystem.

Bezos, Musk, Page, and Zuckerberg are disrupting multiple industries at once: tech (cloud computing, AI), automotive, entertainment (production, streaming), space (re-usable rockets), health.... (Note: watch the Blue Origin and WagonBot videos below.)

Challenges Faced By Older, Traditional Companies

Each companymentioned above are teenagers. They were simple startups 10 to 22 years ago. They behave like Millennials (Gen Y) and Gen Z's.

For survival's sake, older companies -- born before 1980 and molded in our grandparents' era -- have developed cultures that need to adapt to the Millennial world. This new corporate world is defined by exponential innovation (versus linear) and by disruptive hyper-adoption (think Uber, AirBnB, AWS, Amazon Prime, Pokemon Go).

If you work in an older firm, your team might be constrained by corporate culture. Your team may work as a "incrementalist" ... continually tweaking your core revenue streams. Thankfully, your company needs "incrementalism" ... like Amazon needs its Weblab. But a singular focus on core incrementalism is short-sighted. Below are suggestions that might help your company maneuver into an Edge Strategist position. 

The Edge Strategist's DNA + Psyche

To survive over the next 5 to 10 years, your organization needs to do be an incrementalist AND an Edge Strategist. As Amazon, Google, and Facebook prove, The Edge can be accessed by inventing internally (intrapreneurs), licensing advanced technologies from startups, or acquiring startups. But -- above all -- to succeed, your CEO needs to carry the "Innovation Torch". 

The most disruptive Edge Strategists are a handful of well-capitalized CEOs who double as entrepreneurs: Bezos (Amazon), Musk (Tesla), Zuckerberg (Facebook), Page (Google), Ma (Alibaba).

One great example of Edge Thinking, is Blue Origin, the space company that Bezos dreamt up in high school, and founded in 2000. Its rockets land upright (see video):

Retailers, media companies, NASA, and tech companies (like HP) -- all -- have to keep a watchful eye on Bezos' Edge-moves. His companies iterate on the core (Amazon's Weblab) ... while (b) inventing at the Edge.

To grasp how ingrained "Edge Thinking" is in Bezos' psyche, look at the timing of Blue Origin. It was founded in September 2000 -- while Amazon's stock was dropping 67% (from $106 to $25).

Imagine "having the courage" to ask Amazon's Board for permission to start a spaceship company (on the side) in 2000. Bezos has backed Blue Origin with $500 million of his own money, demonstrating his capacity for patience and bold moves.

Today's New Forces: Hyperadoption and Techno-Exponentialism

Executives need to embrace "The Edge" today more than 10 years ago because new forces exist. Forrester calls one of them hyperadoption. Singularity University calls the other exponentialism ... the advancement and convergence of many technologies all at once.

Last Mile Supply Chain is likely to completely change as Edge Strategists combine AI with robotics. 20% of package deliveries may not involve people by 2020 (in just 4 years). McKinsey predicts 80% of all packages will be delivered autonomously within 9 years (2025). Starship's self-driving WagonBots (below) are possible solutions. These Edge Inventions are being tested today in DC, Europe, and San Francisco!

Click the video ... you'll see that WagonBots (AGV's -- autonomous ground vehicles) can navigate sidewalks and travel for a few miles to deliver your pizza, your medicine, a new pair of shoes. Maybe Amazon will use them to deliver from the 2,000 Amazon grocery stores it's building. Or maybe Amazon will use drones Or maybe a combo of tools.

McKinsey & Company, September 2016: "Get ready for a world where ... Autonomous vehicles including drones will deliver close to 100 percent of X2C and 80 percent of all items. Only ~ 2 percent will be delivered by bike couriers in the relatively small instant delivery segment. Traditional delivery will account for the remaining ~ 20 percent of all items."

This graphic below is from that McKinsey report (how customer demands are reshaping last mile delivery):

The WagonBots are point solutions. But ... combine autonomous deliveries with an Amazon Dash Button (another Edge Strategy) ... and combine those with Private Label products like Amazon batteries ... and the economics become dangerous. Costs plummet. First movers gain advantages. The dynamics of Edge Strategy start to appear as many Edge Inventions coming together, harmoniously.

Imagine a button summoning a Drone ...(this is Edge Strategy):

Imagine your voice, using Echo Dot, to summons the WagonBot:

Legislating the Edge

Amazon invests $9.5 million per year to educate the U.S. government ... to influence regulation affecting The Edge ... which is one more reason why Amazon is dangerous.

If you look at Gur Kimichi's LinkedIn Profile (Gur is VP of Amazon Air), you will see that Amazon started working on Commercial Drones in 2012 ... giving Amazon a four-year head-start on the U.S. Government it seems.

Contrast Amazon's Drone launch in 2012 with the White House Drone-announcement in 2016. In August 2016, the White House set up two of groups -- the FAA's new Unmanned Aircraft Safety Team and their new Drone Advisory Committee. As they set up those committees, Amazon was lobbying and conducting real life Drone tests in the U.K. (blessed by the British Government).

When the U.S. Government says, "Go" on Drones, Amazon will be prepared to be first-mover ... AGAIN.

" Pursuits of Imagination" requires CEO support and blessing

Edge Strategy is disruptive by nature. Thus, for it to succeed inside large organizations that value collaboration and predictable process, "Innovation" (with a capital "I") and intrapreneurs need CEO level backing. Tommy Knoll says it well:

"The key to innovation management, and (a supportive culture) ... is to have the innovation function report directly the CEO and/or the Board. The risks increase for the innovation program being cut/divested with a bad earnings call if the function reports any lower in the org."

CEO as Chief Edge Strategist (CES)

Bezos is arguably the most commercially-dangerous Edge Strategist. As he tinkers with 4.4 MPH rocket landings at Blue Origin (below), his Amazon troops work on Drones.

As Bezos invests over $500 million of his own money in Blue Origin, Amazon plows part $15 billion into R&D aimed at Voice technologies, AI, and Deep Learning. Then, similar to with Blue Origin, Amazon "works on our government" to mold policies while patiently and continuously conducting R&D with a long-term outlook.

Amazon "Thinks at the Edge" ... because its CEO expects it

This Blue Origin behavior is consistent with the way Bezos behaves at Amazon. This is Amazon.com's "innovations" page ...

Soon, new grocery formats may be added to the Amazon Innovations page. The new Grab-n-Go store format includes a cocktail of Edge technologies -- from Deep Learning to Visual Computing to advanced Sensors.

Using startup technologies, Iterate.ai (my company) helped build technologies like this by March 2016-- no lines, no checkout -- with Twyst. Many retailers have been excited to see it -- but tentative on trying it. Too futuristic.

But, as demonstrated in many areas, Amazon likes creating the headwinds, and they tend to just GO:

In the end -- Edge Strategists create the headwinds that "Followers Firms" are forced to face. Edge Strategists, like Bezos and Jobs, enjoy headwinds. These people consistently pursue the unexpected. The undoable. The unimaginable. The world scoffs at them. But, that's okay (and they expect it).

A Few Edge Strategies To Think About

Beyond self-checkout (which all retailers are now probably evaluating), here are Edge Technologies and Concepts that many retailers and non-retailers need to think about.

1. Automated Delivery (supply chain)
2. AI, Deep Learning, and Neural Networks (for many use cases)
3. New Business Models including Asymmetric ones

Automated Deliveries

Delivery automation is one Edge frontier that sure to be disruptive. Yet, despite being on the Edge, it's will mainstream soon.

Self-driving DeliveryBots could drive out of Autonomous Vans. Watch this short video from Mercedes and Starship (out of Estonia and London):

Drones could also fly out of Autonomous Vans. Maybe Amazon will try this ... as they are known for experimenting with many concepts at once? Watch this short video:

Starship Technologies created the Robotic Delivery Vehicles showcased here. Like Amazon technologists, the founders of Starship are not lightweights, true for many startups. Starship's CEO / CTO, Ahti Heinla, writes that he's "happiest when he lits up his laptop and shoots another module of a brilliant code." Ahti was a co-founder and Chief Technical Architect of Skype and KaZaA.

Like Google Self-Driving Cars, these WagonBots or AGV's have been racking up miles:

This Edge Strategist, Starship, has started deliveries in Europe. Trials make Starship believe that the cost of on-demand package deliveries in central London will drop from ￡12 ($15) to have a package delivered to ￡1 by using their six-wheeled WagonBots. That's a 70% cost reduction for last-mile delivery.

AI, Deep Learning, and Neural Networks

New waves of innovation will be powered on advanced AI -- deep learning and neural networks. AI empowers the drones, chatbots, new retail recommendation and personalization engines, space ships, self-driving wagonbots, and the new Amazon Go grocery store. The interconnected networks function like neurons in our brains -- learning from experiences, recognizing patterns, reading visual images, and even writing text like a human copywriter. This type of technology is accessible to all of large companies via the startup ecosystem.

AI and deep learning will (for sure) be disruptive. In the old days, rules-based software ruled the roost. But now robots with embedded deep learning software can teach themselves. Just look at this Softbank AI Lab demo:

AI will change financial dynamics of existing industries. Business models are likely to change too.

New Disruptive Business Models

Technical inventions lead to disruptive business models (like AirBnB and Uber) and new business opportunities.

Tesla's distribution model is an example of business model disruption. Elon Musk, the CEO, has replaced franchised dealerships with stores in shopping malls. This has worked, and it's transformative. Within two weeks of taking orders (mid-April 2016), Tesla's Model 3 reservations had risen to almost 400,000 units. Selling direct (versus through dealerships) helps Tesla control the presentation, achieve greater speed-to-market, and lower the costs of inventory, facilities, and service. If all 400,000 Model 3's units are sold for $35,000, Tesla will realize $14 billion from those two weeks of selling. That’s an unprecedented sum.

CNBC  reports, "The 24 malls that list Tesla as a tenant average $940 in sales per square foot, compared to $835 for those without the carmaker in their directory, according to research by Green Street Advisors. Tesla's correlation to high-performing malls mimics that of another star Silicon Valley tenant: Apple."

As Taxi Drivers fight Uber, some auto-franchisees (from Ford, GM, etc.) are fighting Tesla. Tesla presses on, though, opening retail stores in hot vacation destinations.

Technical inventions can lead to asymmetries exploited by entrepreneur/CEO's like Musk and Bezos. Amazon believes in exploiting asymmetries as Vision Mobile shows:

Bezos was describing assymetry here:

IoT makes asymmetries accessible to product companies as shown in Vision Mobile's value quadrant:

Asymmetric business models form when a company "gives away" one product to gain control of another. Asymmetric business models may emerge in the Tesla / Solar City combination. They become more commonplace as companies cross industry boundaries (Apple into music, Amazon into technology hosting) ...

Digital allows for distribution channels to blur. Ecosystems -- like Amazon's -- may become a dominant "company-type" in the future.

Edge Inventors are Proactive

Yet, Edge Strategists don't rest on their laurels. They are thought leaders, and they build their dreams. Amazon did this with AWS and S3. They disrupted HP, Google, and Oracle ... Google being two years behind Amazon.

Yet, that leadership position doesn't give AWS any reason to slow down. In fact, they've sped up! These are AWS stats revealed last week at its annual Invent conference —

AWS ... revealed one new service after another, one thing became clear: the company with a marketshare lead that is by Gartner’s estimate  10 times bigger than its 14 closest competitors combined, has no plans to slow down or rest on its laurels. (Techcrunch: AWS Shoots for Total Domination)

HP, Google, IBM and Oracle -- all of a sudden -- are chasing a RETAILER: Amazon. As Techcrunch says:

AWS isn’t just dominating because it was first (although that’s part of it), it’s also continuing to innovate at an astonishing rate, adding around 1000 new features every single year up from 722 just last year.

AWS practices a fast paced "feature release" cadence:

This is similar to the way Amazon.com innovates incrementally though Weblab (1,976 experiments in 2013, up from 500 two years prior).

On top new features, AWS cuts prices: "Since its launch in 2006, Amazon's cloud business has seen 52 price cuts in total." wrote Business Insider, October 2016. "Our price reductions are a core part of our philosophy," said Amazon CFO, Brian Olsavsky.

The Edge sneaks up

Edge companies build products proactively ... this is "intentional innovation" as Jeff Roster (analyst) says. They invent patiently ... yet they operate with a contradictory sense of urgency. Knowing that their inventions will matter five years from now.

That's Edge Strategy.

11 Ways To Pursue Edge Strategies without Google or Amazon Pursestrings

Today's enterprise companies -- for survival's sake -- need to practice Edge Innovation Strategies (in addition to incremental improvements), even if they don't have the big R&D budget. Like Amazonians, all companies should be continually scanning the globe to find seemingly wild ideas that could be disruptive to their futures.

1. As a CEO or VP ... provide air-cover

Make your support obvious. Get everyone on board. If your'e a leader, this is a key role for you to play. A company's ability to embrace the Edge is likely to predict future growth. Lack of leadership here might be a "cause of death" in the long run -- think Kodak, Nokia, Blockbuster. Show the inventors, both inside and outside your firm, that you value them ... and provide air-cover.

2. License technologies and partner with startups (early)

eBags, which has sold 27 million bags through digital channels, is good at this. They move fast, looking quarterly (alongside Iterate) for early stage technologies to integrate into eBags.com. In late 2015 and 2016, they integrated 8 of 12 technologies Iterate.ai helped them discover, curate, speed-up-legal barriers, and test. This is on top of all the many Proof of Concept's they lined up on their own. It's one reason eBags is growing 25% year-over-year this holiday season.

3. Build technologies internally.

If you have the intrapreneurial DNA ... if time's on your side ... if you have air-cover from the CEO -- then build technologies internally. eBags built its own drop ship technology which integrates with 900 warehouses now. It built its own ratings and reviews technology in 1998-9 -- still use it today. It built it's own A/B split test technology nearly 10 years before Optimizely and VWO existed.

4. Acquire digital companies

If you need to move fast ... if you want a headstart ... or, if you need to build a moat around a strong core business, then acquisitions are a good move.

• Acquisitions can be small like Amazon did to support Echo with voice technoloigies -- each costing roughly $20 million (rumored numbers).
• Acquisitions can be larger, like Uniliver did with Dollar Shave Club, investing $1 billion to buy the $150 million disruptive direct-to-consumer subscription service. Or like Walmart did with Jet ... Walmart's $3 billion consumer-facing acquisition. Or like Amazon did with Zappos.
• Companies can aggregate a cocktail of acquisitions like Nordstrom did with TrunkClub, investing $350 million as the company projected $100 million in revenues, and HauteLook, which they acquired for $180 million. Or like Under Armour did with MapMyFitness, MyFitnessPal, and Endomondo (buying all three of them for $750 million).

5. Monitor trends and startups

Keep your entire management team aware of large-scale digital trends. Keep your team aligned, on the same page. Iterate's Tours of the Possible do this.

Or use companies like FitForCommerce in the U.S., Cnetric in APAC, or Qanda.nl in Netherlands.

Anyone can monitor startups by using Iterate.ai. Iterate.ai tracks 158,000 emerging technologies ... for both innovations you can apply today (applied innovation) and for future Edge concepts:

When you track startups, sometimes it's good to seek out "the crazy ones". Big companies can lend a hand, offering support and partnerships. Also remember that the Edge Inventors like Athi of Starship, or Bezos of Amazon, are often viewed as "nuts" ... but they are simply Breakthrough Artists who enjoy the headwinds.

“Most of the breakthrough technologies/companies seem crazy at first: PCs, the internet, Bitcoin, Airbnb, Uber, 140 characters...It has to be something where, when people look at it, at first they say, ‘I don’t get it, I don’t understand it. I think it’s too weird, I think it’s too unusual.’” - Marc Andreessen

6. Leverage shared Labs and Learnings

Q&A and Iterate both help on that front. Q&A operates three Innovation Labs in the Netherlands -- Store of the Future. Two clean labs, one dirty lab. Join, and you become part of a club of "like retailers" who can share test results with non-competitors. Iterate does this as well when you are a member of Iterate's Virtual Lab Network.

7. Update your legal framework to test nimble startups

Andy Wichern, with an Opsware, E&Y consulting, and Iterate.ai background, invented a PilotPass? program to advance the goal of reducing the needless friction involved in the digital innovation process for large organizations wanting to test startup technologies. PilotPass? is built to reduce the time and cost of pre-pilot legal and procurement administration ... and speed up experimentation to establish proof-of-value. This could help you double your experimentation and double your successes.

Old legal frameworks were often built for enterprise software that touched many parts of the business infrastructure ... and took many months (or even years) to configure, test, and promote into production. Today, SaaS has changed the way any Enterprise can test and deploy software. Digital innovators can implement experiments in controlled test environments in a matter of minutes. PilotPass? is built for this new digital world.

8. Innovate in many areas ... all at once

Innovating on multiple fronts is good for shareholder returns, (research by Doblin).

Your company may say, "Impossible." But you can do it if you architect your firm to be Exponential Organization. Embrace modularity. Work with people who are not your employees. Embrace the startup community which is can be your $100 billion (Exponential Organization) Lab. ($100 billion is roughly the level of cash invested in the startup ecosystem every year. ) Let third-party investors and passionate bootstrappers "fund the early stages" of YOUR LAB.

Startups can help you innovate in many arenas at the same time. They can help enterprises innovate exponentially instead of linearly.

Just be a good partner to the startups by treating them as important partners.

9. Digitize your HR

Make sure every part of your organization is updating and digitizing. HR is important because all your employees and prospects interact with it. As a recruiting and retention tool, digital HR sends the message that you are advanced.

10. Give your corporate innovators space

The best ideas are often the ones no one agrees with. It conflicts with traditional Corporate Culture which values teamwork and collaboration. So give your innovators space and respect.

11. Reinforce a company culture that values change

"The ability to reinvent yourself and reinvent your organization will be one of the most important competencies to master in the 21st century," says author, Ron Immink.

What Won't Work

Doing things the old way might be comfortable (for a while). But it's high risk. It's the most likely path to having a Kodak Moment.

Thanks for reading! Embrace the Edge ~