One surprising aspect of the current ‘technological revolution’ that we are currently experiencing is the ability of longstanding, traditional companies to survive and sometimes thrive even as the business landscape is in constant flux.
Of course, there are exceptions and some companies have undergone notable falls from grace. Kodak Eastman and Blockbuster are often mentioned as high profile casualties this century. But the top five companies in the US have all been listed for over a decade; with Apple soaring, Exxon defying the demise of oil, Microsoft surviving the rise of mobile and Google innovating constantly. The much discussed revolution has not yet played out on financial markets, aside from the rise of new methods of trading them: CFDs, spread betting and binaries amongst them.
Even the latest high profile entry onto the New York Stock Exchange, Alibaba, is a long-standing e-commerce giant with an operating model not too dissimilar to Ebay and Amazon. For all the evidence that we are currently in the midst of an ever-more rapid period of technological change, Facebook is the last ‘new’ form of media to hit the top of US indices. And Facebook has been in operation for over ten years.
Indeed, The Economist reported recently that traditional family run companies are not only proving resilient in modern times, they are growing. On the Fortune 500, the percentage of companies run by a family dynasty has increased from 15% to 19% since 2005. Some huge businesses across the world – 21st Century Fox, BMW, Ford and Samsung amongst them – continue to have a prominent family at their head.
There are several reasons that the markets are yet to fully modernise and reflect rising technologies. One is that many of the newer technologies are being quickly bought out by existing companies. Facebook’s acquisitions since joining the NASDAQ include WhatsApp, Instagram and Oculus Rift. Amazon have bought video game streaming company Twitch. Apple have bought Beats (for their streaming service, Beats Music, as much as the headphones themselves).
When companies haven’t directly bought out new tech, they have instead brought their own versions of it to market. BSkyB and Amazon have on demand TV and film services in the UK, Google has Play Music (its Spotify rival), Apple has Apple Pay, Sony is developing the Morpheus (an Oculus Rift rival), Nissan and BMW have leading electric car models. Existing brands are often able to utilise their bigger audience reach, budget and cross-selling opportunities to quickly deliver a cheaper alternative to their start-up rivals.
Many companies have developed the ability to take advantage of new technologies with impressive speed. ARM holdings has repeatedly demonstrated that it can produce microprocessors for various new products in a multitude of markets; the likes of Google, IBM , Alibaba and Facebook understand that taking advantage of new opportunities is key to their continued success.
Finally, financial markets do tend to be slower than most to catch on to rising trends. That is not entirely their own doing: most social media sites waited until they were fully established before they attempted an IPO, a trend replicated often in new sectors. 3D printing is having a demonstrable impact in many areas but is yet to have a company on the markets that investors can recognise as defining it. All of this is exacerbated by the rise of crowdfunding, meaning that companies can delay their arrival on stock markets for yet longer.
Disruptive technology, then, is having its impact diluted in areas where it really matters. And as the memories of the dotcom bubble at the turn of the century continue to play on the minds of traders, companies and regulatory bodies, the prospect of technology and business growing ever more divergent looms. What that might mean for investors, consumers and companies in years to come remains to be seen.
Spread bets and CFDs are leveraged products and can result in losses that exceed your deposits. The value of shares, ETFs and ETCs bought through a stockbroking account can fall as well as rise, which could mean getting back less than you originally put in.
Header image courtesy of Flickr user Donna Cleveland