Yesterday’s email referred to the “new industrial revolution” spawned by the powerful convergence of cloud + sensors + data + machine learning technologies. Lunch with Randall Stephenson, CEO of AT&T, further convinced me the phrase is not an exaggeration.
Stephenson has set his company on a path to replace its traditional switching equipment with cloud-based IP infrastructure by the year 2020. (See related story by Fortune’s Jonathan Vanian on the serious threat this software-based networking raises for Cisco.) That’s just the beginning. The move to the cloud will allow massive data collection and analysis that will change the company’s relationships with its customers, suppliers, employees…even its equipment.
To use a small example, Stephenson told me AT&T used to lose significant money when repair trucks had a dead battery, and had to be towed. Now, he says, the company monitors those trucks wirelessly from afar, so it knows if a battery is failing, and has it replaced before it does.
The ramifications for business of this technological tidal wave are immense – too immense, Stephenson says, to leave in the sole hands of the CIO. “Your CEO, your CFO, your marketing person, all have to have technological proficiency if you are going to succeed.” His company is retooling its entire workforce by running 100,000 people through online technology training courses.
Further evidence of the tidal wave: Fortune is in the midst of surveying CEOs of Fortune 500 companies. One question we asked: What is your biggest challenge? More than three quarters of respondents so far have cited the “rapid pace of technological change” as either their top challenge, or one of the top three – ranking it higher than cyber security, shareholder activism, increased regulation or competition from developing countries.
Do you agree? Let us know. Today’s top story picks below.
| Alan Murray | |
| @alansmurray | |
| alan.murray@fortune.com |
Top News
• Dan Loeb's salty comments
“He criticizes hedge funds, but he used to run one. He criticizes activists, but he was the first activist. He says we should all pay more taxes, yet he avoids them himself." That's a quote from Dan Loeb, who runs the Third Point hedge fund, about Berkshire Hathaway's Warren Buffett. The critical comments drew loud applause at the SALT hedge fund conference in Las Vegas where Loeb was speaking. To learn more about why he said them, check out Fortune's take on the news. Fortune
• A whole new Whole Foods
Whole Foods is planning to open a new chain of lower-priced stores for people that can't seem to open their wallets up for its premium and organic food. The target audience of this concept? Millennials, of course. Whole Foods says the new format will have a simpler design to cater to people who want the grocer's quality without paying Whole Foods prices. The news comes amid new signs that Whole Foods’ fast growth engine is sputtering, as same-store sales grew less than analysts expected for the latest quarterly results. Fortune
• "Crazy off the hook" Tesla
Tech executives love to talk about how demand for their newest gadgets just can't possibly be met by production. Tesla CEO Elon Musk is the latest to make such sweeping statements, calling the 38,000 pre-orders for the company's new Powerwall home batteries "crazy off the hook," while -- you guessed it -- adding his company's production can't keep up. “There’s like no way we could possibly satisfy demand this year,” Musk told analysts Wednesday. “We’re basically sold out through the middle of next year.” Tesla's excited, but there are some doubts about the latest initiative. Fortune
• A memo labeled "Dow Confidential"
A 2013 memo, written by Dow Chemical's former chief auditor, outlined concerns that almost all revolved around Dow's high-profile CEO Andrew Liveris. It expressed concern about whether Dow may have misled shareholders and U.S. regulators about projects or expenses linked to the CEO. In more than 2,000 pages of documents reviewed by Reuters, new details and allegations call into question how Liveris, close to presidents past and present, has been running the $58 billion company. Reuters
• Siemens slashes another 4,500 jobs
Germany's engineering giant said it is cutting thousands of jobs at its power and gas division, a move that comes as peers in the power business have also trimmed positions for the sector. The move is partly a response to tough competition from emerging markets. Around half of the cuts will be in Germany, Siemens said. The action comes as the company also published a modest improvement in quarterly results. Fortune
Around the Water Cooler
• J&J changes 'compassionate' care
Johnson & Johnson has arranged for an independent panel to review requests from seriously ill patients who want to try an unapproved drug even if they aren’t participating in the drug’s testing. The issue is a thorny one for the industry, as companies make only enough of an experimental drug to supply trials, while also fearing lawsuits or a backlash if an unapproved drug fails or suffers serious side effects. WSJ (subscription required)
• The all-about-me iGeneration
Conglomerates are only just now getting a handle on what it takes to market to a Millennial (with varying degrees of success). But there is an even greater challenge on the horizon: the all-about-me iGeneration, also known as Generation Z, or those born in 1994 and later who grew up with a smartphone in hand. They want robust content and better designed websites. They want it to be mobile. And it better be personalized. Companies need to get on board, as this generation is graduating from high school and college and just starting to enter the workplace. Harvard Business Review
• Could the U.S. be headed toward recession?
Could the outstanding performance of commodities in April be the canary in the coal mine? The global head of commodities at S&P Dow Jones Indices has suggested that the months when energy and industrial metals perform particularly well often are followed by an economic slowdown. Basically, the theory is this: as the market nears a top, companies are flush with cash but short on faith. They respond by hoarding basic commodities. The data could suggest that the weak first-quarter performance could be more than a blip. Fortune
• McDonald's tries kale for breakfast
Large food and beverage companies are in a pickle. Consumers are pivoting quickly away from older patterns, and many of the larger firms are finding themselves on the ousts with Millennials in particular. That has led to ads mocking those trends, like when Budweiser made fun of craft beer earlier this year, or McDonald's mocked kale. Those campaigns can be viewed as a tad hypocritical. Bud's parent Anheuser-Busch has been busy buying craft beer companies. McDonald's, meanwhile, confirmed it is testing kale at nine restaurants in Southern California. Fortune
Fortune's 5 things to know today
Markets in retreat and Alibaba — 5 things to know today. Today's story can be found here.
