CEO Daily: Wednesday, April 27
Yesterday was a landmark in the consumer tech era, with Apple reporting a quarterly decline in earnings for the first time in 13 years. Investors showed their disappointment by driving the company’s shares down 8% in after-hours trading, and eliminating more than $40 billion of market value.
But while Apple’s peak may signal the consumer tech boom has reached maturity, the age of the digital enterprise is still in its infancy. Many non-tech companies have just begun to grapple with how connected devices and omnipresent sensors spitting out comprehensive real-time data that can be analyzed by ever- smarter computers hold the potential to fundamentally reshape the foundations of their business.
Klaus Schwab, founder of the World Economic Forum in Davos, is among those who believe the coming business transformation will be on a par with the vast changes brought about by the steam engine, electric power, or the introduction of computing. Fortune has invited him to write a series of essays on what he calls the Fourth Industrial Revolution, the first of which we are publishing this morning.
Schwab identifies several ways businesses will need to change to survive in this new era:
-They must look “outside in,” to embrace the developments outside their industry that have the potential to radically change what’s happening within.
-They must create internal cultures of innovation, willing to embrace rapidly-changing ways of doing things.
-They will need to “resist short-term thinking” and keep focused on the long-term changes that these technologies can bring to their business.
Schwab also argues that the profound nature of technology developments in areas like artificial intelligence and genetic engineering will require business leaders “to draw deeply on their values and those held by their employees and stakeholders to both navigate and shape” this new industrial revolution.
You can read his essay here. Let me know what you think of it.
More news below, including impressive wins last night for Donald Trump and Hillary Clinton.
• Trump Triumphant
Donald Trump stormed to victory in all five north-eastern states which held primaries Tuesday, taking him a big step closer to the Republican nomination. Hillary Clinton also extended her lead over Senator Bernie Sanders with wins in Pennsylvania, Maryland, Connecticut and Delaware, ceding only Rhode Island to her opponent. The margin of victory for Trump in particular has focused attention on how long and how hard the trailing candidates will continue to fight, in their hope of taking the contest to the national Republican convention. Trump has now secured 950 of the 1,237 delegates he needs to secure the nomination, which means that rivals Ted Cruz and John Kasich desperately need to win Indiana (next week) and California to keep their chances alive. Fortune
• Comcast Goes After Dreamworks Animation
Another big deal afoot between Hollywood content producers and distributors: Comcast is in talks to buy Dreamworks Animation SKG for around $3 billion, according to The Wall Street Journal. The rationale is clear: Comcast's Universal Pictures needs to beef up in animated features to challenge Disney, and the DreamWorks' Kung Fu Panda franchise in particular will help its profile in the important Chinese market. For DreamWorks, the deal would reduce its reliance on volatile movie revenues. It isn't yet clear what the deal would mean for co-founder and CEO Jeff Katzenberg, who controls 60% of the voting stock. Fortune
• Google's Antitrust Battles
Getty Images, which supplies a large part of the professional photo images you see every day on the Internet, is planning to file a formal antitrust complaint at the E.U. against Google for 'scraping' its content--basically diverting viewers away from its own site and leading to a drop in sales of high-resolution images. The complaint is similar to the one that news providers often voice about Google. The E.U. already has two antitrust procedures open against Google, for allegedly manipulating online shoppers and for abusing its dominant position as owner of the Android operating system. On the latter issue, The Wall Street Journal reports that the Federal Trade Commission is also meeting with affected companies to hear their concerns. You might be forgiven for thinking a pattern is emerging. Financial Times, subscription required WSJ, subscription required
• VW's Smoking Gun
Well, maybe the gun isn't smoking, but the barrel is suspiciously warm. The investigation at Volkswagen into the emissions scandal has turned up a PowerPoint presentation from 2006 in which a senior executive laid out in detail how it could cheat U.S. emissions tests. It appears to be cast-iron evidence of a thoroughly-planned conspiracy to mislead U.S. officials, which can only raise the risk of criminal charges against the company (so far, the DoJ has only pressed civil claims). The New York Times also reports further suggestions implicating top management, saying they repeatedly rebuffed proposals to upgrade the emissions controls on the grounds of cost. NYT
Around the Water Cooler
• Adidas' Hot Streak
We're rapidly running out of sports-based metaphors for the remarkable turnaround at Adidas, which seemed to be fighting a losing battle with Nike and Under Armour on almost all fronts less than a year ago. The German company upgraded its profit outlook for 2016 for the second time Wednesday, ensuring that long-serving CEO Herbert Hainer will hand over a company that is fighting fit later this year. One of the company's strategic moves that have paid off best is its decision to focus in the U.S on running and casual footwear. The looming Euro 2016 soccer championship should also help carry it through the summer. WSJ, subscription required
• Germany To Subsidize EVs
Continuing our German theme this morning, Berlin has announced new subsidies for electric vehicles in what could be a game-changing development for the country's carmakers. Behind the rhetoric about saving the planet is a much harsher truth: it's the carmakers, especially you-know-who, that need saving after having invested too much, too long in diesel, the low-carbon technology that is now firmly on the wrong side of history. Buyers of new electric cars will get a handout of 4,000 euros ($4,500), and the government will also throw money at upgrading recharging infrastructure across the country. Don't expect Tesla to benefit in the short term, though--the handouts only apply to cars that cost less than its Model S and Model X. Reuters
• Boomers Make Way for Millennials
Millennials--those born between 1981 and 1998, according to an admittedly arbitrary definition--are now the most numerous generation in the U.S., according to the Pew Research Center’s slicing and dicing of the Census Bureau’s figures. This is a long-term phenomenon that cuts across every aspect of business life, from recruitment to consumer tastes and income distribution. But for the rest of the year, its significance is going to be, first and foremost, political. Millennials may have less disposable income, and fewer financial assets, but they now have more votes than Baby Boomers, the generation that has dictated the political agenda in the U.S. since the 1960s. Whoever wants to win in November is going to need to tailor his or her campaign accordingly. Pew
• Apple Has Company
Apple isn't the only tech darling that has lost its luster. Twitter shares fell as much as 14% in after-hours trading Tuesday after it missed earnings forecasts and gave an outlook for the second quarter over 15% below what analysts had been expecting. That reinforces long-standing concerns that Jack Dorsey, in his second tour of duty as CEO, is struggling to generate user growth, and to attract advertizers in a world dominated by seemingly savvier rivals like Facebook and Google. The company's shares had already fallen 24% this year before the release. Financial Times, subscription required