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Agility Update May 2021
The Reserve Bank of Australia "has committed to maintaining highly supportive monetary conditions … (and) not increase the cash rate until actual inflation is sustainably within the 2-3% target range”. The upshot is, as the RBA states, an increase in the cash is “unlikely to be until 2024 at the earliest”. To take advantage of this luxurious window of certainty, Agility Update May offers articles and tools to help look around corners, catch up on digital smarts, and consider opportunities in the fur-baby boom.
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Navigating the Great Reset
Changes wrought by the COVID-19 pandemic has created a unique wrinkle in time to birth a new future. But how does one look around the corner, especially when life itself is in flux? Set below are two methods, one from Bain & Company consultants who claim their clients outperform the market 4 to 1, and one from strategy and innovation consultancy Innosight co-founded by Harvard Business School professor Clayton Christensen.
The Bain Futures Method encompasses:
- Analogical reasoning: You can often apply lessons from industries and markets where the transition is hitting sooner to others that lag behind IF they have the same underlying cause-and-effect relationships.
- Test hypothesis: Understand the range of views on that topic and the implicit assumptions behind them, formulate hypotheses based on prior insights then use data to test whether a particular hypothesis is true or false.
- Examine historic patterns: Identify the earliest rumblings of coming change 10 to 20 years in advance. Next, evaluate and note the downfalls and the advantages of previous systems to chart a path forward.
- Avoid groupthink: Recruit diverse groups and kickstart discussions by giving them a provocative hypothesis to react to. This technique encourages divergent opinions based on the variance of individual experience and mitigates against groupthink.
- Align on the future environment: Gather a solid base of research that points to the social, emotional, and functional needs that your customers are moving to in 5 to 10 years’ time.
- Blueprint the future state: Estimate your growth gap and your projected financial shortfall, define a portfolio of new growth initiatives to fill that gap, then narrow down to strategic opportunity areas.
- Walk the future back to move forward: Convert the vision into action in a ‘to do’ with a set of priorities, milestones, and signposts.
- he currency used was NFTs or Non-fungible Tokens – a unique digital identifier attached to, and used to verify ownership of a, virtual item – registered on blockchains or distributed ledgers.
- NFT marketplaces for trading such crypto-goods are ranked according to the number of traders and volume by DappRadar here.
- Enterprise blockchain platforms are now down to a two-horse race between Hyperledger Fabric (a permissioned model championed by IBM) and Ethereum (including Quorum, a permissionless model championed by EY) that account for over 60% of enterprise blockchain engagements. See details in HFS Top 10 Enterprise Blockchain Services 2020 (excerpt for IBM released April 2020).
- Besides storing data, blockchains can facilitate transactions and provide the official record for them (a.k.a. Smart Contracts). Read Nasdaq’s A Blockchain Primer: What is it, who's using it, when it'll go mainstream, and how to invest in it.
- Blockchains are being used to fight the COVID-19 pandemic.
- Systems using trusted information (from IoT), secure ways to record and share it (through blockchain), and analytics to draw out insights (from AI) can open up an endless world of applications and opportunities. See PwC’s Automating Trust for an explanation.
Innosight’s Future-Back Approach:
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Digital Smarts, NFTs and Blockchains
A digitally savvy top leadership team — that is, a team in which more than half of the executive members are digitally savvy — can outperform comparable companies without such teams by more than 48% based on revenue growth and valuation. Unfortunately, digital savviness in the upper echelons of leadership is rare, found in just 24% of boards in U.S.-listed companies with more than US$1B in annual revenues, and only 7% of C-level executives in large global companies. For details, read MIT Sloan Review's article on what digitally savvy top performers including Charles Schwab, Dunkin’ Brands, Marathon Oil, Ovintiv (formerly known as Encana), and Visa do differently, and recommendations on how to bolster the digital savviness of executive teams.
MIT’s research also shows that, foremost, executives must be curious and willing to learn to become digitally savvy. For an individual, reading widely and delving behind the news is a start. For example, digging behind the headline of digital artist Beeple selling “Everydays: The First 5000 Days” for US$69.3M would have revealed signposts to the future including:
About 3 in 4 respondents to a survey by technology analysts HFS believe blockchains will be mainstream within 5 years. HFS also reveals enterprise blockchain is going through a 60-30-10 adoption challenge. Around 60% of enterprises are still unclear about blockchain, nearly 30% of enterprises are struggling with how to get started, and the remaining few with successful proofs of concept or pilots are struggling to get to production. For a list of ASX-listed blockchain companies click here, and for an in-depth article on NFT read Ars Technica’s non-fungible guide to NFTs.
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Money in Pets? Paw-sitive!
If the doubling of pet adoptions in 2020 is any indication, the pet industry and pet tech is on the cusp of an explosion. Worldwide, sales of pet food alone reached a peak of almost US$94B in 2019, an increase of almost US$3B compared to the previous year.
In Australia, which has one of the highest pet ownership rates in the world, 61% of households own over 29 million pets and spent over A$13B on pet services and products in 2019, a jump of over 40% from 2013. Data from industry analysts IBISWorld shows pet food production is worth A$2.6B a year in Australia and is projected to grow to A$2.8B by 2026.
The 2020 pandemic lockdowns have also accelerated the pet humanisation trend as ‘pet parents’ spend more time around their companions and increased their focus on sustainability, convenience, health, and thrift – both for themselves and their fur-babies. This is driving 7 major trends, namely:
- The pet supplements industry is set to hit US$1B by 2027 with Asia Pacific estimated to exhibit the highest CAGR of 7.9% over the forecast period. ASX-listed Australian players in this sector include Paw by Blackmores and CannPal which specialises in medical cannabis for pets.
- Entirely new pet product categories like pet wipes, toothpaste, puppy toilet training pads, and dog deodorant. In services, there are pet cremation, pet preservation, and new platforms like Mad Paws which has over 15,000 approved sitters and dog walkers and 300,000 pets across Australia signed up.
- Luxury, tech-enabled products such as the US inventions Litter-Robot (A$895), a battery-powered, WiFi-connected litterbox that self-cleans after every use; and Cat Genie (A$449) a self-flushing, self-washing litter box.
Then there’s Australian startup CarePod, a new-age travel crate featuring several layers of protective walls to prevent bumps, dimmed lighting to help reduce the pet’s stress levels, a built-in water supply and the ability for the pod to self-regulate temperature.
- The increasing number of pet food niches like raw food and freeze-dried are growing faster than traditional pet food. Australian start-ups include Frontier Pets which boasts “100% ethically sourced, human grade ingredients sourced directly from Aussie farmers”; Freeze Dry Australia which offers treats like salmon bellies, chicken hearts, whole sardines as well as “freeze dried 100% raw dog food”; and Lyka which offers grain- and legume-free fresh pet food.
- Preference for natural food brands focusing on factors that human owners tend to look for in their own food, like organic ingredients and omega-3 content. Balanced Life for example offers premium foods like LID (Limited Ingredient Diet) Dog Rolls “using limited, functional ingredients to provide the best nutrition for dogs with sensitive skin, stomachs and allergies or those on elimination diets”.
- Direct-to-consumer (DTC) online sales. Market leaders include Pet Circle which holds more than 50% of the online market, and pet care brand Rufus & Coco which recently launched its first standalone bricks-and-mortar venture called The Fur Salon in Mosman, NSW. Newbies include high-end pet accessory business Wolf & I Co. and subscription-only dog kibble company Scratch.
- Pet insurance. Globally, the pet insurance industry reached US$3.33B in 2018 and is expected to grow at a CAGR of 16.3% through 2028. In Australia, pet insurance is sold via supermarkets as well as private health insurers including BUPA, Medibank, HCF. However, only an estimated 7% of pets are insured meaning households spend about A$2B a year on vet bills with only about 5% of that paid by insurers. In contrast, about 30% of cats and dogs are insured in Britain.
The one thread tying almost all these trends together is: pet health. And just as telehealth for people finally took off in the pandemic, tele-vet services are likely to follow. Examples include Your Vet Online founded in 2015, VetChat, and Nuzzl.
Read also The secret to creating a pet tech unicorn? Community, Your ultimate guide to ASX stocks in pet care and Companies targeting dog vitamins and funerals as pet industry proves it's 'COVID-19 proof'.
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