Exponential - May 17, 2015

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Exponential
from
Volume 2 – Issue 9 | 17 th May, 2015
Major topics in the world of business today,
curated expert research:
what to know, where to go
The Briefing
• Tech M&A: firms bulk up by
making large acquisitions
• Growing pains: the great
Chinese slowdown
• Caterpillar invests in the “Airbnb
for heavy equipment”
Deeper Dives
• Gamers without borders: video
games grow on mobile
• The cyborg future: robots show
growth across industries
• #WeHeartCharts: China’s GDP
in focus
betsyweber via flickr
dkeats via flickr
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Exponential the Skillbridge Magazine
The Briefing
Tech M&A: firms
bulk up by making
large acquisitions
• Verizon Communications agreed to buy
AOL for $4.4bn in cash.
• Though Salesforce is hugely successful
by many metrics and has a market cap of
~50bn, it continues to lose money.
Key Reading:
• New York Times: Verizon to Buy AOL for $4.4
Billion to Expand Digital Portfolio
• McKinsey: M&A 2014: Return of the big deal
• NetworkWorld: Money aside, who’s the best fit
to buy Salesforce?
Verizon to Buy AOL for $4.4bn
Technology companies are bucking the trend to divest
acquisitions made before the financial crisis. While large
industrial firms like General Electric are shedding companies
they purchased before the crash, technology firms are bulking
up by purchasing rival companies.
Fifteen years ago AOL acquired Time Warner in a spectacular
merger estimated to be worth $164bn. AOL is now being
acquired by Verizon Communications for the relatively paltry
cash sum of $4.4bn.
The deal will see America’s largest wireless provider acquire a
king of US media. The rationale behind the acquisition is similar
to the original AOL-Time Warner deal but this time the platform is
different. While the original tie-up sought synergies between
media and the emerging internet, the new deal seeks to exploit
the possibilities of integrating content and new advertising
technology on the mobile phone.
Verizon is hoping that its buy-out will be more successful than
AOL’s acquisition of Time Warner which is generally regarded as
an era-defining debacle. Within two years of the deal, AOL had
announced a staggering write-down and one of the biggest ever
losses in US corporate history.
Verizon is betting that by adding a layer of entertainment,
advertising and services to its vast network of smartphones, it
can attract more customers and find new sources of revenue.
Is Salesforce next on the auction block?
An even larger technology acquisition
involving Salesforce, the pre-eminent
Customer Relationship Management
system, may be on the horizon.
Salesforce pioneered the software-as-aservice
model in which companies rent
applications from a vendor who handles
maintenance on its own servers or
cloud. Since its foundation in 1999,
other enterprise software companies
including Microsoft, Oracle, and SAP
have rushed to play catch-up to its
business model. Though Salesforce is
hugely successful by many metrics, has
thousands of big business customers
and a market cap of ~50bn, it continues
to lose money.
In recent weeks, Bloomberg reported
that Salesforce had hired an investment
bank to evaluate acquisition offers.
While there have been significant
rumors about possible suitors both
Microsoft and Oracle have denied
interest in a deal.
Gossip continues to swirl about a
potential acquisition of Salesforce, with
Amazon, Hewlett Packard, Google and
IBM all touted as possible buyers.
Content, distribution, and advertising
Verizon’s large gamble on AOL comes
as the overall growth of subscriptions
across the telecommunications industry
has been slowing. While Verizon has
found steady growth in business
services and premium television
offerings, it is also trying to protect its
profitable mobile phone business,
which today has 109m customers.
By pursuing a marriage of content and
distribution, Verizon is following the
same path as other big media
companies. Comcast, the biggest cable
operator, recently acquired
NBCUniversal. AT&T, Verizon’s nearest
rival, is in the process of acquiring
DirecTV, the satellite television
business. And Sprint, another wireless
operator, is making its own forays into
content.
“The logic is clear, and it’s the same
logic as AOL and Time Warner,” said
Jonathan Miller, the CEO of AOL from
2002 to 2006 who is now a venture
capitalist. “The logic then was to put to
together content, distribution and
access, and it still is. The telecoms are
clearly saying, ‘We’re not going to be
dumb pipes.’”
What the brains think…
The McKinsey report “M&A 2014:
Return of the big deal” explains that in
2014, M&A accounted for over 7,500
deals with a combined value exceeding
$3.5 trillion. Excess cash among the top
1,000 US companies approached $1.5
trillion by the end of 2013, creating
pressure to put money to work. Among
the top 1,000 listed companies in the
US, about half of that excess cash
appears to reside in the
telecommunications, healthcare,
technology, media, and sectors.
Another explanation for the increase in
M&A activity is the desire of
corporations to own monopoly
businesses and products. Such
businesses have been enabled by the
massive distributional, networkprotective
power of the Internet
combined with a major shift towards the
production of non-physical things. A
first-mover with a strong intangible
product can distribute that product to
the entire world at little cost, protect it
as intellectual property, and build a
profitable user network around it. The
combined advantages make monolithic
tech corporations extremely difficult to
compete with.
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Black Growing Friday pains: is back, the
but great is Chinese it better than
ever? slowdown
• Approximately $70bn of Alibaba’s market
value has evaporated since November.
• Chinese GDP rose 7% in the three
months through March from a year
earlier, according to the the Chinese
statistics bureau.
Key Reading:
• The Economist: China’s slowdown
• McKinsey Insights: What could happen in China
in 2015?
• WSJ: China Cuts Interest Rates as Economic
Growth Slows
Exponential the Skillbridge Magazine
The Briefing
China cuts interest rates as it attempts to keep growth steady
On May 11, the Chinese government cut interest rates for the
third time in six months with the People’s Bank of China saying
it would shave a further quarter percentage point from current
base lending and deposit rates. The decision came amid an
economic slowdown and efforts by the Chinese government to
ease the debt burdens of companies and individuals. The
Economist reports that senior officials are increasingly
concerned about how the rapid expansion of credit and debt
have begun to slow growth in what is, by some estimates, the
word’s largest economy.
In the last quarter, China’s domestic economy expanded at the
slowest pace since 2009 with output, investment and retail
data all slackening. GDP rose 7% in the three months from
March, matching the median estimate of economists and the
leadership’s full-year expansion target. Data for the month of
March showed industrial production was weaker than all 40
estimates in a Bloomberg News survey. China’s leaders have
publicly signalled tolerance for a slower expansion as they seek
to rein in debt risks, corruption and pollution, but the cut in
interest rates is clearly intended to act as a stimulus.
The Economist reports that Premier Li Keqiang’s government
has, in recent months, relaxed home-purchasing rules and
reduced the reserves banks must set aside. The International
Monetary Fund this week retained its projection for China’s
6.8% expansion in 2015 -- but it is expected to grow less than
India for the first time since 1999.
Policy changes after imports decline
Will Alibaba lead China ahead?
What the brains think…
The Chinese State Council has recently
announced a reduction in tariffs on
popular imported consumer goods to
boost spending. Premier Li Keqiang has
stated that boosting domestic
consumption is as an important step to
stabilizing economic growth.
China will also adjust the consumption
tax policy that importers face when
bringing in everyday items such as
cosmetics, clothing and accessories.
Some imported products currently carry
up to 30% consumption tax. In addition,
some companies must pay between 5%
and 20% in import duties. Zhao Ping, a
senior researcher at the Chinese
Academy of International Trade and
Economic Cooperation said the tariff
reduction could drive mainland retail
sales growth up by 0.5 to 1%.
Chinese citizens are now more willing to
head overseas to buy not just big-ticket
luxury items but also regular household
goods. Reports of Chinese citizens
snapping up toilet lids in Japan have
raised concerns over domestic product
quality and triggered the calls for
lowering tariffs.
After Alibaba Group raised a record
$25bn in its IPO last year, founder Jack
Ma said the Chinese e-commerce
company faced the danger of high
expectations. His words have proved to
be prescient. Approximately $70bn of
Alibaba’s market value has been lost
since November 2014. While Alibaba
has made strong inroads into Russia
and Brazil, the firm currently gets less
than 5% of its revenue from outside
China. According to Bloomberg,
Alibaba’s sales rose 41% in the fourth
quarter of 2014 to 16.9bn yuan
($2.7bn). That compares with an
average of about 50% during the past
seven quarters. Alibaba’s strategy of
expanding in under-served regions of
China and overseas is driving up
marketing costs as more consumers
shop on mobile devices, where ads
typically generate less revenue than
those on desktops.
Allegations have also resurfaced that
Alibaba platforms, including Taobao
Marketplace and Tmall.com, are a
haven for counterfeiters. The Chinese
government said Alibaba faces a
“credibility crisis” for failing to crack
down on shady merchants, fake goods
and misleading promotions.
According to the McKinsey Insights
report “What could happen in China in
2015?”, the prospects of Chinese
companies maintaining profitability
relies on firms improving their
productivity and efficiency.
McKinsey estimates that the impact of
technology in eliminating jobs in the
service and manufacturing sectors will
become even greater. The report
counsels the Chinese government to
keep a sharper focus on net job
creation and the quality of those new
positions. It is estimated that
companies will hire even more
information technologists to keep up in
the race to exploit technology.
McKinsey also speculates that China’s
push to lower carbon emissions will
lead to even greater investment in
domestic solar and wind farms,
boosting the global position of Chinese
producers.
High-speed-rail construction will
continue domestically and abroad, as
Chinese companies become the builder
of choice for countries across the globe.
If China invests wisely, it has a good
chance to stay ahead.
3 +1 (212) 548 4548 www.skillbridge.co

Caterpillar invests in
the “Airbnb for heavy
equipment”
Exponential the Skillbridge Magazine
The Briefing
Idly heavy machinery? Not for long.
Heavy equipment manufacturer Caterpillar has invested in Yard
Club, a San Francisco startup that helps owners of heavy
equipment rent idle machines to one another. The concept has
similarities to the Airbnb model which helps people find vacant
homes or apartments during their vacations.
Caterpillar, which makes construction and mining equipment,
said the company had provided a bridge loan that could be
converted to equity in the future. Colin Evran, the 31 year-old
CEO and founder of Yard Club, declined to provide details of the
financing but called it “pretty substantial.” Yard Club attracted
$1.6m of venture capital funding in late 2013.
Yard Club has tested its service in the Bay Area and currently
has about 700 pieces of equipment listed for rental. Excavators,
bulldozers and other types of equipment often sit idle between
jobs, leaving owners’ capital tied up in assets that aren’t being
used regularly. To avoid the costs of owning idle equipment,
more users have turned to equipment rental firms in recent
years. The American Rental Association, a trade group,
estimates that 54% of the U.S. equipment fleet is owned by
rental companies, up from around 40% a decade ago.
Winners
and Losers
andreas_poike via flickr
Good Week For: Chicken consumers
Tyson Foods, America’s largest
chicken processor, plans to adopt a
new standard governing the use of
antibiotics poultry. The proposal is
aimed particularly at schools,
hospitals and large institutions. The
standard, developed by School Food
FOCUS and Pew Charitable Trusts,
limits antibiotic use on poultry farms
to cases where it is needed to control
and treat disease. The measures
help reduce the drugs’ overall use
and potentially slow the development
of dangerous bacteria that can resist
antibiotics. In April, Tyson announced
plans to eliminate all antibiotics in its
poultry by September 2017.
Bad Week For: TurboTax
TurboTax, America’s largest online
tax-software company, temporarily
halted electronic filing of all state tax
returns after more than a dozen
states spotted criminal attempts to
obtain refunds through its systems.
Intuit said that its TurboTax unit
stopped transmitting state e-filing tax
returns after seeing attempts to use
stolen personal information to file
fraudulent returns for tax refunds.
The shutdown lasted about 24 hours.
19 states have reported potential
fraud issues. Alabama has identified
as many as 16,000 suspicious tax
returns. Minnesota said it stopped
accepting individual tax returns
through TurboTax.
Good Week For: Drone Maker DJI
Chinese drone maker DJI Technology
secured a $75m investment that
values the company at roughly $8bn,
propelling the firm into an exclusive
club of startups and signalling Silicon
Valley’s continued faith in the
commercial promise of flying robots.
Venture capital firm Accel Partners
said its $75m investment in DJI is
one of its largest ever. “We think [the
drone sector] is still an early market,
but one that we think is a new global
technology category,” said Sameer
Gandhi, who led the investment for
Accel, based in Palo Alto, Calif. DJI
says venture firm Sequoia Capital is
already an investor.
Bad Week For: Sugar buyers
One company's purchase of an
unusually large amount of sugar is
sending the market scrambling.
Wilmar International bought 1.9
million tons of sugar on the ICE
Futures US Exchange and called on
sellers to ship the order - the largest
exchange delivery on record - as soon
as possible. Sugar prices soared in
response. More than a dozen ships
are now lined up at Brazilian ports to
transport the sugar to Asia. After
Wilmar placed the $547m order,
brokers surmised that the firm may
be betting on Asia's growing demand
for sugar. The company will benefit
from the difference in sugar prices
between the US and Asia.
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The global round-up
Exponential the Skillbridge Magazine
The Briefing
Obama loses trade deal vote
President Obama’s most aggressive and
sustained legislative push since the
Affordable Care Act failed a crucial test
this week. A divided Senate failed to
pass a bill that would have granted
Obama accelerated power to complete
a massive trade accord with 11 nations
across the Pacific Rim. Democrats,
many of them fiercely loyal to labor
unions handed the president a stinging
rebuke. The Senate voted 52-45 on a
procedural motion to begin debating the
bill to give the president “trade
promotion authority.” This vote was
eight votes short of the 60 votes
needed to proceed.
Nuclear engineering firm Areva to lay
off thousands of workers
After years of losses, beleaguered
French nuclear engineering firm Areva
plans to reduce its global payroll by
between 5,000 and 6,000 jobs as part
of a cost-cutting effort. The largely
government-owned company has
opened talks with labor unions to find
ways to cut its payroll through voluntary
departures. The toll is likely to include
between 3,000 and 4,000 positions in
France. The company is seeking to
reduce its labor-cost by 15% in France
and by 18% abroad. Currently, the
company employs 44,000 workers in
more than 30 countries.
Indonesia to cut its corporate tax rate
Indonesia is considering slashing its
corporate tax rate from 25% to as low as
17.5% to attract investment from
companies that are operating in the
region. Indonesia, which posted weak
quarterly growth figures, already has
one of the lowest tax collection rates in
Southeast Asia. The proposed corporate
tax changes will bring Indonesia closer
to its neighbor, Singapore, which offers
17%. In the short term, the policy may
hurt tax returns. The Indonesian tax
office is trying to recoup an estimated
200 trillion rupiah ($15.6bn) in lost
state income due to transfer pricing,
primarily in the commodities sector.
South African electricity not functioning
British firm Just Eat purchases Menulog
waklingsf via flickr
South Africans are learning to live in the
dark, as the beleaguered power utility firm,
Eskom, is unable to meet electricity
demand. Blackouts are euphemistically
described as “load shedding”. South
Africans now check electricity reports in the
same way they would read weather
forecasts. Newspapers print survival tips
and “load shedder recipes” for food you can
prepare without electricity. The power cuts
continue to hurt an already stagnant
economy, estimated to have expanded by
just 1.4% in 2014.
Just Eat, a British online service that acts as
a web based intermediary between
independent takeaway food outlets and
customers, announced that it is buying
Australian and New Zealand rival Menulog for
$702m. The deal is fully paid for by selling
new shares in Just Eat. Menulog's price tag is
pretty hefty given that revenue last year
stood at just $20.8m, with earnings at
$1.85m. However, online takeaway
penetration in Australia and New Zealand is
currently at just 22% leaving significant room
for growth.
5 +1 (212) 548 4548 www.skillbridge.co

The Briefing
The Briefing
Exponential the Skillbridge Magazine
Five key
reads
aiigle_dore via flickr
New York Times: Is Slack Really Worth
$2.8 Billion? A Conversation With
Stewart Butterfield
WORK; UNICORNS; DISRUPTION – Slack
CEO Stewart Butterfield proclaims that
today is “the best time to raise money
ever.” Butterfield claims that “[i]t’s …
the best time for late-stage start-ups to
raise money from venture capitalists
since this dynamic has been around.”
On the question of whether Slack is
worth its $3bn valuation, Butterfield is
ebullient but acknowledges that, in the
future, there is a risk that investors may
say his company is only worth half what
they thought.
Butterfield goes on to cite the figures of
venture capitalist Marc Andreessen who
pointed out that the entire amount of
venture funding allocated last year was
$50 billion. Given that the sum
represents a small percentage of the
overall economy, Butterfield believes it
won’t make a difference to most private
citizens whether venture capitalists lose
a lot of money on current investments.
Washington Post: Tech Titans Latest
Project: Defy Death
ENTREPRENEURSHIP; DEATH – Today,
entrepreneur-philanthropists are
transforming American society. Parallels
can be seen with the turn of the
twentieth century when Andrew
Carnegie and John D. Rockefeller led a
handful of wealthy industrialists intent
on reshaping society. Philanthropists of
today’s Gilded Age are more numerous
and have became rich faster and
younger than their predecessors. The
increasing influence of today's titans
comes at a time of historic and growing
inequality. By next year, the richest 1%
of the world’s population is predicted to
control more than 50% of the world’s
wealth, according to an Oxfam report
released at the World Economic Forum
in Davos.
What’s left for today’s entrephilanthropists
to conquer? Death.
Entrepreneurs intend to conquer it
through medical research, mines and
maps, tracking the huge sets of digital
fingerprints stored when people use
social networks and leave geographic
traces of daily movements.
Bloomberg Businessweek: A League
of His Own
FOOTBALL; FIFA; LEADERSHIP – It is
hard to find a perfect description for
Joseph “Sepp” Blatter, the 79 year-old
head of FIFA. The Daily Mail called him
a “smug, self-righteous Zurich gnome”;
the Guardian called him “the most
successful non-homicidal dictator of the
past century.”
FIFA representatives reach for different
sobriquets. In April, at the annual
meeting of FIFA’s North and Central
American representatives, Osiris
Guzman, president of Dominican
Republic soccer, compared Blatter to
Jesus Christ, Nelson Mandela, and
Winston Churchill. Blatter is currently
running for his fifth term as president of
soccer’s international governing body,
the Fédération Internationale de
Football Association, and the delegates
are eager to outdo one another in a
competition to shower epithets on their
chief. One after another, waving their
nations’ flags for the right to speak,
delegates lauded Blatter, using terms
like “transformational” and “futuristic”
and “the father of football.”
WSJ: How to vet a charity
PHILANTHROPY; CHARITY; VETTING –
“Charitable giving is a form of
investment, and people need to perform
due diligence on the groups they give
to,” says Ben Pierce, who heads
Vanguard Charitable. Pierce’s $5bn
donor-advised fund is affiliated with
Vanguard Group and makes donations
on behalf of individual account holders.
Natural disasters, like the recent
Nepalese earthquake, always bring out
donors’ good intentions—but also
charlatans who prey on them.
Sandra Miniutti, vice president of
Charity Navigator, says traffic to its
website tripled to about 100,000
visitors during the week after the quake.
The site rates 8,000 charities. A new
phenomenon, she says, is appeals from
individual “victims” on social media and
crowdfunding sites that may be bogus.
In America, there are more than a
million nonprofit companies eligible for
tax-deductible contributions. According
to the National Center for Charitable
Statistics, the sector, has revenues of
more than $1.7 trillion and assets of
more than $3.7 trillion.
McKinsey Quarterly: Getting beyond
bureaucracy in Human Resources
INTERNATIONAL; OPERATIONS; HR –
High-quality, timely information about
talent pools and talent gaps represents
a competitive advantage that human
resources (HR) departments are
uniquely positioned to provide.
HR should help critical connections to
be made and then help line managers
seize opportunities.
The best HR organizations also offer a
perspective on emerging gaps. For
example, as digitization becomes more
critical to cars, leading automakers
need to put more emphasis on
recruiting computer engineers—a
challenge for organizations accustomed
to recruiting mechanical engineers.
HR teams must discreetly monitor
metrics for proven warning signs when
the company needs to find subjectmatter
expertise.
HR’s mission is to interpret events and
respond rapidly to potentially significant
breakdowns -- not to become an
omnipresent process police.
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Deeper Dives
• International video game revenue was estimated to be
$81.5B in 2014.
• The nations with the largest video game revenues are
the United States ($20.5bn), China ($17.9bn), and
Japan ($12.2bn).
Exponential the Skillbridge Magazine
Games without
borders: Video games
grow on mobile
Video game markets grow worldwide
As the global video game industry continues to grow and evolve, it remains hugely
profitable. Today, America is home to major game development companies such as
Activision Blizzard (Call of Duty, World of Warcraft), Electronic Arts (Fifa, Battlefield,
Mass Effect), Take-Two Interactive (Borderlands, Grand Theft Auto), and ZeniMax
Media (Doom, Quake).
Other important players in the video game industry are the large technology firms that
enable game distribution. Microsoft and Sony operate one of the largest game console
hardware franchises while the largest mobile gaming platforms are operated by
Google, Apple, and Amazon through their respective app stores. As Google, Apple, and
Amazon increasingly encroach on the traditional video game space, incumbents like
Microsoft and Sony have shifted their focus to become all-in-one entertainment
systems. Both sides desire to be the single entertainment hub that connects to the
television, as this will enable them to win.
International video game revenue was estimated to be $81.5bn in 2014.The largest
nations by video game revenues are the United States ($20.5bn), China ($17.9bn),
and Japan ($12.2bn). Driven by strong mobile gaming and video game console and
software sales, the market is forecast to reach $111 billion by 2015.
Nintendo makes a comeback
Oculus debut: Virtual reality is here
A closer look within the video game sector
Gartner predicts that 3 out of 4 segments
within the video game market will continue to
grow, with mobile games as the fastest
growing sector of the video game market:
Handheld game market 2012: $17.8m
Handheld game market 2015: $12.4m
Mobile games market 2012: $9.3m
Mobile games market 2015: $22m
PC games market 2012: $14.4m
PC games market 2015: $21.6m
Video game console market 2012: $37.4m
Video game console market 2015: $55m
What the brains think...
Classic Japanese videogame maker
Nintendo is making its long-awaited
entry into smartphone games. It is
projected that the new venture will help
double the firm’s annual operating
profit in 2015.
Nintendo repeatedly resisted investor
calls to shift focus to smartphone
games until it unveiled a gaming app
partnership in March with another
Japanese firm, DeNA. Nintendo also
recently announced it would branch out
into theme parks through a tie-up with
Universal Parks.
Though console sales are slowing,
Nintendo forecasts annual operating
profits will roughly double to 50 billion
yen ($419.71 million). For the year
ahead, the company predict that Wii U
sales will be roughly flat at around 3.4
million consoles, while the 3DS portable
console will shift 7.6 million units, down
from 8.7 million a year earlier.
Key Sources:
• Reuters: Oculus to sell virtual reality
headsets for consumers from early 2016
• Gartner: Gartner Says Worldwide Video
Game Market to Total $93 Billion in 2013
• McKinsey Insights: Video games grow up
Virtual reality technology company
Oculus said it would start shipping the
much-awaited consumer version of its
Rift headset in the first quarter of 2016.
Pre-orders for Rift will start later in
2015. Facebook bought Oculus for
$2bn in early 2014. Previous versions
of the VR headset, available since
2012, were aimed at developers who
make games and run tests. The
consumer version is widely expected
sometime this year. The Oculus Rift has
gone through several iterations since it
was launched on Kickstarter in the
summer of 2012. It's seen two
development kits and multiple
prototypes, most recently the Crescent
Bay redesign that appeared last year.
Facebook CEO Mark Zuckerberg hasn’t
been shy about his ambitions for the
Oculus Rift, stating that Facebook will
need to sell 50-100m units in order to
be considered an important platform.
The scale of Zuckerberg’s aspirations
can be seen in the contrast with the
PlayStation Move and the Kinect which
were both introduced in 2010. The
Move had shipped 15m units by the
end of 2012 and the Kinect had sold
24m units by February 2013.
In the recent McKinsey piece “Video
games grow up,” McKinsey partner
Jayson Chi, who heads the firm’s video
game practice, argues that “[g]aming
monetizes easily and abundantly.
Mobile gaming is the fourth most
popular activity after messaging,
browsing, and watching video.”
Keiji Inafune, the CEO of video game
maker Comcept has stated that “for
Japanese game companies to regain
their global competitiveness, they will
need to invest more creatively, act less
like bureaucrats, and do a better job of
understanding other cultures.”
Even in a creative sector such as
games, it is challenging for large,
established organizations to change.
In the West, unlike Japan, the model of
production is similar to that seen in
Hollywood. Top video game talent jumps
from project to project, depending on
what is needed where.
Who will win the monetization battle as
the industry shifts to more consumers in
the East remains the sector’s largest
unanswered question.
7 +1 (212) 548 4548 www.skillbridge.co

• From 2015 to 2017, robot installations are estimated
to increase by 12% on average per year.
• In 2013, robot sales increased by 12% to 178,132
units, the highest level ever recorded for one year.
Exponential the Skillbridge Magazine
Deeper Dives
The cyborg future:
robots show growth
across industries
More robots present across many industries and sectors
Between 2008 and 2013, the number of robots sold per year increased by an average
of 9.5%. In 2013, robot sales increased by 12% to 178,132 units - by far the highest
figure ever recorded for one year. The primary recipients of industrial robots were the
automotive, chemical, rubber, plastics, electronics, and food industries. In 2013, China
overtook the US to become the biggest robot market with a share of 20% of the total
supply. Five nations continue to dominate robot sales and usage: 70% of the total
robot sales in 2013 were in Japan, China, the United States, Korea and Germany.
From 2015 to 2017, global robot installations are estimated to increase by 12% on
average per year. Linking the real-life factory with virtual reality will play an increasingly
important role in global manufacturing. The robotics industry looks toward to a bright
future as global competition requires modernization of production facilities.
There are strong reasons to expect a new robot boom. Firstly, human-machine
collaborations will open up new applications and attract new customers. Secondly,
growing consumer markets require an expansion of production capacities and an
increase in the variety of products which require flexible automation. Robots continue
to improve the quality of human work by taking over dangerous, tedious and dirty jobs
that are not possible or safe for humans to perform.
North American robotics in focus
Soft robots: a whole new world
Robots>Humans
According to PC Magazine, the top ten
most vulnerable jobs that are likely to
be taken over by robots are:
1. Bank tellers
2. Umpires/Referees/Sports Officials
3. Insurance Appraisers
4. Loan Officers
5. Order Clerks
6. Brokerage Clerks
7. Insurance Policy Processing Clerks
8. Timing Device Assemblers/Adjusters
9. Data Entry Workers
10. Library Technicians
The least vulnerable jobs? Recreational
Therapists, First-Line Supervisors of
Mechanics, Installers, Repairers, and
Emergency Management Directors.
The robotic future
Robot shipments set new records in
2014, with 25,425 robots valued at
$1.5bn being shipped to North
American customers. The Robotic
Industry Association reports the
automotive industry was the primary
driver of growth in 2014, with robot
orders increasing 45% year over year.
Within the automotive industry, the
hottest robotic applications in Q1 of
2015 by units ordered were Material
Handling (33%), Spot Welding (26%),
and Coating & Dispensing (9%).
Non-automotive industry robot
purchases in North America grew at 7%
over 2013. The standout nonautomotive
industries in 2014 in terms
of order growth were Plastics and
Rubber (25%), Semiconductor and
Electronics (21%), and Metals (16%).
In 2013, the average robot density per
10,000 employees in manufacturing
sectors was 73 in the Americas, 82 in
Europe, and 51 in Asia.
Key Sources:
• HBR: What Happens to Society When Robots
Replace Workers?
• International Federation of Robotics: World
Robotics 2014 Industrial Robots Statistics
• QZ: The future of robotics is soft and squishy
For decades, robots have advanced the
efficiency of human activity. Typically,
robots are formed from bulky, stiff
materials and require connections to
external power sources. These features
limit their dexterity and mobility. But
new materials now allow for the
development of "soft robots" that
reconfigure their own shapes and
moves using their own internally
generated power.
Soft robots have unique applications.
Unlike a hard robot, a soft one can run
into a human or animal (or wall) without
causing much harm to either party.
Their flexibility also makes them adept
at tasks in tight, irregular spaces like
the rubble of a collapsed building or an
unexplored cave. For robots that move
by creeping and crawling, hitting
surfaces can actually be a good thing: it
gives them purchase to move around
the environment.
Researchers at the University of
Pittsburgh have created a polymer gel
that mimics euglena mutabilis, a singlecell
organism that uses energy to
change its shape autonomously in order
to move.
The recent HBR piece “What Happens to
Society When Robots Replace
Workers?” considers how technological
progress is typically achieved at an
exponential rate.
In perhaps the most famous example of
rapid growth, information storage
density in computer memory increased
by a factor of five million between 1960
and 2003, at times progressing at a rate
of 60% per year.
Foxconn, the firm that manufactures
products for major companies including
Apple, employs more than one million
workers in China. In 2011, the company
installed 10,000 robots, called Foxbots.
Today, the firm installs them at a rate of
30,000 per year. Each Foxbot costs
about $20,000 and is used to perform
routine jobs such as spraying, welding,
and assembly.
Terry Gou, Foxconn’s CEO, said, “We
have over one million workers. In the
future we will add one million robotic
workers.” This means, of course, that
the company will avoid hiring the next
million human workers. The full effects
of robot technology on labour market
dynamics remains to be seen.
8 +1 (212) 548 4548 www.skillbridge.co

Exponential the Skillbridge Magazine
Deeper Dives
We heart h charts
Trane de Vore via flickr
How has China’s economic growth
slowed in recent years?
China’s economic growth slowed to 7.4% in
2014, downshifting to a level not seen in a
quarter of a century and marking the end of
a period of high growth that buoyed global
demand for everything from iron ore to
designer handbags. China continues to face
a housing glut, soaring debt and
overcapacity in many industries. Taken
together, these factors are likely to continue
to impede growth in 2015.
China’s GDP: % increase on a year earlier
Source: Haver Analytics/National Bureau of Statistics
How fast are video games growing?
Technology research firm Gartner projects
that worldwide video game revenue will
grow to $111bn in 2015. This figure
includes mobile games, computer games,
handheld video games and consoles.
According to Gartner, there is a significant
gain from the $79bn spent on video games
in 2012. In 2011, the average player spent
5.1 hours per week gaming. In 2013, that
number rose to 6.3 hours.
Mobile games revenue soars as more consumers are connected
(Global mobile games revenue in US $bn, tablet devices in mn, and
smartphone connections in mn, 2013-2018)
Source: QZ.com
Source: The New Republic
In which parts of the world are robots
gaining ground?
In China, significant investments in robotic
technology resulted in a substantial
increase in the robot density of the
automotive industry. Between 2006 and
2013, the number of robot installations at
automotive firms in China steadily
increased from 51 to 281 robots per
10,000 employees. All other sectors also
increased the number of robot
installations. In 2013, the overall robot
density rate was only about 14 robots per
10,000 employees.
Annual supply of industrial robots 2012-2013
and forecast for 2014-2017
Source: World Robotics 2014
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The Interview h
Exponential the Skillbridge Magazine
The Interview
• This week’s interview is with Jocelyn Wyatt, Co-Lead and Executive Director of IDEO.org.
• Prior to joining IDEO in 2007, Jocelyn worked in Kenya as an Acumen Fund Fellow with an agro-pharmaceutical
company involved in the production of malaria treatments.
• Wyatt is an advisory board member to the Clinton Global Initiative, Fenix International and Hattery, an Aspen
Institute First Movers Fellow, and one of Foreign Policy Magazine’s Top Global Thinkers.
At IDEO.org, you work on improving
human-centered design. Can you describe
what you mean by this?
Human-centered design is a creative
approach to problem solving.
It’s an approach where we start by
understanding people’s needs: by
spending time with them, conducting
interviews, doing observations, and trying
to deeply understand people’s needs. We
then distill our findings into a set of
insights and opportunity areas, where we
brainstorm a wide range of different
solutions, and choose a few of them to
prototype. In the next stage, we share our
prototypes with others and get feedback.
Finally, we work with organizations to
create pilots, and scale up solutions.
What problems that face the developing
world do you think can be solved or
diseases eradicated?
One of the big ones that we’re working on
right now is about reproductive health and
access to reproductive services for
adolescent girls in sub-Saharan Africa.
Traditionally, reproductive health programs
have focused on creating cost effective
solutions for mothers in terms of birth
spacing of babies and when they’ve
finished having children. But very few
interventions have focused on targeting
adolescent girls. I believe that the issue of
reducing unplanned pregnancies amongst
unmarried adolescent girls is one that we
at IDEO.org will be able to tackle in the
next ten years.
Sanitation is another issue where we’ve
seen traction. I think making sanitation
products more affordable and more
desirable will certainly drive up usage of
sanitation services and products.
Another key area is agricultural
technologies. This includes access to
information and sensor technologies.
Along with financial services and products
for farmers, I think we’ll be able to see
dramatic increases in yields, farmer
productivity and income levels.
Another issue we can tackle is the one of
mobile money. We’ve done a lot of work on
financial opportunity and access to mobile
money products as well as making mobile
money products more desirable and
easier for people to use. For instance,
we’ve done work on mobile micro-health
insurance, on savings products, loan
products, and transfers. The whole
package on mobile phones can deliver
really significant financial opportunities.
IDEO and IDEO.org are famous for
attracting top caliber talent. How do you
maintain your brand integrity and what is
the most fascinating thing you’ve learned
from your work?
In terms of brand integrity, it really does
come from the first part of your question,
which is attracting top caliber talent. We
wouldn’t have the brand integrity that we
did unless we were able to hire best in
class designers to do the work. The
integrity comes from being true to what we
do and ensuring that we’re always proud
of the design work that IDEO or IDEO.org
does. I started IDEO.org in 2011 and it’s
grown tremendously quickly.
We’ve done really well at connecting with
and partnering with nonprofits,
foundations and philanthropists.
Jocelyn Wyatt is the Co-Lead and Executive Director of IDEO.org, the nonprofit
organization started by IDEO to address poverty-related challenges
through design and to encourage the use of human-centered innovation
in the social sector. Jocelyn’s work focuses on identifying non-profit and
social enterprises with whom to partner and design innovative solutions.
It is really fascinating to see how
organizations that we’ve worked with are
really embedding or applying humancentered
design in their work or in their
culture. We’ve developed a whole set of
tools.
Which partnership has been delivering
impact to the developing world?
The partnership we have with Unilever has
been particularly effective. We’ve worked
on both water and sanitation primarily in
Africa with What’s Up and Unilever.
Several years ago we designed the clean
team venture in Ghana to provide access
to affordable toilets for people in their
homes with a service space model so that
the waste would be collected a few times
a week by a service operator.
We also worked with Unilever to design a
program in Kenya for water delivery in
water kiosks. There are currently water
kiosks outside of Nairobi for people to
have access to clean drinking water who
otherwise didn’t have access to it.
A third business that we’ve developed and
which is hopefully launching soon, is a pit
latrine emptying business in Zambia. It’s
basically a business that would allow
people to get their pit latrines cleaned out
as needed. That has been a great
partnership for IDEO.org.
I think what’s been even more rewarding
is that What’s Up has hired humancentered
designers. They’ve developed a
whole program called What’s Up
enterprises which is about designing
social enterprises in line with needs of
communities. They’ve really embraced
and adopted human-centered design as
part of their organization and use it in the
way that they work.
Online Extra: Read the full length interview,
including a deeper discussion into the changing
nature of cyber-security and cloud computing:
www.skillbridge.co/JocelynWyatt
10 +1 (212) 548 4548 www.skillbridge.co