As if by magic, it’s the Amazon octocopter!

Sunday night, right after a National Football League game and on the eve of “Cyber Monday” – the American mini-version of China’s e-commerce bonanza – Amazon CEO Jeff Bezos unveiled his latest big idea: delivery drones. The next day, in a strategy session I hosted with Colgate-Palmolive, the conversation fairly buzzed with talk of this crazy, weird, compelling challenge to conventional supply chain wisdom.

Is it practical? I think so.

Is it the way Amazon will finally monetise its megalomaniacal plans to conquer the world? I think not.

Machines take over the world

I’ve been saying for years that robotics (defined as smart machines, and including drones) will rise and dramatically alter the landscape of supply chain worldwide. Half of the 320 supply chain executives we surveyed in April said they intended to increase spending on robotics and automation; 14% said they planned big increases. Only 2% projected a decrease.

And it’s not happening only in rich countries. Our data shows that industrial robots are more important in countries traditionally thought of as low-cost labour locations than in established economies. April’s manufacturing study showed larger shares of jobless capacity expansions in China, Brazil and Mexico than in the US.

Foxconn in China, for instance, is scaling its internally built robotics so fast that new installations in the year 2016 alone could exceed total installations worldwide in all of history to date. Talk about a fast ramp. What comes with this, of course, is rapidly declining unit costs as the learning curve steepens.

Amazon could do for drones what Foxconn is doing for manufacturing robots, so I believe the economics can work. But I still don’t think this is where the money is for Bezos.

Pay no attention to the man behind the curtain

For those missing this culturally loaded reference to the Wizard of Oz, the “man behind the curtain” is Bezos. Illusionists distract their audience with flash meant to hold attention while something more basic happens surreptitiously in the same frame of view. It’s not magic, but it feels that way to onlookers. I think Bezos is an illusionist, not a magician.

No one can stop talking about octocopter drones, and yet Amazon told us point blank in the same interview that its cloud business, Amazon Web Services, is hosting data and transactions for everyone from Netflix to the CIA. This relatively obscure sideshow humming away in grey, adjacent to the uber-cool drone story, is the trick. Money will be spun by AWS while Amazon Prime Air steals the show.

Amazon is not the only one doing this. Google is betting untold zillions on humanoid robotics research under the ridiculously well-qualified leadership of Andy Rubin, a veteran of not only Microsoft and Apple but also General Magic. Rubin declined to tell the New York Times anything about budgets, but I’m confident it’s plenty. Apple, for its part, has reportedly spent over $10 billion on robotics for manufacturing, although unlike Amazon not in a bid for attention.

The common thread among all three of these titans of the digital age is that their efforts in robotics and automation could quickly make obsolete what has been learned so far in the automotive industry. And yet none ultimately cares about labour savings. The payback is in the information. (We’ve explored this in some detail previously – see our Apple-Amazon report for more.)

Empires of the mind

Amazon is mapping the human genome of demand for each person on earth, just as Google is cornering the market on the logic of enquiry and Apple is locking hundreds of millions of brains into its proprietary content platforms. Each of these companies has the ability to establish unassailable monopolies in the fast-emerging economy of thought.

Perhaps ironically, each also makes Herculean efforts to position itself as friendly, with cuddly branding and relentless messaging around you, the consumer. It’s all good, but isn’t it also a bit scary?

Robots are real and they will absolutely alter your supply chain strategies going forward, but the big thing to keep an eye on is what Amazon knows about our buying preferences. Don’t be fooled by the flash. The money is in the data.

Please contact me directly with any comments, questions or suggestions. I welcome your feedback.

Kevin O’Marah
Chief Content Officer
SCM World