As we continue the slow recovery from the recent painful economic downturn, the web is awash in negative articles and blog posts. Many of these pieces question the strength and quality of the recovery, or posit that it is a new bubble waiting to burst. They look at the recent improvements in corporate profitability and lament the lack of equivalent job creation. They see the successful IPO of LinkedIn and view it as a harbinger of an imminent tech stock crash. I agree conceptually with both of these points. We are going to have social issues to deal with as the rapid advances in technology leave some folks unemployable and not sharing in productivity gains. Additionally, as with all investment booms in a capitalist society, there will eventually be a correction, with some firms (and investors) losing significant sums of money. All that said, I don’t believe we should reverse course, and believe we are on the cusp of radical improvements in corporate efficiency and personal standards of living.
Much of the current improvement in corporate profitability is being driven by gains in efficiency through the creative application of technology to business processes. We have seen this story before, first with agriculture and then with manufacturing. At the turn of the century, 41% of Americans were employed in agriculture. Today, just 2% of the population in employed in agriculture. Yet, due to increases in mechanization and application of scientific farming techniques output has increased substantially. The story with manufacturing is just as amazing. We are near an all time high in terms of manufacturing output, peaking in 2008 as we entered the recent downturn. American manufacturing output is more than twice what it was in 1970. This despite the fact that the percentage of workers employed in manufacturing has dropped by 1/2 during that time. Again, these efficiency gains can be attributed to wide-scale application of automation and improved manufacturing processes.
This same application of technology, combined with process improvement is creating massive productivity gains in the service sector. For this post, I want to focus on one product that is revolutionizing the growing space of online retailing. Kiva Systems, is an 8 year old company that provides a fully integrated solution for warehouse automation that utilizes robots. They provide this solution to such prominent retailers as Walgreens, Diapers.com and Staples. The robots, which look like a turtle with wheels, move autonomously thru the warehouse and select products, bringing them right to human packers for shipment. This link provides a video overview of the robots in action.
Here is a quick summary of the benefits of Kiva’s robotic fulfillment systems:
- Increases the efficiency of warehouse workers dramatically over conventional methods
- Accuracy of the picking and packing process is improved
- Time to fulfill an order is reduced
- Space required for the warehouse can be reduced
- Lighting and heating/air conditioning are not needed in robot only sections of warehouse
- The system is adaptive, constantly rotating inventory to better locations based on how popular the items are
But Kiva hasn’t stopped there. They have created software upgrades for the robots that allows them to work in tandem, with one bot moving “shelves” out of the way for a partner that needs to pick a product that is nested deep in the warehouse. This, according to Kiva, will allow for an additional 15 to 25% efficiency gain in floor space in warehouses.
Kiva is representative of the disruptive technologies that I believe will continue to drive unprecedented improvements in business efficiencies and ultimately increases in personal standards of living. Consider the following qualities that this solution possesses:
- At its core, it’s based on microprocessor technologies, allowing it to ride the curve of Moore’s law, becoming more powerful and capable, at reduced cost
- It is software driven, allowing for new upgrades of existing hardware versions
- It is adaptive, improving its efficiency in everyday operation, with no human intervention or additional capital invesments
- It is a general purpose technology (i.e. intelligent materials handling) that can be applied to a wide range of additional problems
Now, consider the macro environment in which Kiva’s products live and how it supercharges the potential of these products. The current world of social media allows for unprecedented sharing of knowledge, ideas and feedback. This allows for the following possibilities:
- Rapid discovery of Kiva’s capabilities by other industries
- Feedback to Kiva on product issues or ideas for improvements
- Inspiration for other product designers to create Kiva-like solutions
Kiva is but one firm that is using technology to create huge efficiency improvements. The current environment of social collaboration, empowered customers and crowdsourcing will allow these innovative ideas to transform industries with unprecedented speed and impact. While I recognize the inherent social disruption inherent in such change, as with agriculture and manufacturing, the impact will be net positive.