Efficiency Wins: The Transformative Power of Automation
Beyond Conventional Technology
In our conversations about technology, we often limit ourselves to the latest digital trends & information technology that benefits from network economies—social media, blockchain, or AI. Yet, the broader definition of technology encompasses any invention that significantly simplifies and improves human tasks. From the wheel to the printing press, true technology disrupts and transforms. In the world of business, particularly in sectors ripe for change like cannabis, the potential for such transformation is immense—yet frequently ignored.
Consider the assembly line, first implemented by Ford. It wasn't merely an improvement; it was a radical transformation that redefined manufacturing. This wasn’t just about cars; it was about challenging and changing the very fabric of production. Today, we stand on a similar precipice in numerous industries, including cannabis.
The Paradox of Large Corporations
Large corporations often fall into a paradoxical trap: the very systems and processes that allowed them to scale and succeed become the shackles that hinder further innovation. This is commonly seen in established companies that prioritize maintaining the status quo over seeking new opportunities for growth. Their success breeds complacency, fostering a culture resistant to change, famously encapsulated in the adage, "If it ain’t broke, don’t fix it." History teaches us that civilizations and companies that innovate persist. Those that cling to outdated methods, even if previously successful, inevitably decline.
Innovation extends beyond new inventions & product lines. Often times, the most profitable innovations are those that transform processes within an organization. Increasing efficiency translates directly to an increase in bottom line due to lower costs & increased production capacity, but it also redefines the culture and capabilities of a company, increasing the likelihood of development efforts yielding additional value-driven innovations and superior improvements in product attributes.
Consider Toyota, who developed a manufacturing philosophy called TPS, which GM & Ford were both unable to replicate despite Toyota’s willingness to illuminate their processes. In the 1960s, GM was considered to be one of the best run companies in the world, sitting at about 50% market share in the US automobile market. Ford, also an early innovator in manufacturing process, sat in a distant second at roughly 30%. Toyota entered the US market in 1957 and their relentless dedication to manufacturing efficiency helped them solidify their position in the US market (~15% market share), surpassing Ford (~13%) and nearly equaling GM (~17%).
A Closer Look at The Impact of Automation Today
Amazon: A Modern Behemoth
Amazon's decision to employ robots wasn’t just about cutting costs—it was about redefining logistics. The acquisition of Kiva Systems was a strategic masterstroke that supercharged their operational capabilities, allowing them to deploy thousands of robots in their facilities. These robots automate the picking and packing process, not only improving efficiency and allowing Amazon to fulfill orders much faster, but added over a million jobs by 2022.
This automation significantly reduced labor costs and allowed Amazon to offer fast delivery options like Amazon Prime. As a result, Amazon's logistics capabilities outpaced traditional retailers, contributing to a $514 billion revenue in 2022. Competitors who did not invest in similar technologies, such as Sears and Kmart, faced operational inefficiencies and were unable to compete on speed or cost, leading to their decline.
Zara's: Speed as A Strategy in Fashion
Zara automated its inventory management and supply chain logistics, allowing the company to respond quickly to fashion trends. Automated systems facilitate rapid production cycles, with new designs reaching stores in weeks.
This agility allowed Zara to capture a significant market share in the fast fashion industry, with its parent company Inditex achieving sales of roughly €36 billion in 2023. Competitors using traditional production models, like Gap and Abercrombie & Fitch, faced declining sales as they were unable to keep up with Zara's speed and responsiveness. ANF has recently redefined its strategy and did report a positive increase in sales over the past year.
Driscoll’s: Agricultural Innovation
California based berry company Driscoll’s controls roughly 1/3 of the global berry market and 2/3 of the organic berry market. How do they do it? One of their many claims to success is their constant experimentation and adoption of new technologies, including investments into robotics firms and startups. This has enabled them to build a brand consumers trust and stay ahead of competition.
For example, Driscoll's utilizes robotics and AI in its breeding programs to measure physical plant traits like the length of strawberry stems or the size of individual raspberries. These systems collect vast amounts of data across thousands of plants in trial plots, which is then analyzed to inform breeding decisions. Driscoll’s also has tested advanced robots that automate the labor-intensive strawberry picking process, staying far ahead of competition.
In the quality control phase, Driscoll's implemented AI to assist in evaluating the quality of berries before they reached the market. AI algorithms were trained to assess berry quality at scale, performing tasks traditionally done by human inspectors. This included identifying defects and ensuring consistency in berry size and color. Data from AI assessments helped refine breeding and cultivation practices by providing insights into varietal performance under different conditions.
What Does This Mean for The Cannabis Industry?
The cannabis industry is nascent, complex, and fraught with operational inefficiencies. Yet, these challenges present not just obstacles but opportunities—opportunities for radical transformation through automation. The skepticism around new technologies is understandable, given the industry’s background and past exploitation by less ethical entities. However, embracing automation can lead to:
Enhanced Consistency: Automated systems ensure product uniformity, crucial for customer trust and regulatory approval.
Improved Efficiency: Robotics can handle repetitive tasks, freeing human resources for more complex work that adds value.
Scalability: As demand grows, automation is the key to scaling production without compromising quality.
For those in the cannabis industry, the lesson is clear: innovate or face obsolescence. Like the titans of other industries, cannabis leaders must look beyond the horizon and embrace the transformative potential of automation. This isn’t just improvement; it’s evolution. And in this rapidly evolving market, only the innovators will survive and thrive.