I recently read a well-argued article claiming that the term ‘industry’ has been hijacked by new sectors that don’t deserve to be associated with a proud history of world-class manufacturing. In the early twentieth century we had the coal industry, the shipping industry, the steel industry: today we have the beauty industry and all of us hard-working, earnest labourers in the PR industry. Are we appropriating traditional industry’s hard-won values of strength, hard work and earnest endeavour?
Just as unions remain unions even though they now represent teachers, civil servants and other desk-bound deep thinkers, so the term ‘industry’ has never been limited to manufacturing. In my view, an industry is any definable sector of value generation.
What I find particularly intriguing as a communicator is that while many sectors have enthusiastically adopted the ‘industry’ badge for its positive values, investors are seeing only the downsides. The traditional industries come with a perception of old fashioned enterprise with huge amounts of capital employed in generating relatively little value. Any sector calling itself an ‘industry’ associates itself with those values too.
When you compare the price-earnings ratios for profitable auto industry stalwarts Ford and GM (which together made around $18 billion last year, according to Forbes) with those for ‘High-Tech’ firms Tesla and Uber, each of which is worth comparable money but are both substantially smaller and consistently loss making, you can understand why there is a rush for a new label.
This becomes even more strange when you look at the ‘High-Tech’ businesses that are embeded within Ford and GM, with similar skills and aspirations to the standalone market leaders. Ford says it will have 13 models of electric car on the road by 2020, supported by existing global marketing and distribution. GM’s subsidiary, OnStar, already connects seven million vehicles to various data services so is well placed to grow new areas of value generation. There are also the stakes the industrial companies have in independent ‘High-Tech’ innovators: GM has a 9% stake in Lyft, a fast-growing rival to Uber, and in 2016 bought Cruise, an autonomous-vehicle firm based in San Francisco. Yet the impact on the valuations of the two auto industrials is tiny.
It isn’t quite so black and white: the valuations are affected by a host of other factors such as confidence in the leaderships to fully exploit these ‘High-Tech’ assets. But it does bring home that the job of the PR industry is complex as regardless how much value there is in a business and how outstanding it’s management, it is us who are responsible for making sure the right people have an accurate and appropriate understanding that releases the embedded value.
It’s a lesson already learnt by the vehicle manufacturer with the most impressive understanding of how their customers determine the value they derive from a vehicle. In a major break from standard form for the ‘traditional’ automotive industry, Audi CEO Rupert Stadler’s recent ‘summit’ presentation could have flowed from the iPads of the ‘High-Tech’ communicators at Apple.