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November 1, 2014

Step Up or Step Back

“Innovation distinguishes between a leader and a follower.”
—Steve Jobs

Disruption, you have likely noticed, is the new business buzzword these days. Everywhere we hear about it and read about it and run headlong into it. Business models are being blown up, from car manufacturing to taxi services and hotel rooms to, yes, metals distribution.

Our guest columnist this issue, Peter Diamandis, offers valuable advice on how we as corporate leaders can cope with a world of technological, social and economic change that may often seem downright bewildering. Many of you have heard Peter speak at our conferences as one of those clearly on the front lines of disruption and innovation today.

But the truth is, though it may not seem so most mornings as you sit at your desk and discuss the immediate problems and strategies of the day, we are all on the front lines of disruption and innovation today.

The kind of question I invariably get from members following any discussion of the inevitable changes we face is, “In an industry as basic and straightforward as ours, do I really need to be concerned about all this?”

The answer, of course, is yes, you do.

You have heard me describe five main disruptors of our times. Demographics, globalization, technology, consolidation and regulation are major macro-agents of change coming at us. Within those, especially when we talk about technology, the most important to metals industry applications at the moment seem to be developments in computing power and big data, in artificial intelligence and robotics, and in 3-D printing. This list deserves to be closely watched, but it will shift—guaranteed. We need to be on top of it.

Look around carefully. Uber and Lyft are transforming taxi and limo services. Airbnb is changing how travelers book hotel rooms. Amazon is inching into the metals service industry.

I have told many of you about my own experience with Tesla Motors, a car company built by Elon Musk, who had no auto manufacturing experience. Nevertheless, he’s putting together extremely high-quality cars in fully automated factories with few humans in sight, and selling vehicles that many thought would never be accepted in large numbers. A side note: Musk and Diamandis are part of the SpaceX team now building space capsules for NASA that will taxi astronauts to orbital laboratories.

Tesla illustrates how disruptive technology coupled with innovative leadership created something unanticipated and entirely new. Technology alone did not build this car company; it took innovative leadership as well. As a recent McKinsey paper on management in the new age of machines and artificial intelligence so accurately notes, computers and big data offer new capabilities, but they are limited. “Machines may be able to adjust prices in real time, but executives must determine the target,” McKinsey says. “Similarly, machines can monitor risks, but only after executives have determined the level of risk they’re comfortable with.”

Likewise, machines and big data cannot develop talent, motivate employees or nurture customer relationships. Only human beings can do that; only motivated, imaginative, flexible leaders. Men and women who ask the right questions, and who are unafraid of ambiguity and fluid situations.

McKinsey proposes that CEO, from now on, stand for chief experimentation officer. In Silicon Valley they say it slightly differently: Drive the bus, or get thrown under it. Steve Jobs understood this fully. So must we all.