Tech-Company or Company-Tech?

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Eight of the top ten companies in the world by market capitalization consider themselves technology companies.

These companies are so large that the top four alone (Apple, Google, Microsoft, Amazon) are collectively worth more than the entire economy of the United Kingdom according to the Associated Press. The latest International Monetary Fund figures put the UK economy at $2.8 trillion with these top four at $2.97 trillion.

The technology naming convention formula could be reaching extremes. According to a recent survey by London venture capital firm MMC, 40 per cent of European startups are wrongly classified as Artificial Intelligence (AI) companies. Often, these companies aren’t using AI in any way that is material to their business.

Technology companies are perceived as faster growing, cooler and more marketable, making them inherently more interesting to investors. But is Sweetgreen really a tech company? Is Postmates?

Postmates is a company that calls itself an “urban logistics platform: that is “transforming the way goods move around cities”. It is set to go public this year, even though it is not profitable, uses third-party drivers that have repeatedly sued their employer, and leverages Google Maps to run its ETAs. And yet Postmates is called a tech platform.

Compare Postmates to FedEx, the firm that invented the tracking number and, according to its 2018 Annual Report, is making sizeable investments in autonomous vehicles and robotics. However, FedEx is considered a logistics provider.

Strip away the marketing speak, and both Postmates and FedEx are logistics companies. They just tell their story differently.

Try Sweetgreen. A company that sells custom made salads at 75 locations. It managed to raise $95 million in venture capital for developing an algorithm to make ordering more efficient. Sweetgreen declares “we’ve always acted more like a tech company than a food one”. McDonald’s has the same ordering technology — they just tell their story differently.

The formula keeps going:

  • Airbnb calls itself a tech company, even though the business model is the time-tested one of acting as a broker for renting out places to stay.
  • Amazon runs a glorified online catalogue (the CEO itself has called it “the everything store”), a business that resembles that of Gap, Target & Walmart, and yet Amazon is the technology company among its peers in retail.
  • Netflix produces it’s own content and then uses the internet to distribute it. Disney and Universal product their own content and then use movie theatres to distribute it. The same model again.

There are serious tech companies — those investing in autonomous vehicles or stem cell research for example. But then there are most other companies in the world, ones that leverage technology, whether it is for supply chain management, product development or even recruiting. But can they define themselves as tech companies, or are they merely tech-enabled?

The use of the ‘tech’ label has become a key marketing strategy to give the impression of a company being innovative and breaking the mold. It is a clever trick; it creates excitement, both among consumers and investors, and provides the perception of being disruptive. It’s not wrong either. Most companies are increasingly using developments in tech to stay ahead of the curve and streamline operations.

Schmuik Fishman
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