Month: February 2019

The Irish claim that they were the first to distill whiskey, on the basis of a report from 1405. (Annals of Clonmacnoise stating “A.D. 1405. Richard Magrannell Chieftain of Moyntyreolas died at Christmas by taking a surfeit of aqua vitae. Mine author sayeth that it was not aqua vitae to him but aqua mortis.”)

The first Scottish record dates to 1494, although, to be fair, it isn’t linked to anyone dying from it.

(I heard all this from Mark, the gent in the picture – who conducts a tasting and tour at the Whiskey Museum in Dublin)

Today, the world over, we drink Scotch whisky and except for occasionally choosing Jameson in an Irish pub – without any reference to whiskey type, you’ll notice – most people don’t even know that Ireland makes whiskey. Quick, name three brands of Irish whiskey… see, I didn’t think so.

The main reason for that is an Irish gentleman – Aeneas Coffey – who patented an improved version of the continuous still in 1830 and revolutionised the whisky (and indeed, the broader distilling) industry. Ironically, while he was Irish and first took his design to the Irish distilleries who were using pot-stills at the time, most of them refused to adapt because they felt the quality of whiskey from a triple pot-still distillation was better. Coffey took his technology to Scotland, where most distilleries adopted it to produce whisky in a more economical way, which made it affordable and accessible. The Scottish whisky industry took off, their spelling for whisky became standard and Scotch is now synonymous with whisky. The Irish went from a peak of 412 distilleries of which the largest – Rose – produced more whiskey than all of Scotland to a mere 21 today, while most whisky drinkers around the world can probably name more Scottish distilleries than that just off the top of their heads.

Coffey’s invention – or rather, innovation, since he improved on earlier versions of the continuous still – led to him being compared to Henry Ford with the mass production of the automobile.

It’s funny how reminiscent the lack of interest from the Irish distilleries is of things that happen in the business world today. If you’ve ever run a startup that seeks a new way of doing things and the initial reaction from a lot of people is that it will never work, then think back to the Irishman who drove the disruption of the whisky industry by the Scots. And if you’re feeling particularly down about it, perhaps sample some of the output of said whisky (or whiskey) industry – the Irish make some really good whiskey too, so don’t hesitate to try Bushmills, Powers, Teeling, Knappogue Castle, the Irishman and others. Don’t expect to find them at your friendly neighbourhood Irish pub though, or even in duty free – the sign of how much that disruption cost them is how difficult it is to get Irish whiskey outside Ireland, nearly 200 years later.

What’s the lesson here? It’s the same old one I keep repeating, I’m afraid – if you say no to new ideas, you run the risk of one of them disrupting the industry, and your business. That doesn’t mean you have to entertain every crackpot who shows up at your door, but it does mean you have to attract everyone with a new idea to show it to you first and find ways of trying out as many of them as possible.

And the other lesson? Also an old one – disruption doesn’t have to be digital. This one is clearly analog, apart from being nearly 200 years old – which suggests that perhaps it’s time for the Irish to disrupt the industry right back!

It was interesting to read about Huawei coming out with a foldable phone – not necessarily a very affordable product or destined to be profitable or successful in it’s own right, but certainly a statement of Huawei stepping up to fill the vacuum left by Apple falling asleep at the wheel. Chinese brands have been leading the design and innovation charge in many other categories – notably consumer electronics, appliances, solar power and electric cars, but increasingly in other areas as well.

Normally global brands would look at that and worry about how to win in China against these local innovators. Now, in the context of the China slowdown, I believe they may have a very different scenario to worry about.

So far, everything I’ve read seems to point to people only treating this as a contraction of demand in China for a limited period of time – so if various international companies have business in China they’re thinking about how the contraction of demand will reduce revenue for a while, perhaps a few years at most, before things go back to “normal”.

I believe a far more disruptive trend will emerge in the next few years as Chinese companies also suffer from the contraction of domestic demand in key categories. Companies which hitherto were happy to focus on the massive domestic market in China will now start to expand. Provincial players will go national (an already established trend over the last couple of decades) and national players will go international (also an established trend that will only accelerate).

Will they all succeed? Obviously not – some will learn how to adapt and compete in new markets and some won’t. There are some brands and categories where we can already see Chinese successes – Huawei is clearly one of them. The electric car industry is definitely being led by Chinese brands at this point – brands like BYD and Roewe are way ahead of Tesla in terms of mass producing a viable electric car (in fact, several different models). They have some pretty spectacular consumer electronics and appliance brands as well.

Consumer products may be slower to follow – but inevitably they will.

So here’s the thing to think about. Do you currently have business in China? If so, who are the biggest local competitors you face? Imagine them being local competitors not just in China but in more countries around the world – because that’s definitely going to happen in the next few years. How would you deal with that situation?

There are lots of ways of looking at this, one of the most productive being to try and hedge your bets by buying into some of the most likely future successes from China. The point is to start worrying about it now.