DORAL, Fla.—It sounded like something out of a Star Wars movie, but Shawn Rasey wasn't speaking about intergalactic conflict, though the forces of change facing the off-the-road tire industry could be just as dramatic.
Instead, in his keynote address to 443 attendees of the Tire Industry Association's 56th annual Off-The-Road Conference Feb. 17 in Doral, the president of Bridgestone Americas Off-Road Tires addressed some real-life changes and shifts impacting the OTR tire industry—what he called “forces of disruptive innovation.”
Or, as he put it: Shift happens and more changes and shifts are coming.
Rasey described these forces as so powerful they “will likely change many of the products we manufacture, changing with the very markets we serve and the ways we serve them.”
Those in the industry, he said, must decide whether they want to be players or spectators in the e-volving OTR tire mar- ket.
“We're either going to be part of the innovative disruptions that take our industry to the next level, or subject to it—either way, these disruptions will continue, and shift will hap- pen,” he said.
Rasey said the disruptive innovative forces are not necessarily a bad thing, “but rather a natural evolution of human ideas, ingenuity and progress, driven by startling world population growth, dwindling material and energy resources, emerging global environmental concerns, the continued explosive growth of the Internet and the race between countries, companies and the people across the earth to compete with it all.”
Innovation through disruption
What is this disruptive innovative force?
“Disruptive innovation is the process by which a product or service takes root initially in simple applications at the bottom of a market, and then relentlessly moves up market, eventually displacing established competitors,” Rasey said.
Think of the iPod and iTunes, introduced by Apple Inc.'s Steve Jobs, and how these two innovative disruptions changed the music industry, he said. Consider how Henry Ford and Harvey Firestone changed the course of the transportation industry.
These individuals didn't just wait for things to happen to them, nor just seek ways to expand existing markets, Rasey said. “Their vision was bigger. They decided to create markets that had never existed.”
He suggested that if countless people in other industries can do it, “so can we.”
One of the “forces of innovative disruption” driving the off-road industry, Rasey said, is the trend toward ever larger tires from giant ultra-class tires to mega tires, which will drive new specializations.
“If you look at Ã evolution charts for front-end loaders, motor graders, port handlers Ã you'll quickly see that machines are getting larger, more specialized or both,” he said.
For those in the OTR tire industry, “this innovative disruption in machine evolution will require us to shift quickly from being all things to sell many, to being far more solutions-driven performance consultants,” he said.
“We'll need new and specialized capabilities to apply our products, technologies, people and services in more meaningful ways to every customer.”
Rasey also cited the evolution of information technology and e-commerce and its impact on the OTR tire industry. As mines and construction companies harness the power of information technology to achieve new levels of cost efficiencies and performance output, it will require a “mega leap” in tire design technology, manufacturing expertise, performance analytics and service modeling, he said.
“Not many players will have both the proven technologies and financial resources to effectively compete in this new arena,” he said. “Mega-tires will take mega-investments.”
OTR tire manufacturers also no longer will be able to afford to guess what customers will want or will buy in the future, meaning it will be critical to get closer to the customer.
“It's just way too expensive and risky to guess any longer what your customer is going to buy and when.
“All of us must begin to partner more closely and choose partners more carefully or suffer the consequences of bad guessing, bad timing, bad choices or all three. In short, the disruptive forces pushing the evolution of off-road tires from giant to ultraclass and from ultraclass to mega-class, is also driving a new era of purchase rationalization.”
The Internet, he added, is fueling a change in buying cycles to 24/7, 365 days a year from the traditional 9 to 5 and is causing purchasers of OTR tires “to want to know what the unit cost of their sales rep is.”
This latter point is a growing trend and unstoppable, Rasey said.
“All of us can expect the role of our sales people to become far more rationalized and questioned by every customer as to their relevance and value—sooner rather than later,” he said.
The recession of the past few years has “provided more fuel than ever for Internet growth,” Rasey said.
“The Internet has become the ultimate real time “shopping channel,” and all of us can expect our customers to demand better communication platforms, customized product performance comparisons, and more relevant value demonstrations if we are able to grow our businesses, and more importantly remain profitable.”
Rise in population
The growth in human population is another force driving change in the OTR tire industry.
Rasey said the United Nations forecasts a nearly 50-percent increase in the global human population over the next 40 years to between 8.9 billion and 9.2 billion people from 6.8 billion people last year.
At the same time, the U.S. population is projected to reach to 420 million by 2050 from 306 million in 2010.
That's 2.1 billion more people competing for energy, natural resources, food, housing, transportation and the income to buy it all, Rasey said.
Along with this growth in population is the projected migration of people living in the countryside to cities.
“This shift in global urbanization is unstoppable,” he said, “and should generate significant innovations and growth opportunities within construction, as more and more people migrate to cities where they can find jobs.”
As the population grows, so will the demand for sources of energy, especially coal, Rasey said. “That's just one reason I feel we can expect prices and demand for equipment and off-road tires related to the production of coal, base metals, minerals and rare earths necessary to build and power our machines, factories and buildings to grow steadily at least for another few decades or more.”
Population growth also will drive new technologies and markets in energy conservation, Rasey suggested.
This will lead to more construction opportunities and/or new equipment applications from businesses providing product innovations that reduce energy costs and increase energy efficiencies in buildings. That will serve to benefit the OTR tire industry.
Rasey said he sees a “Big Squeeze” taking place in the OTR tire industry as a result of continued consolidation within the mining and constructions industries.
“These consolidations and others yet to occur will affect all of us sooner or later,” he said.