Dis­rup­tion

Finweek English Edition - - INVEST DIY -

So how do we en­sure that the company which we have in­vested in doesn’t get dis­rupted out of business, or if it does, how can we spot it soon enough and exit be­fore the fi­nal nail is in the cof­fin?

Well, firstly, we have to keep a close eye not only on the company we’re in­vested in, but also on the com­pe­ti­tion and also more broadly the wider sec­tor. This is why, as a share­holder in Sho­prite* and Woolies*, I also read the re­sults from Pick n Pay, Spar and Mass­mart, but also in­ter­na­tional re­tail­ers such as Tesco, Wal­mart and other global play­ers.

This helps us un­der­stand how our in­vest­ments are do­ing rel­a­tive to the di­rect and broad com­pe­ti­tion, and also helps us bet­ter un­der­stand the in­dus­try.

It is also about un­der­stand­ing the trends and whether a cer­tain trend is a mere f lash in the pan or some­thing that is more sig­nif­i­cant and a pos­si­ble threat to the cur­rent prof­itable business model. Ul­ti­mately, we have to make a fairly bold decision about the fu­ture of the business model. The company may help in their re­port­ing to share­hold­ers about threats and what it’s do­ing about them, but we’re go­ing to have to de­cide to exit long be­fore the writ­ing is on the wall, and some­times we will get it wrong.

But if sales are slip­ping (or even just f lat) and com­pe­ti­tion is go­ing down a dif­fer­ent path, we have to ask what our company is do­ing to head off the threat or ad­just ac­cord­ingly.

That said, be wary if your company is try­ing to lead the way in a new space - first movers of­ten end up fail­ing and at a huge ex­pense. So this is far from a per­fect sci­ence but some­thing we need to keep an eye on.

Lastly, an im­por­tant point is that dis­rup­tion or even be­ing ob­so­lete is not the end of the world if the company adapts. Mi­crosoft makes se­ri­ous money from the Xbox and has cloud ser­vices as well as mo­bile phones, and even re­cently an­nounced HoloLens as an up-and­com­ing profit area. The Of­fice Suite also still makes a packet, so giv­ing away Win­dows for free is not a threat to the company’s over­all sur­vival. *The writer owns shares in Sho­prite and Wool­worths.

Mi­crosoft’s Ash­ley Frank talks about Win­dows 10 dur­ing Mi­crosoft share­hold­ers’ meet­ing on 3 De­cem­ber 2014 in Belle­vue, Wash­ing­ton, USA.

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