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The age of the drone – why the logistics sector needs to innovate to accommodate

As the logistics industry continues to transform through the introduction of advanced smart technology, such as artificial intelligence and the use of drones, many logistic firms are left wondering how they can adapt to accommodate and prepare for these transformations within their own companies. Tony Hughes, CEO of Huthwaite International, considers how the logistic sector is changing, and whether new starts-ups, like drone manufacturers, have the potential to revolutionise the market.

Tony comments: “While a relatively niche proposition at present, when it comes to logistics capabilities, the drone industry is fast moving. Many drone companies are start-ups with robotics, artificial intelligence skills and novel approaches. Such innovation could see them out compete the larger ‘traditional’ logistics players – particularly in precision or niche markets.

“To remain competitive and to continue expanding their businesses, larger logistics providers will increasingly need to look for ways to incorporate drone propositions into their existing suite of services and product offerings.

“Though start-ups may offer competition to larger logistics companies during their early development, it won’t last. High growth start-ups, by their nature, want to be seen to be working alongside the main players to grow presence, access resources, establish their reputation and build credibility – thereby maximising company value rather than cash flow or immediate profits.

“Is it realistic to think that a start-up business can radicalise a global and established market like logistics? The answer is yes. In today’s climate, it is not uncommon for a few start-ups to take a new model and totally revolutionise an industry. Consider the food delivery market currently evolving at lightning speed, with Just Eat, Amazon and Ocado. Just Eat has a good offering acting as a front end to many suppliers who don’t have IT resources to go it alone. Ocado, and of course Amazon, are an increasing presence in fast delivery services too. Each has strong credentials and each has weaknesses. This makes for a superb upcoming battlefield where competition is on price, speed, delivery, adaptability, customer interfacing, social networking and most importantly, good relationships with food suppliers."

What does all this mean for those responsible for selling and negotiating deals on both sides?

Tony continues: “When it comes to selling and negotiation in the short term large logistics firms and small drone manufacturers, provided they have the right skills, will successfully negotiate with and/or sell to each other. In the longer term, a default exit strategy for many IT or robotics start-ups is to be purchased by larger players, and that of course will need complex negotiation capability on both sides to achieve the best synergy.

“Though acquisitions will be tempting, we’ll also see a growth in subcontracting and collaboration which offer valuable alternatives to the competition that would otherwise erode profits on both sides.

Both companies should take heed when it comes to selling and negotiating new business

Tony concludes with a word of caution for both sides. “Start-up companies – drone or otherwise - need to be aware that the bigger the deal or the longer the contract, the more the buyer will require reassurance of product and company sustainability. It’s a key consideration that grows in importance the greater the number of people in the buying decision-making unit. Left unaddressed it can escalate throughout the sales process leading to an eleventh-hour stall. Technical and product expertise on the side of the start-up are important but they are not a replacement for skilled selling and the ability to understand, and act appropriately within each stage of, the Buying Cycle.

“Though larger logistics firms may feel they are experienced in selling and negotiating, the question is are they experienced in dealing with small but high growth tech companies. It’s likely to be new ground for many and traditional paradigms may no longer suffice. As for the drone manufacturers, technical capability is one thing but arming potential buyers with a viable story of value and enough reassurance to overcome business sustainability concerns may be the ultimate determiner of success or failure."

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Further reading

How great commercial skills can help logistics players ride environmental levies
By Tony Hughes | November 22, 2017

Smart intermediate players are set to strengthen the Logistics supply chain
By Anna Home | November 8, 2017

The age of the drone – why the logistics sector needs to innovate to accommodate
By Tony Hughes | October 18, 2017