Buying Stuff? That’s so last century

This whole idea of, like, every time you want something, having to spend money, I mean, that’s kind of like an old-school idea. As a futurist, I’m of the mindset that you won’t really buy anything, and people won’t own anything and that’s just how the world will work.


Buying stuff? It’s so last century. The internet has made distribution so cheap and convenient, and made it accessible for so many more customers, that it has opened the way for models that sell access rather than products. Aaron Perzanowski, a professor at a University in Ohio and author of The End of Ownership, said: “There’s no doubt the notion of ownership is in decline, and we’re likely to see this trend continue.”


These forces have been at work for years. What has changed is that the psychological barriers that have long held them back — the fixation with ownership — have begun to crumble. This is partly due to companies simply getting better at offering compelling services. It is also about demographics. The biggest section of our Z Tyre subscription programme are customers are aged between 25 and 45 — Generation X and Millennials.


Meanwhile, economic needs have become more acute as the proliferation of smartphones has accelerated the death of old models. Why buy a morning paper if you can scroll through the news before you get out of bed? The question is, how widely those dynamics can be applied and how quickly they will take hold. Well let’s look at the entertainment industry which was transformed by the file-sharing phenomenon Napster. Spotify this summer announced that more than 60m people pay a monthly fee for access to its library of 30m songs. That surge has coincided with the revival of the industry. This year is set to be the first since 1999 — when Napster burst on to the scene — that the industry will actually record consecutive years of revenue growth. Netflix launched its film streaming subscription operation 10 years ago, and this summer it surpassed 100m subscribers.


Technology’s ability to bend the concept of ownership is seeping into other, unexpected corners of life — such as cars. The typical automobile sits idle 95% of the time, yet most people would rather it stayed parked in the garage than hand the keys to a stranger. Turo was founded to change that. The San Francisco company connects people looking for cars to rent with owners willing to lend. Nearly 180,000 people have put their cars up for hire on the site, up from the fewer than 5,000 it had lured in 2012, the first year of nationwide operation. Chief executive Andre Haddad said shared ownership helped to alleviate the cost of buying and maintaining a car. “We can make the car an asset for the first time,” he said. Last month, Daimler led a $90m financing round in the company — its bet on the future of car sharing. You have also many major car manufacturers, like Porsche and Hyundai offering subscription services for cars. And now not just cars but even tyres can be subscribed for with Z-Tyre’s world first tyre subscription service.


As technology becomes more deeply ingrained into products, the very notion of what a product is, and where its value lies, gets muddied. When Hurricane Irma was bearing down on Florida last month, Tesla made a striking move. It remotely lifted the battery-charging constraints on some of its cheaper models to help people who were desperately trying to get out of town before the hurricane hit. The cars all had the same physical batteries. What that showed is what’s important isn’t the product, it’s the code, and it also demonstrated that Tesla can do the exact opposite. If you haven’t paid your bill, maybe they cut back your battery capacity. Even with these things in our possession, we don’t have control in the way we might expect.


So if buying stuff is over then one has to wonder what Amazon, the biggest seller of stuff on the planet is doing about this. The answer – PRIME!! I see Amazon bundling more and more into Prime. The opportunity for Amazon is to get hundreds of millions of people, or even a billion people, paying $10 a month for a bundle of services and effectively controlling more and more touch points. And you know if Amazon is getting into it then it really is the future!

Customer Loyalty in the Digital World

Recently I have been spending a lot of time in our Tech Centre in Madrid and been thinking about digital marketing. I thought I would share some of my thoughts with you.


I think that the most important part of any marketing, especially digital marketing campaign, is the ability to build and maintain customer loyalty. But in the age of digital marketing achieving that has become much harder. What does customer loyalty even mean in the digital world and how does one go about achieving it?


I think that the most important way to build loyalty is to focus on gratitude. From a psychological perspective this is the emotion in most humans that is the best indication of whether loyalty is present. How do you get to gratitude? This needs to come through reciprocity. You need to give things first to your customers for them build this sense of reciprocity. And this is not just free things but something that recognizes their value to you. So for example if you have 24950 air miles and to achieve the next tier you need 50 miles. The airline should just give it to you and not make you buy it. If they make you buy it then you will never be loyal. But if they gave it to you they make you feel valuable and you reciprocate through a sense of gratitude. Now once you achieve that sense of gratitude you need to ensure you get advocacy which is the final step in achieving loyalty. You need these grateful customers to go out there and advocate for your products. So how do you get the customers to advocate for you? The way to do this is to bring consumers into your ORBIT.



What is the ORBIT?



This is where the digital world is changing the way people transact. Old school marketers focused on the transaction and the BUY. We need to change this. We need to not focus only on the BUY but the entire relationship with the customer both before and after the BUY. Infact, especially with subscription businesses, the customer is not so interested in the BUY. The focal point for the customer is the entire experience. We have to focus on the entire customer journey and ensure that we keep the customer engaged throughout the journey. More importantly we need create a long term relationship with the customer and embed the transaction within the relationship. It is these relationships that drive the transactions and not the other way around.


Creating the long term relationship is also recognizing that the internet has changed the way marketing is done. In the past marketing was one way with the usual customer segmentation and targeting customers and sending them the message. Digital communication has changed that forever. Firstly through social media the audience now starts to talk back. Secondly they are also the co-creators of content (think of sites like YELP and Opentable reviews). So now the job of a brand is to empower and enable that connection and collaboration where people talk back and then are part of the process with you.


All these thoughts that I think of when I am sitting on these long flights are great but perhaps a bit theoretical – although I like the ORBIT one as it is very appropriate for when I am on the plane. So I think that for our ‘round, black and boring’ industry we need some practical applications for these thoughts. So what do we need to do with this information?
We need to build a sense of community through a shared purpose that has to be aligned with our brand DNA. We need to ensure that we have continuous engagement with this community and this is particularly important in the case of a subscription model where a lot of people only focus on the renewal. Finally we need to create a social currency that we can offer to our community to further bind it together.




So if you want to build a community the best way is to align it around a purpose. But in the digital world we have to ensure that it is the right kind of purpose; one that is built with our customers. We have to try and achieve this purpose together with our customers and use it to connect disparate groups of people together. In our case what aligns best with our DNA is the Zenises foundation. We need to build a community of like-minded people who see the value in a company that not only wants to change the world but also the way tyres are consumed. Secondly we are an automotive company and we need to engage a community around people who love their cars and want to engage more with others who share that passion. We have a lot of knowledge and passion about both subjects and could easily curate communities around those purposes.


Continuous Engagement


We need to ensure that we are with them through the customer journey providing content, content and content on a regular basis that is outside the transaction but focused on the customer need. This is ensuring that the relevant content is provided both for the demographic as well as the time. So we need to provide specialized focused content for different demographics such as women, millennials, and Gen Z. Then we also need to provide content that is time relevant. This is ensuring that before the summer we provide relevant content for people who may be taking long drives. Or in the Christmas period we provide more relevant content to holiday makers or perhaps people going skiing. With regards to the content on the Foundation we need ways to provide people relevant content which may allow them to connect with the children directly. This could be interviews with the children or more details on the homes that we build. Also we need to provide them ways to get involved should they want to.


Social Currency


This currency is valuable to build engagement within the community and also provide a sense of gratitude. All companies today have big data on their clients. Using that big data to provide little data to customers costs little to the companies but could be of value to the consumer. For example a large electricity company started providing its customers with data on neighborhood consumption patterns in the customer bill. This helped many customers understand how much their bills varied from the average and then to take actions to rectify this. Whilst this cost the company nothing it built a sense of loyalty with the customers. We need to look at the big data we generate and see what we can offer the consumer throughout the relationship that will enhance his experience. The other great thing about social currency is that consumers should be able to freely share it. As such we need to provide the customer with things that he can easily share online with his friends and community. This allows him to feel more part of the community and also bring more of his network into our orbit.


All the theories here are fine but it really boils down to treat your customer with the same level of respect and dignity you want to be treated with and ensure that you are there with the customer for the long term for the good and the bad! At the end of the day relationships are relationships – online or offline!

Tyres and the Electric Car Revolution

With a loud Bavarian fanfare at the Frankfurt Motor Show this year, BMW pledged to build 25 – yes 25!!! – new electric models by 2025. Raising the bar amongst the traditional car manufacturers, BMW also plans to launch the third model in its electric ‘i’ series at Frankfurt. But it’s not just the Germans pushing ahead with electric transformation. Indian-owned Jaguar Land Rover has announced that all its vehicles will be in some way electric by 2020 and Chinese-owned Volvo will launch five new electric models between 2019 and 2021. So why does this matter to us in the tyre industry – these cars will still require tyres – right? So why can’t we just carry on with our steady evolution, making black, round things?


Well first of all that means we will again remain oblivious to the rapid technological advances happening around us! With electric cars there is a whole different design process that we, at Zenises, are now working diligently with many manufacturers. There is much to consider. Due to the large battery capacity, electric cars will need to carry more weight and be more evenly balanced than conventional cars – they are typically 20-30% heavier. Tyres for electric cars will also need much better handling characteristics due to increased torque and acceleration power. And finally (for now), rolling resistance will become even more important. Due to limitations on battery life, extending fuel economy (even in small increments) will be really important.


To match the requirements of the electric car driver, unique tyres will be needed for specific electric car models. For example in our conversations with the folks at Tesla, they want it all! I’ve already mentioned that smaller electric cars mostly care about rolling resistance to extend their journey range, but Tesla wants that PLUS good handling and grip PLUS low noise. But the Tesla is heavy, so you can’t just take a tyre off the shelf and expect it to handle the same. You have to reconfigure it to be able to absorb all those forces. So Tesla is demanding unique tyre requirements in sizes like 265/50R19. And it’s not just Tesla – the BMW i3 rides on 155/70R19 (a dimension that sounds rather strange to more traditional tyre people). In addition, for European tyre labels, the very top rating of ‘A’ wet grip and ‘A’ rolling resistance will become pretty much standard for electric cars.


But there is still one key element missing for our discussion that could add rocket fuel to the electric car revolution – CHINA! The world’s fastest growing and potentially largest automotive market has woken up to the potential of electric cars. Rumours abound that China is considering a total ban on petrol and diesel vehicles in the near future. Impossible you say – even crazy! But China always dreams big. And it’s now not just dreams, but action that could catapult China to the forefront of determining the industry’s future. Not only could electric cars help solve the chronic pollution in some of its major cities, but a determined focus on electric will allow Chinese car companies to leap forward over the inertia that old technology can entrench. What better way to take on the current global leaders – not on the battle ground set by petrol engines but in the new revamped arena that electric cars could require. And if this happens then the massive Chinese tyre industry will also start focusing on the needs of electric car consumers, largely ignoring the legacy strategies of petrol that the traditional European and American automotive giants have to still support.


This is such an exciting chapter in our industry’s history. There’s still so much to play for, but for sure it will be those in the tyre industry who embrace the technological potential and possibilities that electric cars will bring who will reap the commercial benefits for the decades to come. Simply making and selling conventional radial tyres is no longer the only future path for the tyre business. To stay ahead of the pack, you have to be nimble and aware of opportunities that our changing world will bring. Like BMW’s head of R&D said “We have become a tech company. Where once we were employing mechanical engineers, it is now about the software”. Maybe tyre companies need to start becoming tech/software companies too!


‘How Do You Get Anything Done In China’?

“I just don’t get China!”, “As a foreigner, how do you get anything done in that country?”, “How can you trust the Chinese?!!?” Having worked with China for nearly two decades now I get many of these questions from friends and colleagues. They realise the need to do business with China and are having some trouble navigating the choppy waters. So here are some of my thoughts – in the hope I don’t offend any of my Chinese friends!


Conventional wisdom and cross-cultural management studies often emphasise the collectivist nature of Chinese society. However, I’ve always maintained that the Chinese have the most individualist of behaviours. Chinese society is collectivist in that individuals identify with an “in-group” consisting of family, clan, and friends. Within this, co-operation is the norm. Outside, zero-sum competition is common. As a result, self-organised (as opposed to hierarchically imposed) co-operation can be difficult to achieve. In addition, zero-sum competition means that your Chinese counterpart may not believe in so-called ‘win-win’ solutions. One can observe this, for instance, in the tendency to re-open negotiations just as everything seems settled, especially if one seemed too ready to agree with the negotiated terms; one’s Chinese counterpart may interpret this as an indication that he or she has not bargained hard enough.


It is certainly difficult to gain trust in China. The Chinese tend not to trust until there is enough evidence of trustworthiness. Unlike in the West, the creation of personal friendship is a prerequisite of doing business. Building friendship takes time, which is another reason to avoid rushing into things. There are numerous invitations to events; I was once the chief guest at the wedding of the chairman of a tyre factory’s godson. The poor kid must still be wondering who the big guy is in the turban in his wedding photos! One major element in building trust is the long dinners during which everything but business is discussed. In these, alcohol plays an important role. Fortunately for me, my religion does not allow me to drink. This has saved me many times in China but also some people have refused to do business with me because they could not ‘trust’ someone who doesn’t drink with them. Their loss!


Company decisions are typically reached in a top-down manner, with only the very top of the pyramid involved in decision-making. Mistrust puts limits on delegation, and supervisory control at each level is high. Mid-level managers typically have little power to make decisions of consequence, and their main role is to pass on orders from the top and ensure execution. Be aware in negotiations that the decision is ultimately made at the very top. If your counterpart is not part of that group, he is typically not authorised to make major decisions but must report back to the top for instructions. Also, make sure your representative matches the status of his or her counterpart. Important dimensions of status are formal position, age, and education.


The Chinese are an extremely proud people. I’ve never known a person in China in my many years of experience to ever be wrong! The Chinese that I’ve dealt with do believe that they are a superior people (much like the rest of us!). One needs to recognize those sentiments and then ensure one defers to them if you want to get things done in China. For example, when I’m in China, I always wear a pin on my lapel with a Chinese flag and it’s always noticed and appreciated. In fact, one senior government official even told me that “You are wearing my heart on your jacket!” That meeting certainly went very differently after that comment.


Conventional wisdom holds that China’s governmental structure is highly centralised, with all key decisions made in Beijing. In reality, Beijing directs little of what happens throughout the country, especially in far-flung regions. To be sure, if Beijing truly wants something to happen, it will. At the same time, Beijing recognises that decentralisation of power plays an important role in taking economic reforms forward. By running things in a slightly different way, the thousands of localities throughout China constitute a large population of local experiments, collecting information about what works. From these experiments, the central government can select suitable future policies. Expect conditions to vary by province. In addition, to the extent you need to negotiate with government, it’s crucial to involve local government. Even if you have agreement from Beijing, if the local government wants to thwart you, it will.


There are so many more aspects about doing business in China which I would have to write a whole book to cover. All the usual statements like “In China you always have to have the long term vision”, or “Change is the only constant” or “The Chinese never say no directly and will always use the indirect route”. But the one piece of advice I want to leave you with is the one I find the most important about doing business in China. Nothing happens in China if you aren’t there! If you want to get anything sorted, get your ass on a plane and just go there!


Geopolitical turmoil, cyber hacks, Brexit and Donald Trump—many recent disruptive events have taken our industry by surprise. What is for sure more now than ever is that change is coming and it is coming fast. As such our industry needs to have new leaders, at all levels of the food chain, that can replace old thinking with new ways to innovate and manage that change. The old ways are going! The old channels are going! The old managers have already gone!


So what do our new industry leaders need? What does the industry need from our leaders?


We need leaders that can anticipate and drive change. This does not mean simply extrapolating today’s pace of change into the future. It means boldly imagining new possibilities—and understanding they will come sooner than expected. Leaders will have to get equally comfortable with what can be known and with exploring what is unknown. Today our leaders see future events as a new version of past events, presuming the pace of change will move in a straight line. In reality, growth is exponential and new variables—unforeseen technologies, for example—always enter the fray. In most organizations, the future is primarily projected through spreadsheets reinforcing a perspective that the world is an extension of what we know today. The problem is that the future is anything but that! Our new leaders need to get comfortable asking open-ended questions about unspoken assumptions to see new possibilities. They need to be curious about the future and blend imaginative practices of strategic foresight and science fiction design. But most importantly they need to ensure that this mindset permeates through their organisations.


In addition to imagining a range of new futures, our new leaders must also act as disruptors, discovering new ideas through open dialogue with all stakeholders and then ensuring a constant iteration of those ideas. Most leaders today are still primarily focusing on getting existing products to be better, faster or cheaper. But our leaders need to focus on the new breed of customer and invest in designing and developing new products and services to satisfy the emerging customer’s needs. They need to use human-centered processes, such as observation and questioning, to collect insights; and they need to embrace a growth mindset to test and gather evidence on what they’ve learned. Great leaders in our industry will do this continually, iterating over and over to uncover opportunities obscured by the fog of uncertainty.


As technology innovation accelerates, leaders have to understand which technologies will directly impact our industry and which will affect adjacent industries. Our leaders need to figure out fast how they can digitize, demonetize and democratize our products. Once we figure out how to digitize our products we can become an information-based technology and move to an exponential growth curve. Something digitized can be replicated and transmitted for a near-zero marginal cost. Once we have successfully digitized our products then we need to figure out how to demonetize them and eventually democratize them.   In terms of demonetization one needs only to look at digital photography as an example of an industry that has demonetized. The first 0.01 megapixel Kodak camera is now generating a 10 megapixel image. The result of which is the complete demonetization of film photography. As products and services demonetize they become available to billions of users across the planet and this is the democratization of the product. This democratization now allows us a market size of not just one or several countries but the entire three billion people connected to the internet now and the seven billion potentially connected by 2026.


Now how do you digitize a physical product such as a tyre? We are not music or film that can be easily converted to zeros and ones. Well we can start by digitizing as many of the processes with the tyre as possible. Uber did not digitize the car – but it did digitize the taxi industry. Perhaps we have leaders in our industry who can figure this out. I am working on it with our teams both in the industry and in our venture capital fund. Honestly we have not figured it out yet but I can tell you we are having a lot of fun trying!

How Can We Update the Education Model for the 21st Century?

One of my recent articles, How do we prepare our children better for the future?, ispired lots
of comments and questions, which I’d like to thank each and every one of you for. The main
question that I was asked was how can we utilise the latest technologies in order to make the
education process a personalised twenty-first century experience? How can we use robotics
and AI to engage our children and inspire a sense of curiosity, passion and perseverance, those
essential components of learning that are often somehow lost through the artisanal approach
to the education process?


Having done some research on the subject and through conversations that I’ve had with some
of the leadig tehologial ids oer i Silio Valley, its lear that AI, irtual reality ad 3D
printing have a crucial role to play in the future of education. Tablets and laptops now sit on
every student’s desk and have become as ubiquitous a part of the education process as the
humble pen and paper. But if students also had 3D printers sat alongside their tablets and
laptops, this would allow them to immerse themselves in subjects such as tech, science and
egieerig i a ay that siply hast ee possile efore. Just iagie the possiilities!
Instead of simply reading or learning through a visual presentation, kids will be able to literally
print out an object and study it in its physical form, thus making education a truly engaging and
immersive experience.


Research shows that human beings learn best through action and simulation. The current
education system still relies on visual and audio learning, so when we consider that we only
remember 20% of what we hear and 30% of what we see, it’s of little wonder that many
students are left feeling disengaged and under-stimulated in the classroom. But we remember
up to 90% of what we do or simulate, which is why virtual reality is one of the most effective
technologies for engaging our kids in the learning process.
Sure, hearing about the very depths of the Pacific Ocean and imagining what it might be like is
interesting but imagine if, through virtual reality, teachers could simulate actually being there!
So rather than learning about the respiratory system through words and images, students could
take a virtual tour around the human body and experience the world as if they were a blood
itself on its journey to becoming oxygenated. Combine virtual reality with augmented reality
and suddenly the student becomes an active participator in the learning process, rather than a
passive observer.


The other great thing about machine learning is that it can be adapted and personalised to
appeal directly to each individual student, no matter what his or her learning style or
educational background. AI teachers for example, unlike their human counterparts, will be able
to use global networks and sensors to share and access unlimited information and intellectual
resources such as interactive video content at lightning-fast speeds. They will be able to
monitor our kids for signs of frustration or boredom and will adapt the model accordingly to
ensure that every child gets a personalised, immersive learning experience that takes them far
beyond the confines of textbooks and stuffy classrooms. So in a very real sense, such
technologies could serve as a much-needed equaliser, creating a system where every child has
equal access to education and therefore equal chance of unlocking their full potential.
However, from what I see happening across Europe and the Middle East, whilst such
technologies are undoubtedly crucial to updating the education model for the twenty-first
century, what seems to be missing both in education and in business is a tolerance for failure.
So what we really need is a mind-set shift and we only need to look to Silicon Valley for
inspiration. Because here, failure isn’t only expected but welcomed and embraced because they
recognise it as being a critical aspect of the learning process. In fact, many investors won’t fund
your business unless it’s experienced some kind of failure. This is a difficult lesson to learn and a
difficult lesson to teach. But in some ways, helping our kids develop a tolerance for failure is
even more important than ensuring that they have access to all the latest technologies.
We only have to look at the Millennial generation to see that the current approach to education
is in desperate need of updating. Because it seems that rather than raising a generation who
are adaptable and resilient, we have coddled them to the point that many now have such a
strog fear of akig istakes ad of eig pereied to fail that they hae ee crippled into
complete inactivity.


The fact is that our kids need to be able to deal with criticism. So the best way to prepare our
children for the inevitable changes to come is by teaching them that learning is by its very
nature a process of trial and error and that being able to recognise the value of failing is a
crucial ability, in life as well as in education. Because this is the only way that they will learn,
grow and ultimately survive in what is becoming an increasingly competitive world.

Will Passenger Drones & Flying Cars Disrupt the Tyre Industry?

So I have to start with a big thank you to everyone for your comments and questions on my article, Who Will Disrupt the Tyre Industry. Most of the questions and comments were focused around drone technology and flying cars. Since I was asked by many of you to write further on this topic I thought I would oblige and write an article on some of the developments in this emerging technology. Now, to the main question that you all asked me – will drones and flying cars disrupt the tyre industry out of existence?


Well simply put – I don´t think so! Although I think that this emerging technology will undoubtedly bring massive incremental changes, these changes will be innovative rather than disruptive. And to understand why it won’t be the disruptive force that many people imagine,we first need to look at the technology itself. If you happened to have read some of the recent headlines in the world’s media, you’d be forgiven for thinking that we’re all going to be travelling about in flying cars and that the skies are going to be full of passenger drones by this time next year! In the US, we read that Uber have just hired an engineer from NASA to lead their flying car project, while in the Middle East, The Roads and Transport Authority in Dubai in collaboration with the Chinese company Ehang, are due to launch an autonomous passenger drone in Dubai this coming summer. And let’s not forget Airbus who aim to have their flying car prototype ready by the end of the year. So there is clearly a lot of innovation happening within our industry and companies looking to collaborate with one another, but such stories can be misleading in the sense that they can make it appear as though this emerging technology is much further along in development than it actually is.


To get a more realistic sense of both the strengths and limitations of this technology, we need look no further than the recent collaboration between Matternet and Mercedes-Benz, who have utilised both drone and van technology create the Vision Van. So M and M have equipped self-driving vans with drone delivery systems, so the van does most of the journey and the drone acts as a ‘last-mile solution’. Whilst this is rather innovative it also serves to highlight the biggest problem currently facing the drone industry. Because although drones are brilliant for getting to inaccessible areas, they simply don’t have the power capacity to travel across long distances without running out of charge and dropping right out of the sky, which is a pretty major drawback! So M and M have created an elegant workaround to a problem but not really disrupted anything. When they solve the battery problem, thats when things will get interesting!

The other important factor to consider is regulation. Implementing safety regulations and building flying car and passenger drone transportation routes in the sky isn’t one of those things that simply happens overnight. The logistics of creating a system that is safe and efficient enough to convince people to abandon their traditional cars in favour of a flying equivalent is complex to say the very least. In fact Elon Musk is worried about people not maintaining their flying cars well and hub caps falling out of the sky and killing people. So that futuristic ‘Jetson’s-like’ world of drones and flying cars that many of us have been envisioning is unlikely to become a reality for a while now, by which time we may have discovered an even better way to travel.


How can I be certain of this? I know that we’re not even close to seeing drones and flying cars become the everyday norm because of what I see happening in the tech startups that we invest in through our venture capital fund, Walpole Capital. Whilst I see great innovation happening, we are nowhere near close to solving the battery problem or implementing the regulations and safety measures that are necessary to make this technology a dominant commercial force within our industry. In fact, even the engineers from NASA are yet to find a solution to these problems! Although the way things are today with the NASA bureaucracy it will be that 14 year old I mentioned in my last article that will beat them to it!


So tyres aren´t going anywhere soon! But this doesn’t mean that we shouldn’t keep abreast of all the developments in flying car and drone technology so that we know who to partner and collaborate with. Because as we’ve seen from the partnership between M and M progressive incremental changes within our industry are inevitable and happening as we speak. And by collaborating with other companies, we can be involved in defining those changes rather than risk being left behind by them, and ultimately in the long-term our industry can only gain and be bolstered by this. We need to stop this fear in our industry of change and see new technology as the opportunity for progression and innovation that it is. And who knows the more we innovate perhaps the less we are likely to get disrupted!

How do we prepare our children better for the future?

At the Zenises Foundation we believe that education is the future for children especially if they have to break the cycle of poverty. With the advancements in Artificial Intelligence “AI” and Robotics I was concerned whether the education that the Foundation provides to children will really prepare them for the future. In my recent trip to Silicon Valley I met with many tech insiders and posed them this question – how do we educate our children for a world where by 2035 years 40% of the jobs that will exist are noteven conceived yet? Fewer workers will be needed for the jobs we have now, so children must be prepared for the jobs we cannot imagine. My basic conclusion after a week of discussions and interviews was simple. In the future there will be two types of jobs: people who tell computers what to do, and people who are told what to do by computers. So now how do I ensure that our children are the in the former half?!?


If we want our children to “rule the machines” we really need to focus what makes our children individuals. We need to move on from a 19th-century, artisanal model of education – where knowledge resides with each classroom teacher – to a 21st-century personalized experience that technology can replicate on a global scale. The new model should focus on skills, not knowledge you can Google, and abilities that will be needed, whatever the workplace. So what are these abilities?


I believe that the most important things we need our children to focus on are around curiosity, passion and persistence. Rote learning needs to be done with – computers can now do this. Children need to have the interpersonal skills to work in groups, to communicate well, be creative, arrive at an answer in many different ways. Curiosity is something innate in our children, yet something lost by most adults during the course of their life. Perhaps because we “educate” the curiosity out of our children making them “learn” things they don’t need. In a world of Google, robotics and AI, raising a child that is constantly asking questions and running “A/B Tests” can be extremely valuable. In an age of machine learning, massive data and the Internet of Things, it will be the quality of their questions that will be most important.


One of the most valuable resources our children have is an imaginative and passionate human mind. We need to ensure that we don’t “socialize” that out of them as they grow up. Children are the some of the most imaginative people on the planet. We need to help them find a passion or purpose that is uniquely theirs. Once they do that then they can imagine the world they want to live in. Their passionate mind will then help them create that world. I imagine a relatively near-term future in which robotics and AI will allow any of us, from ages 8 to 108, to easily and quickly find answers, create products or accomplish tasks, all simply by being passionate about what we imagine.


Teaching our children not to give up and to keep trying new ideas for something that they are truly passionate about achieving is extremely critical. Acceptance of failure as an integral part of this process is also key for us to inculcate in our children. I do believe that persistence is one of the most important predictors of and contributors to success. I always joke with my son about how many nights it took for Zenises to become the “overnight” success that people claim it is.


Once our children have the curiosity to ask the right questions, the passion and imagination to be able to drive them and the persistence to keep going there will be nothing that will stop them from “ruling the machines”. Einstein once said, “I have no special talent. I am only passionately curious.” And look what he achieved – and that was without the help of AI and Robotics. God Bless our Children – Our Future!

Who will disrupt the Tyre Industry?

People always confuse disruption with innovation. Innovation is evolution, whereas disruption is revolution. Innovation makes the old ways better, whereas disruption makes the old ways obsolete! But most importantly in business, innovation allows you a 10% growth while disruption allows you a 10X growth. We’ve already seen two technological revolutions in our lifetime that have caused major disruption – the internet and the smartphone. And thanks to the digital revolution, disruption is now happening more frequently and at a faster pace than ever before. So we’re going to experience more disruption than previous generations ever did – disruption that will revolutionise business models and industries in ways that we can’t yet imagine. So who will disrupt the automotive/tyre industry?


In our industry, the last major disruption was the introduction of the motor car in the early 1900s. How many horse and carts do we see on the streets today? Clearly, the car disrupted the horse and cart out of commercial existence. So now our old school, white, male-dominated industry is ripe for disruption and trust me (from the startups that I see as a venture capitalist), it is coming sooner than we think! And moreover, I can tell you that it will not happen as a result of the legacy manufacturers making better tyres, improving distribution systems or selling tyres on the internet. Like in every other industry, disruption in our industry will come from the outside. Look at the mobile phone industry – Nokia were undoubtedly one of the most innovative companies and arguably the industry leaders in this technology, yet in the space of just a few years, Nokia??s reign was well and truly ended. And this happened ??e??ause of one reason – disruption, which Nokia just didn??t see ??oming. Because while Nokia had their eyes on their competitors, Apple came and ate their lunch! Let??s look at the medical industry for another example – CRISPR/CAS9 – (the genome editing tool that will enable scientists to weaponise human cells against cancer) could potentially be a cure for cancer and would ultimately disrupt the medical field. Where did this come from? You guessed it – from outside the medical field.


Every industry has such examples! So who will disrupt our industry? Some industry observers say that Zenises (along with Alzura) is well on its way to disrupting the industry, being the first company in the world to offer tyres as a service across the internet. To those people I argue that what Zenises has done is definitely innovative but not disruptive. To understand disruption in our industry, we really need to understand not just what we do but why we do it. What we do is sell tyres and if we see our industry from that narrow perspective then Zenises is disrupting it. But if we understand the reason why we do what we do, which is to provide mobility, then we can see that we are merely a small fragment of a much larger industry. From this position, we can see that there are many more companies and individuals that have the potential to disrupt our industry. So disruption in the industry could come from the company making flying cars – if that ??takes off?? and we end up living in a world like ??The Jetsons??, tyres would become obsolete. Or disruption could happen as a result of tech companies taking virtual reality technology to a level that it negates the need for travel. Perhaps the companies creating personalised drone transport could disrupt the industry, or maybe it will be a company that works with a combination of these technologies or different technologies altogether. Such companies may sound futuristic but they already exist, and two of them have even received investments from our venture capital fund.


My idea here is simply to get my colleagues to start ??thinking outside the box?? and seeing beyond our industry, as this would perhaps enable them to come up with their own ideas for disrupting it. So what will the Apple or CRISPR for the tyre industry be and how will it work? I don??t know, ??ut you ??an ??ount on it that there’s a 14 year old kid somewhere outside the industry figuring it out (hopefully one whose company I have already invested in)!

The Rise of Automated Vehicle Technology

The digital revolution has affected the auto industry in many ways, but perhaps one of the most exciting and potentially cataclysmic changes currently taking place is the development of automated vehicle technology. Up until the late 1970s, automated cars, or ‘robo-cars’ as they are otherwise known, only existed within the realms of science fiction. Fast forward to today and some serious advances have been made in perfecting the technology. In fact, during a recent visit to Silicon Valley I was lucky enough to see a Google autonomous car driving right beside me, so it won’t be long before they become a familiar sight on the roads of the world’s major cities.


Volvo for example, have stated that they aim to have 100 automated cars on the roads of Gothenburg by as early as next year, while Tesla have already released their auto-pilot software and plan to offer their customers the full self-driving experience by 2018. And let’s not forget Ford, who have recently tripled their investment in semi-automated systems in order to compete with technology behemoths such as Google ( who just spun out its self driving unit into a separate company called Waymo ) and Apple (who recently confirmed that they are working on an electric iCar to rival Tesla). However, there’s a good argument to suggest that the current leaders in the car industry are Daimler, who have been implementing a similar autopilot technology to that of Tesla in high traffic situations for quite some time. But fundamentally the issue boils down to are the car companies going to build a better car or are the computer companies going to build a better computer and put it on wheels. From what I have seen in the Valley my view is that that the computer companies will win this battle!


Companies such as Uber are also getting involved, having recently completed their first successful 120-mile delivery using a self-driving truck – it was 50,000 cans of Beer just in case you are wondering what they delivered! Industry experts such as Brad Templeton argue that as automated vehicles become more common, car sharing will increasingly start to become the norm. So although Uber may be behind in terms of the technology when you compare them to companies such as Google, they are undoubtedly the innovators when it comes to capitalising on the concept of car sharing. They have already started picking up passengers in Pittsburgh with their self-driving cars – although there is a driver sitting in the car so that the customers feel more comfortable!


So it’s clear that robo-cars are no longer confined to the realms of science fiction, they are very much a tangible reality. Astro Teller, director of ‘X’ (formally ‘Google X’) recently posed the following question “Is there a scenario in the future that doesn’t involve self-driving cars? No. So let’s just do it”, and I’m inclined to agree with him. So, if car/tyre companies wish to survive in an increasingly competitive marketplace, then such technology needs to be embraced and utilised because progression in this area isn’t going to stop to allow those who aren’t already doing so to ‘catch up’.


There are also many benefits to using automated vehicles. Firstly, energy consumption and CO2 emissions will be reduced dramatically, which would have a significant impact on the environment and would perhaps even contribute towards slowing down climate change. Robo-cars would also provide a safer and more efficient driving experience because unlike human drivers, self-driving systems aren’t affected by distractions or ill health, and most significantly of all, robots don’t drink alcohol, which is one of the leading causes of road traffic accidents. In fact, statistics suggest that on average around 3,000 people are killed or seriously injured each year in drink drive collisions in the UK alone, and such accidents could be all but eradicated when robo-cars start to outnumber human drivers.


This technology is equally positive for the tyre industry because put simply, automated cars will increase mobility. Whilst there will be less cars in parking lots there will be more cars around as demand for mobility will increase. As such demand for tyres will increase but it does beg the question who will be the new customer for the tyres? Just imagine a world where driving on demand was accessible to everyone, where you could use your phone to order any car of your choice that perfectly suited your needs in that moment, all in a matter of mere seconds. This is a concept that appeals directly to the younger generations whose attitude towards ownership is completely different to that of their parents’. They don’t think about what car might suit their needs tomorrow, they only think what car will suit their needs today.


Of course, there are some drawbacks; In 2015, hackers worked out how to cut the transmission of a Jeep being driven at speed miles away – sparking a recall of 1.4 million cars. Autonomous vehicles will need a high level of connectivity in order to detect each other: vehicle-to-vehicle communication which – if hacked by terrorists – could cause carnage. Cyber experts routinely talk of “ransomware” attacks in which driverless cars will be hijacked, with a ransom demanded to avert disaster. But I for one think that the pros far outweigh the cons, and what’s truly exciting is that we aren’t even close to unlocking this technology’s full potential.

New Anti-Dumping Duties will Limit Job Growth

With news on anti-dumping investigations making industry headlines, we have subsequently seen more countries considering anti-dumping duties (ADD) against China. The US has had tariffs in place on some types of Chinese tyres since 2008, while even more duties have been legislated over the past year. Recently, the Indian government has announced that it is also looking at similar legislation. Investigating a demand from the rubber industry body, India is currently looking at creating similar ADDs thus increasing the cost of many imported Chinese tyres.

The ultimate reason for these tariffs is that China has been very successful at reducing production costs and manufacturing large numbers of quality tyres. As someone familiar with the tyre industry, I have to say that low-cost, high-quality products are only going to benefit the world market. The demand for tyres is increasing and will continue to do so. With emerging markets like India and Africa, there’s a real need for these Chinese-manufactured products.

Of course, this is a complex situation that can be examined from many different angles, but here at Zenises, our customers’ point of view always comes first. We distribute tyres at a global level, with a presence in close to thirty countries. Zenises is dedicated to offering premium tyres at the lowest possible price and we will work with manufacturers that produce this type of product, regardless of where they happen to be located.

There are a number of misconceptions regarding these duties, so let’s take a closer look at the specifics of the case. The anti-dumping duty (ADD) in question is the method the World Trade Organisation (WTO) has chosen to regulate sale and production costs in different countries. The intended goal of the policy is to ensure that exporting countries don’t have an unfair advantage over local manufacturers when it comes to product pricing. A country that suspects dumping, in this case India, can launch an investigation into production in another country, such as China, to ascertain if there is a valid case for the accusation. Independent researchers need to find data showing that the cost of tyre production in China does actually exceed the price at which these tyres are being sold in India. In other words, the country must prove that the low cost is due to government subsidies rather than fair market factors.

When China entered the WTO in 2001, it exhibited a sincere commitment to reforming the economy and creating an open market that was favourable to foreign investment. Nevertheless, some suspicions, from the US especially, led China to accept considerably harsher conditions than most developing countries do upon entry. China has yet to be granted full Market Economy Status (MES) within the WTO, in spite of internal reforms that reduce government subsidy and support foreign investors. China’s lack of MES means that countries interested in adding an ADD to Chinese exports can use statistics provided by a third party rather than China’s own internal manufacturing statistics.
Government support may have helped to initiate tyre development in China, but currently the industry is thriving on product advancement and state of the art facilities. At Zenises, we are happy to count a number of excellent Chinese brands among our products, including the world famous Westlake tyres, Kapsen, and iLink. I obviously can’t speak for every Chinese tyre; examples of poor quality manufacturing can be found in every country around the world, but this shouldn’t make us deny the merits of factories like Zhongce Rubber which has been producing quality rubber products for years.

If the Indian government chooses to add a new tariff, this will punish both Chinese manufacturers and Indian consumers. The rubber industry in China will see a production decline; at the same time, Indian drivers will be forced to purchase tyres at a higher price. India’s government will be ignoring the immense advantages a competitive neighbour like China can bring.
We have to ask ourselves why the trade deficit between India and China is currently $50 billion. Why have Indian exports to China increased by only 22% over the past ten years, while Chinese exports to India have grown by 500%? The middle class in China is expanding almost exponentially, so the market for imported consumer products inside the country should more than offset Chinese exports. Perhaps a campaign aimed at reducing this trade deficit with China would do more to support Indian rubber manufacturers than a tariff on imported tyres.

The bigger picture here, I believe, is how governments are approaching trade with China. At present, many countries seem to see the Chinese manufacturing capacity as a threat, yet at the same time these countries have not found a way to satisfy their own internal consumer demand or adequately support their own manufacturers.

When we advocate a free global market, we should support manufacturers around the world who work hard to offer quality products at low prices. This is what the Chinese have accomplished in the tyre industry, leading to an increase in jobs and affluence in China. By adding unfair ADD’s, we are limiting the scope of China’s success, and in the process we are also curbing worldwide progress and job growth. It seems countries would do better to follow China’s lead and increase manufacturing efficiency so that all these new emerging markets can be an opportunity for growth.

Made in China can also be a mark of Quality

So often we’ve heard phrases like ‘the world’s factory’ or ‘cheap Chinese’ that they have become deeply fixed in our minds. So much so that the words ‘Chinese quality’ still stirs up overwhelmingly negative images. But should this always be so? The country is simply climbing the value curve just as all other successful economies have done previously. In recent times the newcomers have included Japan and Korea – and now both these countries are readily associated with high quality consumer products.


Perhaps it’s useful to step outside our tyre bubble for a few moments and look deeper into a recent success story that maybe points to a future where many Chinese tyre companies could look to prosper.


In just a few years, China’s luxury goods market is set to be the second largest in the world (after Japan). However, most discerning Chinese consumers have until now shown a preference for ubiquitous global western brands such as Burberry, Louis Vuitton and Gucci with their massive marketing machines and global reach. But leading the counter-charge is Shanghai Tang – now increasingly regarded as China’s first global luxury lifestyle brand. Established in Hong Kong by David Tang in 1994 as a bespoke tailoring outfit, Shanghai Tang operates in the fashionable districts across Asia, the Middle East and now Europe. The positioning of the brand involves upscale fashion creations with a ‘Chinese touch’.


It’s a careful mix of ‘Old China’ silk fabrics and naturally coloured tissues, but with a youthful brand image emphasizing design innovation to attract the upwardly mobile of Shanghai, Beijing and the dozens of upwardly mobile Chinese mega cities. But the real turning point appears to have been the appointment of a renowned French fashion industry leader as CEO of Shanghai Tang in 2001. Monsieur Chermont has steadily guided the company away from merely selling fashion wear, and instead has helped weave the Shanghai Tang label into a veritable lifestyle statement.


Supported by a capable and enthusiastic Chinese workforce (only the CEO is French), Shanghai Tang has adopted and applied western marketing tactics which have also, most interestingly, helped propel massive brand growth and recognition in the domestic Chinese marketplace. At the forefront is the widespread use of social media and communication tools which, as you are surely aware, are already well established by Western brand icons. Future success is expected with the company predicted to double in size in the next five years. As one analyst commented: “Shanghai Tang is the best combination of Chinese culture paired with current dynamic market change and shopper needs. This model could be learned and re-applied by other Chinese brands, but success is not that easy to copy”.


And there’s the rub when we come back to our own supposedly less glamourous world of tyres. When we consider that more than half of the 300 or so tyre brands that are now out there in our European market originate from China, how many of these carry even a fragment of brand equity or loyalty? How many extoll the virtues of their technical excellence? How many stand out from the crowd as future world beaters?


We’re already starting to see the effects of production overcapacity in the market and the consolidation in manufacturing that will likely follow. This may have the beneficial side effect of establishing stronger market leaders in China who can enthusiastically take on the global brand challenge. For when it comes to brand success, it’s not only about making an exemplary product but, more importantly, communicating the benefits to a skeptical or ignorant public. Many consumers have already been indirectly influenced to avoid ‘cheap Chinese’ – even though several of these challenger Asian tyre brands are now proving themselves to be technically superior when compared with legacy manufacturers from the West.


For those tyre brands that we are proud to selectively represent, Zenises will use every communication channel available to support the incredible product development advances that we witness with each year passing. For sure there will remain some lesser quality Chinese tyres on sale, just as there will also be low quality American, African and European tyres readily available in the market (we shouldn’t forget where the majority of the old tyre facilities are based).


But let’s also celebrate those manufacturers who are working hard every day to be the new Shanghai Tang of the tyre business. And with a clear brand message and long-term marketing focus, those brands can be challengers to the ‘status quo’ of the tyre business.

Who´s testing the testers?

It’s human nature to look to a higher authority for answers to life’s many questions. I’ve just returned from a fantastic trip to India with our wonderful business partners and associateswhere, amongst many other delights,we visited amazing temples, ancient ruins andiconic monuments – each designed to inspireand influence through the generations.In the tyre business we can often be acynical lot – but if there’s one thing that’stalked about in serious tones and knowingnods, it’s the ‘higher authority’ of themagazine tyre test. Nowadays there is quitea proliferation of such tests but the mostrecognised of them all is the German motoringorganisation ADAC’s bi-annual summer/winter ‘Reifentest’.


Amongst many Germans(as well as fellow Swiss and Austrian drivers)the ADAC tyre test has taken on a reputation both far and wide with manufacturers vyingfor a ‘highly recommended’ seal of approval.ADAC was founded over a century ago and is the largest automobile club in Europe withover 19 million members who avidly followthe magazine’s advice.


The results of these tyre tests are also syndicated across Europeand beyond (for example in Which? magazinein U.K.).However, such tests have recently come under renewed scrutiny by the introduction ofthe European tyre label scheme (in place nowfor over a year). Like the magazine tests with their often blunt ‘not recommended’ conclusions set against the ‘highly recommended’score usually reserved for more established brands, the expectation was for a clear divergence of label results between selfproclaimed ‘premium’ brands and the lesser known newer ‘economy’ names. But if that was the thinking, it’s not quite gone to plan,with new entrant tyre brands exhibiting labelresults close to, or sometimes exceeding, those of better known competitors.So, the argument goes, the label is too simplistic -there are lots of other tests that aren’t included- tread wear, aquaplaning, drybraking being just three examples. And so,the best way for the tyre buyer to find out all this important information is to read one ofthe many ‘consumer champion’ magazines. And this is where ADAC has stood out as the’King’ of tyre tests.However, ADAC’s unexpected fallibility recently surfaced when news broke of revelations that an executive had been falsifying some voting results in its annual ‘Yellow Angel'(Car of the Year) award.


Instead of totalling 34,000 votes, the winning VW Golf actuallyonly received 3,400 member scores.Although this has been described as an isolate doccurrence, even Germany’s TransportMinister has stated that the organisation must”lay all the cards on the table”.Admitting that the organisation has itswork cut out to repair trust, ADAC’s Managing Director can’t have been pleased to subsequently hear that concerns have now spreadto the organisation’s ‘Reifentest’. Firstly, a former design engineer of a European tyre manufacturer was quoted in the ‘Servicezeit’consumer TV show on German channel WDR as saying that special sets of tyres were preparedfor magazine tests that had nothing to do with the tyres actually commercially available in the market.


Secondly, another former employee of a ‘premium’ tyre manufacturer informed the same WDR show that scoring requirementsfor the ADAC test were shared in advance and positive modifications to the tyres for testing were able to be made thereafter.And the story keeps on going. In April,tyre industry veteran Mr. Willy Matzke (formerhead of testing at ADAC’s Austrian ‘sister’ association OAMTC), joined in with his own observations of testing over the decades. According to Herr Matzke, there were”virtually unlimited” opportunities for manufacturersto manipulate tyre tests. From using manufacturer-owned test tracks to switching tyres mid-test to using machinery only operated by employees of tyre companies….well it’s quite incredible what is now flying out of’Pandora’s Box’.


So where now from here for our industry and its tyre comparisons? Well, for me personally,I certainly still support the usefulness of magazine tyre tests – any way we can get the public talking about tyres and understanding their nuances and characteristics as well as their safety value must be agood thing. And there is no doubt that ADAChas been a positive force on the German (andEuropean) driving public over the years. So it’s a real pity we are now discussing alleged tyre test manipulation. But it’s important thatwe get some clarity since the playing fieldneeds to be level for all brands and recent allegations and opinions suggest that tyre tests may have sometimes been a ‘cosy’set-up unduly influenced by a small group of manufacturer representatives and their secretive ‘magazine test’ technical teams. Remember that in many European markets a ‘highly recommended’ tyre test result isworth its weight in gold for the short-term marketing value alone so the temptation to influence or ‘assist’ motoring magazines in any possible way must be immense.


As a long-term partner of two of China’sleading tyre producers, it also must be saidthat although the new EU tyre label is levelling the playing field in terms of consumer tyre brand perception and recommendation,there have been several recent occasions where Chinese produced tyres as a homogenous group have been negatively tainted bysome motoring magazine articles. So, in the light of such tyre test ‘finger pointing’, shouldI also now question if such articles are possibly’open to influence’ by those with connections who would try their hardest to keep new tyre brands (even those with first classmanufacturing facilities) from gaining any foothold in the European arena?


In the next edition of ‘Talking Tread’, I’lltry to highlight some of the ways forward for our industry to ensure that magazine tests can possibly regain their complete validity inthe eyes of the motoring public. Until then, Iwill continue to read the ever growing number of magazine tyre tests – but certainly with a new degree of scepticism.

Testing, Testing 1-2-3

It’s now been a year since the introduction of tyre labels in the European Union and it was interesting to see the results of a recent NTDA – Lanxess survey on this topic. Despite widespread recognition within the tyre trade itself of the new label’s importance, survey results appear to demonstrate that 74% of consumer respondents highlight the tyre price as still being the most critical issue at  the point of purchase.


Maybe in these difficult economic times, we shouldn’t be surprised that the driver looks at the cash in his or her pocket first before selecting a tyre. But even if “John Smith” were to compare tyre labels before making a purchase, what should draw his eyes first? I would suggest the fuel efficiency label rating of the product as it’s the main measure which impacts on the cost of motoring over the long-term. In this respect, many of the so-called ‘value’ tyre brands now obtain ‘C’ or even ‘B’ label grades which are actually not far away from those labels presented by ‘premium’ tyre brands. If this is the case, the tyre label reinforces the opinion that most tyres are of similar fuel-saving quality and if the option is there to buy a tyre 20%, 30% or even 50% below the ‘premium’ price level, then it’s an opportunity to be taken.


Let’s not forget that tyre labels were, in fact, originally intended to support the tyre purchase process in the same way that similar such labels now adorn white goods such as washing machines. The focus was very much on driving energy improvements – in particular to lower the vehicle’s energy absorption / rolling resistance. As the European Commission states on its own website, a typical passenger car driven 25,000 km can save fuel costs of up to £200 per year by choosing the best performing tyres. Interestingly, the Commission goes on to state “as the best performing tyres will be more costly, it is in the second year that you will have net savings”. So even before the labels arrived, the ‘thinking’ was already in place that the consumer would need to spend more on buying ‘premium brand’ tyres to gain savings in the long-term.


But the results haven’t always worked out that way. In fact, many of the premium brand tyres exhibit fuel consumption grades similar to (if not even sometimes worse) than ‘mid range’ or ‘value’ competitors. In a recent UK motoring magazine tyre comparison article, the ‘value’ tyre tested actually topped the rolling resistance section of the test, performing over 25% better than some of its ‘premium’ competitors. That’s some margin!


Let’s also not lose sight of the laudable aims of the tyre label. The aim is to reduce CO2 emissions by up to 4 million tonnes by 2020 – the equivalent of removing up to 1.3 million cars from European roads per year. The end goal is ‘sustainable mobility’ and the reduction of our industry’s carbon footprint. This ‘green’ debate is one that is raging across the globe and tyre makers from the Far East have already grasped the importance of the issue. New ranges have been brought to market with a balanced goal of achieving more or less a ‘C’ grade in both rolling resistance and wet grip criteria. This differs from approaches by some tyre brands which look to maximise wet grip scores to the detriment of rolling resistance grades (E grade or lower).


Of course, the other label criteria of wet grip (and external noise) are also very important. And so too are a wide selection of other tyre tests that don’t make it onto the label – again, for sustainable mobility purposes, surely the lifetime tread wear of the tyre is a worthwhile measurement? But it seems that after the launch fireworks of 1st November 2012, the push for more fuel efficient tyres has been a bit of a damp squib. As the grading is not proving to give a real competitive advantage to some’legacy’ brands, the media focus is being shifted steadily to the ‘wet grip’ argument. What a pity! Not only because of the original intentions of the tyre label but also, as the consumer’s friend, tyre manufacturers need to strive to deliver cost savings for the hard-pressed driver – either directly via attractive pricing, or indirectly via the communication of real long-term fuel saving tyre features.


The proof is in the pudding

I’m going to start this latest conversation by talking about Christmas….. in the middle of summer! Well not exactly the celebration of Christmas, but specifically the humble Christmas pudding. For those of you unaware of this traditional British delight, it’s a boiled pudding composed of dried fruits held together by egg and suet and flavoured with sweet spices. The pudding is aged for several months and the often high alcohol content prevents it from spoiling and has the added benefit of sending adults to sleep in front of a warm fire on December 25th.


Whilst it doesn’t really appeal to my taste buds, it’s a staple part of the Christmas experience to my British friends. But I digress – so where are we going with this unseasonal discussion?


Well, the Christmas pudding is sold across the land in many shops and they are sold in their millions. Last year, the venerable Good Housekeeping magazine did a taste test and here are some of the results. In first place came the offering from the German company Aldi at just £3.89 (less than 5 euros). In last place at a whopping £25 (or 30 euros) came Fortnum and Mason’s pudding – this from the shop that provides the food to Her Majesty the Queen.


In fact Aldi was the cheapest by some way and won the taste test. Fortnum and Mason was actually six times higher in price!


This is just one small example of how product brand positioning is becoming a cloudy business and the positioning of legacy brands in the minds of the end consumer built up over the past decades in the ‘Age of Marketing’ is now fast eroding. Compare the stellar passenger ratings of Easyjet with the lacklustre Iberia or Alitalia, the rise and dominance of Primark and Zara in the clothing business, the amazing JD Power scores of Toyota and Skoda and you can see that the historic linear correlation between price and quality is flexing – and may even be shattering.


Whilst we in the industry still tend to describe tyre brands through historical terms such as ‘Premium’, ‘Mid Range’ and ‘Economy’, it appears that we too are failing to understand ever-changing consumer thinking. In a recent study commissioned by marketing company INNOCEAN, it reveals that tyre brands are failing to gain traction in the minds of today’s consumers….’creating a golden opportunity for new challengers looking to shake up the market’.


Incredibly to those of us who live and breathe tyres on a daily basis, this research found that 40% of drivers have absolutely no idea what make of tyre is on their car – and 46% of consumers spend less than five minutes in the decision making process before buying new tyres.


Most interestingly for those of us who try to invest in the time and effort to develop brand equity, this survey found manufacturers are failing to communicate major selling points of their product, with many campaigns treading the same familiar ground. This results in few communications that actually stand out, with the report concluding that ‘after years of inertia in the market….there are huge opportunities for brands willing to be more targeted – and to focus on more than the usual suspects of safety and performance’.


So does this mean that we should surrender to the public’s growing perception that all tyres are simply ‘black and round’? Definitely not! What it does mean in my opinion is that when a tyre market like the U.K. now comprises over 50% ‘economy’ replacement tyres, is that it is even more important for those of us who consider ourselves ‘challengers’ to step up and memorably communicate to the driving public that even at a lower price point level, all tyres are not created equal (excuse the plug!) and that factors such as tyre labelling, tyre sourcing and tyre brand equity remain important to ensure accountability and a satisfied customer. All economy tyres are simply not the same – in tests we ourselves undertake there are ‘budget’ tyres that deliver similar results to ‘premium’ tyres – and there remains a job to educate and inform the driving public that selecting and caring for tyres remains a key safety aspect of vehicle maintenance.


Just because we have a more sceptical audience does not mean the message is no longer worth delivering, it’s just that in the words of INNOCEAN, we ‘ need to think beyond Formula One billboards and calendars full of scantily clad models, and think much more carefully about the consumer journey’. Or if we don’t, never mind the puddings, it will be those who adhere to the ‘same old same old’ who will soon be the turkeys at Christmas.

Are we witnessing generational Change?

The incredible rise of the Chinese tyre industry has been the major phenomenon within our business over the past decade. Rather than seeking major overseas acquisitions, the Chinese have steadily arrived on the global stage through organic growth and via impressive investment in new factories and state-of-the-art capital equipment. Enterprises like Hangzhou Zhongce and Shandong Linglong are now not only well established as domestic forces but are becoming increasingly global tyre players.


It’s a commonly held belief that the Chinese tyre industry is export-led. But an incredible 24% of all global car production now takes place in China – so it’s logical why so many tyres are also being built there – primarily to satisfy the new ‘first generation’ Chinese drivers. As the domestic vehicle market expands, so more and more tyres are needed – both for OE and replacement. It’s also worth noting that the Chinese currently own 80 vehicles per 1,000 people – compared to more than 500 per 1,000 people in the UK – and China is already the number one car market in the world! But domestic growth is also there to support global ambitions and Chinese tyre brands are now becoming more visible worldwide, following a trend in almost every other consumer product.


Take a closer look at your mobile phone – the brand message may be ‘California’ or ‘Finland’ but it’s probably made in China. The same with your blu-ray player or laptop or 3D TV or even the wallet in you pocket. The brand is global but the production is in China.


Why China? Of course initially it was down to cost advantages but now, although input costs still play a major part, the country also offers improving quality and reliability. Just as several decades ago with its neighbour Japan or maybe later in the 1980s with Korea, China is emerging. Some fifty years ago when they first started to export to Europe, there was maybe a reluctance to buy ‘cheap Japanese’ and I remember the reactions approximately 20 years ago that Korean tyres were not perceived as good as ‘Made in USA’ or ‘Made in Europe’. That has all changed of course. The world’s leading tyre producer is Japanese and Korean tyre brands (like Hankook) are now globally respected.


So it looks to me that we are entering a new phase in the tyre industry. An era in which we will witness significant shifts – so-called a ‘generational change’. In a few years’ time the list of ‘Top 20’ tyre manufacturers could look very different to today. The European and North American tyre markets have matured. To see where change is really happening, it’s time to look further afield to where vehicle ownership is in its infancy and undergoing a rapid transformation and to consider how this, in turn, will influence the supply of new tyres and new tyre names across the globe. It’s an exciting change to be fully embraced. A change that can only help to deliver better choice, better quality and more buying power in the hands of you – the local tyre dealer.

The Economic Marvel Changes Tack

One of most important issues facing not only the tyre industry but also every industry today is the growing impact of China in the world. In this special New Year edition of Talking Tread I would like to take this opportunity to write more about China – what has it achieved and, more importantly, what is still to change in this fascinating country. It’s quite remarkable that the Chinese nation has successfully elevated over 500 million people out of poverty in the past thirty years. It has also grown from under 5% of global GDP output to over 15% of the world’s GDP and is still on track to grow its economy at a rate of 7% per year. It’s the largest mobile phone market in the world and now consistently the largest consumer of iron, steel and cement in the world. And it has built more for its people in the last ten years than any other nation on earth. Deng Xioaping – the ‘architect’ of reforming China – used four key words to describe how China would go about achieving this. The first two were ‘Reform’ and ‘Openness’: China focused on reforming the economy and allowing market forces to play a much bigger role. It has done this whilst ensuring that the country has been relatively protected from big external ‘shocks’ such as the 2008 financial crisis. It also ensured that it employed the maximum opportunities afforded to it from its demographic dividend whilst many Western societies were ageing more quickly. The next two were ‘Stability’ and ‘Consensus’. China has also tried to establish a better rule of law. Whilst there still may be some way to go in this regard, it has moved from a situation of Party opinion to a better set of codified laws now actually in use. This has also ensured effective control whilst opening up society to build enough stability. It has also ensured that there has been consensus on the most important issue facing Chinese society – the elevation of living standards. This consensus has led to a single-minded determination of the leadership to focus on growth to lift people out of poverty. Can all this continue now that China has changed so rapidly over recent decades? There are two very important challenges that the country faces today. Society is now ageing rapidly. China’s one child policy is catching up with it. Today the country’s ‘over 65’ population is 8%. But, by 2040, this number is forecast to be over 23%. The number is more than the population of the three largest European economies combined – all over the age of 65! This has tremendous societal pressure not only on the pension systems but on services and in particular the provision and availability of healthcare. Most importantly for us, this also signals the end of the demographic dividend and the natural associated considerable rise in labour costs. It is no wonder that the Chinese government is slowly changing its policies to allow more couples to have two children. The actual driver of growth of the Chinese economy has fundamentally changed. In the past ten years the engine of growth has been investment for export-led growth. In the last global economic crisis, the Chinese government realized the downside of relying too much on exports. It also foresaw with the rising labour and input costs that it will have to focus on generating internal consumption. In typical Chinese fashion it has achieved this in relatively little time and, today, domestic consumption has surpassed investment for export-led growth as driver of the economy. The Chinese leadership appreciates that for this to continue that they will have to ensure higher incomes for the people – further increasing labour costs. A ruling party communique has already been issued that Chinese workers should all have double their income per capita by 2020. Economists have calculated that this will result in a 10% growth in consumption. And China has a way to go if you measure consumption as a percentage of GDP. China is still relatively low at 35% compared to the USA at 70%. What does this mean for us in Europe? Well it certainly means that the end of the “Cheap China” era is coming. More importantly it tells us that the Chinese consumer is going to be the new ‘King’ and that we should focus more of our efforts on understanding where he will spend those increasing levels of yuan. Changes in China can be described as like a giant wave crashing on to the shoreline. It’s pointless digging in your heels to withstand the efforts and hope that life will be like before the wave came. The best way to deal with a wave is to dive right in. Those that are willing to understand these nuanced changes are in store for a ride of a lifetime!