Summary:

  • Market shifts create losers, and winners
  • Demand doesn’t decline, it just changes form – and usually grows!
  • We want more entertainment and communcation – but not the old fashioned way
  • Losers keep trying to sell what they have, and know
  • Winners supply solutions aligned with market needs regardless of old competencies

How would you react if your customers said your product really wasn’t something they needed?  Would you work hard to convince them they are wrong?  Maybe try to add some features hoping it would regain their attention?  Or would you start looking for what they really do need/want?

Pew Research Center, at PewSocialTrends.org headlines “The Fading Glory of the Television and Telephone” describing how quickly people are walking away from what were very recently considered absolute necessities. As a “boomer” and member of the “TV generation” I was surprised to read that only 42% of Americans now think a television is a necessity!  This has been a rapid, dramatic decline from 52% last year and 64% in 2006!  1 in 5 Americans have changed their point of view about television as a necessity in just 4 years!  And TV as a necessity is in an accelerating decline!  I can remember when my generation went from 1 TV in the house to 1 in every room!  This trend does not bode well for broadcast television networks, affiliates, advertisers, traditional production companies, television newscasters, manufacturers of TV sets and TV equipment – or many other businesses linked to TV as we know it.

Simultaneously, demand for a land line telephone  has declined.  Again, my generation remembers the days with one phone in the house – in some areas on a shared “party” line where multiple families shared a single phone line.  The phone was in a central area so it could be shared.  In the 1970s we saw things change as telephones were added to every room!  Now, according to Pew, folks who consider a land-line phone a necessity has declined to only 62%, a 10% decline from just last year (68 to 62) and barely 3 in 5 Americans!  Wow! 

Of course, for every decline there’s a winner.  47% see the cell phone as a necessity – that’s 5 percentage points greater than the TV score, indicating mobile phones are seen as more of a necessity than television by the general population.  And 34% see high speed internet as a necessity – only 9 percentage points fewer than the TV number – and more than half who see the need for a land-line phone. 

Demand for entertainment and communication have not declined!  If you are in television or land lines you might think so.  Rather, that demand is accelerating.  But it is just shifting to a different solution.  Instead of the old technology, and supplier industry, people are changing to something new.  First with video cassetttes, then digital video recorders (DVRs), then the plethora of available cable channels and on-demand TV, and now with on-line entertainment from YouTube to Hulu people have been changing the way they consume entertainment.  Demand has gone up, but not from traditional consumption of TV, especially as viewing has switched from the TV to the computer monitor – or the hand held device.

Clearly, access to the internet (facebook, twitter, et.al.), texting and anytime/anywhere calling has increased both our access and use of one-way (such as reading web pages) and two way communication.  Communication is continuing to grow, but it will be in a different way.  No longer do we need a “dial tone” to communicate – and in most instances people are finding a preference to asynchronous rather than real-time communication.

These are the kind of industry transitions that threaten so many businesses.  What Clayton Christensen calls “The Innovator’s Dilemma” as new solutions increase demand while making old solutions obsolete.  The tendency is for the supplier of traditional solutions to say “my market is in decline.”  But really, the market is growing!  Just like Kodak said the demand for film was declining, when demand for photography – now in digital format – was (and is) escalating!  When market shifts happen, incumbents have to resist the temptation to try “keeping” the “old customers” by undertaking Defend & Extend efforts – like adding features and functionality, while cutting price.  This inevitably leads to disaster!  Instead, they have to understand the shift is only going to accelerate, and develop an approach to entering the new market.

As this research comes out, Apple launched a series of new products to augment its set-top box and iPod/iTouch product lines. (San Francisco Chronicle, SFGate.comSteve JobsUnveils Upgraded Apple TV, New iPods“)  by doing so Apple recognizes that people still want entertainment – but they are a whole lot less likely to accept sitting in front of a communal television, serially deploying programming at them.  They want their entertainment to be on-demand, and personalized.  Why should we all watch the same thing?  And why watch what some programmer at CBS, HBO or TMC wants to deliver? 

Apple is bringing out products that align with the direction the market is now heading. Ping is designed to help people share program information and identify the entertainment you would like to receive.  iTunes is upgrading to bring you in bite-size chunks exactly the entertainment you want, as you want it, aurally or visually.  These are products which will grow because they are aligned with what the market says it wants — even more entertainment.  Those who are hidebound to the old supply mechanism will simply find themselves fighting for declining revenue as demand shifts – and grows – in the new solutions