Disney and Uber – Using Trends To Great Success

Disney and Uber – Using Trends To Great Success

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Business Trends from COVID19 impact hartung

Thrive to the Future – the 4 top trends for 2021 and beyond.

In February, Disney appointed a new CEO from inside the company. I was not a fan. He came from the traditional,old Disney businesses – studio movies and theme parks. Both of those businesses are historical artifacts, not growing, and clobbered by the acceleration of trends due to the pandemic. But…… after crashing almost 50% shortly after changing CEOs (and the pandemic hitting the USA) the stock just reached a new all time high – recovering all those losses and pushing ahead an additional 16%.

A lot of companies are complaining about how bad the pandemic has affected them. They were tied to their historical value delivery system, and working hard to keep optimizing that business model. They weren’t following trends, so when the pandemic accelerated trends to more mobile, more asynchronous work, greater use of gig resources and ever greater expectations for AI (artificial intelligence) they simply were not prepared.

uber business pivot

But smart companies moved really fast to implement their plans for new business based on trends. For example, while everyone thought of Uber as an alternative to taxis, leadership had already been looking at changes in package distribution. They could see problems in the post office, limitations (and pricing) to UPS and Fedex, and the “last mile” delivery problem everyone local had — as well as alternatives being tested by Amazon.com. So when demand for local deliveries picked up, Uber was ready to change. In a year demand for taxi type services fell 45%, but deliveries rose 100%!! And even though it was small, freight jumped 35%. The net was that in an extremely fast changing marketplace, gross bookings for the first 3 quarters of 2020 were $40.7M vs. $46.8M in 2019. In a terrible year, Uber was ready (and able) to move fast to implement changes to keep revenues moving forward.

And Disney is another great example. Theme parks and studio entertainment seemed to be relics of a bygone era, and in 2020, demand was hit hard. Theme parks fell 37% and studio movies fell 13%. I thought Disney would go into cost cutting mode exclusively and start down the road to irrelevancy.

Disney business pivot

But I was wrong. Yes, Disney did cut employment in those two divisions. Extensively. But that was an acceleration of something bound to happen. Those businesses were shrinking and outdated. However, simultaneously, Disney poured resources into Media Networks and Direct-to-Customer, two business units highly aligned with trends! Basically, Disney went from that old-line movie and parks company to a very well positioned e-commerce vendor and competitor to Netflix!! In just 9 months. Already, Disney has 80M subscribers for Disney+, compared to Netflix 200M, and is targeting 260M by 2024!!! Disney has demonstrated it is ready to launch first run movies, at much higher prices, on its network – building out new pricing schemes as well as new business models for streaming content!

The lesson here is to be prepared for change! Don’t build your plans just on the past – past products and customers. Instead, look hard at trends and build scenarios for the future based on trends. Be ready for those trends to accelerate. And then TAKE ACTION. Don’t wait. Don’t stall. Go to the future by implementing those plans.

If you are planning based on trends you will be prepared for big changes in your “base” or “core” business. And you’ll develop plans for new solutions that meet emerging trends. So when the opportunity presents itself, like in a pandemic – or something a lot less dramatic – you’ll be ready to implement a new business. You can shift your value delivery system quickly to continue meeting the Value Proposition that you offer your customers.

Congratulations to Uber and Disney for doing good trend planning and being ready. Are you properly planning? Are you ready for change?

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Did you see the trends, and were you expecting the changes that would happen to your demand? It IS possible to use trends to make good forecasts, and prepare for big market shifts. If you don’t have time to do it, perhaps you should contact us, Spark Partners.  We track hundreds of trends, and are experts at developing scenarios applied to your business to help you make better decisions.

TRENDS MATTER. If you align with trends your business can do GREAT! Are you aligned with trends? What are the threats and opportunities in your strategy and markets? Do you need an outsider to assess what you don’t know you don’t know? You’ll be surprised how valuable an inexpensive assessment can be for your future business.  Click for Assessment info. Or, to keep up on trends, subscribe to our weekly podcasts and posts on trends and how they will affect the world of business at www.SparkPartners.com

Give us a call or send an email.  Adam@sparkpartners.com  847-331-6384

The Day TV Died – Winners and Losers (Comcast, Disney, CBS)

Remember when almost everyone read a daily newspaper

Newspaper readership peaked around 2000.  Since then printed media has declined, as readers shifted on-line.  Magazines have folded, and newspapers have disappeared, quit printing, dramatically cut page numbers and even more dramatically cut staff. 

Amazingly, almost no major print publisher prepared for this, even though the trend was becoming clear in the late 1990s. 

Newspapers are no longer a viable business.  While industry revenue grew for
almost 2 centuries, it collapsed in a mere decade.

Newspaper ad spending 1950-2010
Chart Source: BusinessInsider.com

This market shift created clear winners, and losers.  On-line news sites like Marketwatch and HuffingtonPost were clear winners.  Losers were traditional newspaper companies such as Tribune Corporation, Gannett, McClatchey, Dow Jones and even the New York Times Company.  And investors in these companies either saw their values soar, or practically disintegrate. 

In 2012 it is equally clear that television is on the brink of a major transition.  Fewer people are content to have their entertainment programmed for them when they can program it themselves on-line.  Even though the number of television channels has exploded with pervasive cable access, the time spent watching television is not growing.  While simultaneously the amount of time people spend looking at mobile internet displays (tablets, smartphones and laptops) is growing at double digit rates.

Web v mobile v TV consumption
Chart Source: Silicone Alley Insider Chart of the Day 12/5/12

It would be easy to act like newspaper defenders and pretend that television as we've known it will not change.  But that would be, at best, naive.  Just look around at broadband access, the use of mobile devices, the convenience of mobile and the number of people that don't even watch traditional TV any more (especially younger people) and the trend is clear.  One-way preprogrammed advertising laden television is not a sustainable business. 

So, now is the time to prepare.  And change your business to align with impending new realities.

Losers, and winners, will be varied – and not entirely obvious.  Firstly, a look at those trying to maintain the status quo, and likely to lose the most.

Giant consumer goods and retail companies benefitted from the domination of television.  Only huge companies like P&G, Kraft, GM and Target could afford to lay out billions of dollars for television ads to build, and defend, a brand.  But what advantage will they have when TV budgets no longer control brand building?  They will become extremely vulnerable to more innovative companies that have better products and move on fast lifecycles. Their size, hierarchy and arcane business practices will lead to huge problems.  Imagine a raft of new Hostess Brands experiences.

Even as the trends have started changing these companies have continued pumping billions into the traditional TV networks as they spend to defend their brand position.  This has driven up the value of companies like CBS, Comcast (owns NBC) and Disney (owns ABC) over the last 3 years substantially. But don't expect that to last forever. Or even a few more years.

Just like newspaper ad spending fell off a cliff when it was clear the eyeballs were no longer there, expect the same for television ad spending.  As giant advertisers find the cost of television harder and harder to justify their outlays will eventually take the kind of cliff dive observed in the chart (above) for newspaper advertising.  Already some consumer goods and ad agency executives are alluding to the fact that the rate of return on traditional TV is becoming sketchy.

So far, we've seen little at the companies which own TV networks to demonstrate they are prepared for the floor to fall out of their revenue stream.  While some have positions in a few internet production and delivery companies, most are clearly still doing their best to defend & extend the old business – just like newspaper owners did.  Just as newspapers never found a way to replace the print ad dollars, these television companies look very much like businesses that have no apparent solution for future growth.  I would not want my 401K invested in any major network company.

And there will be winners.

For smaller businesses, there has never been a better time to compete.  A company as small as Tesla or Fisker can now create a brand on-line at a fraction of the old cost.  And that brand can be as powerful as Ford, and potentially a lot more trendy. There are very low entry barriers for on-line brand building using not only ad words and web page display ads, but also using social media to build loyal followers who use and promote a brand.  What was once considered a niche can become well known almost overnight simply by applying the new dynamics of reaching customers on-line, and increasingly via mobile.  Look at the success of Toms Shoes.

Zappos and Amazon have shown that with almost no television ads they can create powerhouse retail brands.  The new retailers do not compete just on price, but are able to offer selection, availability and customer service at levels unachievable by traditional brick-and-mortar retailers.  They can suggest products and prices of things you're likely to need, even before you realize you need them.  They can educate better, and faster, than most retail store employees.  And they can offer great prices due to less overhead, along with the convenience of shipping the product right into your home. 

And as people quit watching preprogrammed TV, where will they go for content?  Anybody streaming will have an advantage – so think Netflix (which recently contracted for all the Disney content,) Amazon, Pandora, Spotify and even AOL.  But, this will also benefit those companies providing content access such as Apple TV, Google TV, YouTube (owned by Google) to offer content channels and the increasingly omnipresent Facebook will deliver up not only friends, but content — and ads. 

As for content creation, the deep pockets of traditional TV production companies will likely disappear along with their ability to control distribution.  That means fewer big-budget productions as risk goes up without revenue assurances. 

But that means even more ability for newer, smaller companies to create competitive content seeking audiences.  Where once a very clever, hard working Seth McFarlane (creator of Family Guy) had to hardscrabble with networks to achieve distribution, and live in fear of a single person controlling his destiny, in the future these creative people will be able to own their content and capture the value directly as they build a direct audience.  A phenomenon like George Lucas will be more achievable than ever before as what might look like chaos during transition will migrate to a much more competitive world where audiences, rather than network executives, will decide what content wins – and loses.

So, with due respects to Don McLean, will today be the day TV Died?  We will only know in historical context.  Nobody predicted newspapers had peaked in 2000, but it was clear the internet was changing news consumption behavior.  And we don't know if TV viewership will begin its rapid decline in 2013, or in a couple more years. But the inevitable change is clear – we just don't know exactly when.

So it would be foolish to not think that the industry is going to change dramatically.  And the impact on advertising will be even more profound, much more profound, than it was in print.  And that will have an even more profound impact on American society – and how business is done. 

What are you doing to prepare?

 

 

Value creating CEO – Steve Jobs, Innovation and Apple

$150billion.  That's a lot of money.  And that's how much shareholder value has increased at Apple since Steve Jobs returned as CEO.  Can you think of any other CEO that has aided shareholder wealth so much?  Do any of the cost cutting CEOs in manufacturing companies, financial services firms, or media companies see their share prices rising like Apple's? 

Fortune has declared this "The Decade of Steve" in its latest publication at Money.CNN.com.  Such over-the-top statements are by nature intended to sell magazines (or draw page hits).  But the writer makes the valid point that very few leaders impact their industry like Apple has the computer industry, under Jobs leadership (but not under other leaders.)  Yet, under his leadership Apple has also had a dramatic impact on the restructuring of two other industriesmusic and mobile phones/computing.  And a company Mr. Jobs founded, Pixar, had a major impact on restructuring the movie business (Pixar was sold to Disney, and has played a significant role in the value increase of that company.)  So with Mr. Jobs as leader, no less than 4 industries have been dramatically changed – and huge value created for shareholders.

No cost-cutting CEO, no "focus on the core" CEO, no "execution" CEO can claim to have made the kind of industry changes that have occurred through businesses led by Steve Jobs.  And none of those CEO profiles can say they have created the shareholder value Mr. Jobs has created.  Not even Bill Gates or Steve Ballmer can claim to have added any value this decade – as Microsoft's value is now less than it was when the millenia turned.  Despite the relative size difference between the market for PCs and Macs (about 10 to 1) today Apple has more cash and marketable securities than the entire value of the historically supply-chain driven Dell Corporation.

Mr. Jobs is constantly pushing his organization to focus on the future, about what the markets will want, rather than the past and what the company has made.  It was a decade ago that Apple created its "digital lifestyle" scenario of the future, which opened Apple's organization to being much more than Macs.  Jobs obsesses about competitors and forces his employees to do the same, to make sure Apple doesn't grow complacent  he pushes all products to have leading edge components.  Mr. Jobs embraces Disruption, doesn't fear seeing it in his company, doesn't mind it amongst his people, and works to create it in his markets.  And he makes sure Apple constantly keeps White Space projects open and working to see what works with customers – testing and trying new things all the time in the marketplace.

Following these practices, Apple pulled itself away from the Whirlpool and returned to the Rapids of Growth.  Almost bankrupt, it wasn't financial re-engineering that saved Apple it was launching new products that met emerging needs.  Apple showed any company can turn itself around if it follows the right steps.

As companies are struggling with value, people should look to Apple (and Google).  Value is not created by cost cutting and waiting for the recession to end.  Value is created by seeking innovations and creating an organization that can implement them. Especially Disruptive ones.  Whether he's the CEO of the decade or not I can't answer.  But saying he's one heck of a good role model for what leaders should be doing to create value in their companies is undoubtfully true.