When markets shift it’s better to "get it fast" and make changes than "fight to the death" to protect the past.
The Chicago Tribune recently reported results of music compact disc sales (read article here.) It may not surprise readers to learn that nearly half of all teenagers bought no (not one) CDs last year. I’m 50, and I remember when teenagers were the mass consumers of 45’s and then LPs (remember small records with big center holes and "long playing albums") then later 8-tracks, cassettes and eventually CDs (how’s that for a walk down memory lane folks!). So to learn that the percentage of CD sales to teenages fell to 10% from 15% in 2007 was a bit surprising. When my sisters and I were young, teenagers were the vast majority of the market!
What does this tell us about the future? CD’s have a pretty lousy future. In 10 years I’ll be 60 – and who knows if I’ll be buying any CDs. But we know that these teenagers aren’t going to start. They’ll never buy a CD. If you’re a music company that depends on CD sales (like EMI, Sony, Vivendi/Universal or AOL Time Warner) you had better be pretty worried. Whether these companies will ever Disrupt their Lock-in and get a new approach is far from clear. They have ignored the trend for a long time, and Locked-in businesses are well known to remain Locked-in until they, quite literally, fail (at least in that market).
Do you remember how people bought all those albums or tapes? Does anyone remember Musicland – the retailer that in the 1970’s had 20%+ of music sales? Or that Virgin was begun as a direct mail company selling music through the mail? In 2007 the number of sold CDs fell by 19%! While sales of digital songs grew 45%! Today Apple, the company once known for a niche computer called the Macintosh, is the number 2 retailer of music in the country – without a single music store! Apple displaced Best Buy to take the #2 position (of course, #1 is Wal-Mart, but how long do you think that will remain as trends continue?) Clearly, the company that "gets it" has made a fortune, while the ones locked-in to traditional physical product sales and bricks-and-mortar have fared far more poorly.
Do you remember Wayne Huizenga? He was the megalomaniac who built up a car dealership into a network of dealerships making a fortune. He also bought the Florida Marlins, and they became World Series winners. And he bought Blockbuster Video, converted it to Blockbuster Music. So now you think, "what a dope." Guess again. This guy gets it fast. He sold his car dealerships when folks were willing to pay a lot. And he sold his ball players, capitalizing on the world series to make a big profit before overspending to try a repeat – as most owners have done. And he was fast to shut those Blockbuster music stores and sell the real estate before he got stuck with a bunch of unsellable inventory. He got it fast — which is more than we can say for the traditional companies mentioned above. Markets are constantly shifting. Those businesses (and their leaders) that Get it fast can avoid costly Defend & Extend – and build on early wins (like Apple) to huge success.