Defend & Extend – book publishing, movie distribution,

by | Oct 23, 2009 | Current Affairs, Defend & Extend, eBooks, In the Swamp, Leadership, Lock-in, Music

If you try standing in the way of a market shift you are going to get treated like the poor cowboy who stands in front of a cattle stampede.  The outcome isn't pretty.  Yet, we still have lots of leaders trying to Defend & Extend their business with techniques that are detrimental to customers.  And likely to have the same impact on customers as the cowpoke shooting a pistol over the head of the herd.

Book publishers have a lot to worry about.  Honestly, when did you last read a book?  Every year the demand for books declines as people switch reading habits to shorter formats.  And book readership becomes more concentrated in the small percentage of folks that read a LOT of books.  And those folks are moving faster and faster to Kindle type digital e-book devices.  So the market shift is pretty clear.

Yet according to the Wall Street Journal  Scribner (division of Simon & Schuster) is delaying the release of Stephen King's latest book in e-format ("Publisher Delays Stephen King eBook").  They want to sell more printed books, so they hope to force the market to buy more paper copies by delaying the ebook for 6 weeks.  They think that people will want to give this book as a gift, so they'll buy the paper copy because the ebook won't be out until 12/24.

So what will happen?  Kindle readers I know don't want a paper book.  They wait.  Giving them a paper copy would create a reaction like "Oh, you shouldn't have.  I mean, really, you shouldn't have."  So the idea that this gets more printed books to e-reader owners is faulty.  That also means that the several thousand copies which would get sold for e-readers don't.  So you end up with lots of paper inventory, and unsatisfactory sales of both formats.  That's called "lose-lose."  And that's the kind of outcome you can expect when trying to Defend & Extend an outdated Success Formula.

Simultaneously, as book sales become fewer and more concentrated a higher percent of volume falls onto fewer titles.  And that is exactly where WalMart, Target and Amazon compete.  High volume, and for 2 of the 3 companies, limited selection.  This gives the reseller more negotiating clout against the publisher.   So as the big retailers look for ways to get people in the store, they are willing to sell books at below cost – loss leaders. 

So now publishers are joining with the American Booksellers Association to seek an anti-trust case against the big retailers according to the Wall Street Journal again in "Are Amazon, WalMart and Target acting like Predators?" .  Publishers want to try Defending their old pricing models, and as that crumbles in the face of market shifts they try using lawyers to stop the shift.  That will probably work just as well as the lawsuits music publishers tried using to stop the distribution of MP3 tunes.  Those lawsuits ended up making no difference at all in the shift to digital music consumption and distribution.

"Movie Fans Might Have to Wait To Rent New DVD Releases" is the Los Angeles Times headline. The studios like 20th Century Fox, Universal and Warner Brothers want individuals to buy more DVDs.  So their plan is to refuse to sell DVDs to rental outfits like Netflix, Redbox and Blockbuster.  Just like Scribner with its Stephen King book, they are hoping that people won't wait for the rental opportunity and will feel forced to go buy a copy.  Like that's the direction the market is heading – right?

If they wanted to make a lot of money, the studios would be working hard to find a way to deliver digital format movies as fast as possible to people's PCs – the equivalent of iTunes for movies – not trying to limit distribution!  That the market is shifting away from DVD sales is just like the shift away from music CD sales, and will not be fixed by making it harder to rent movies.  Although it might increase the amount of piracy – just like similar actions backfired on the music studios 8 years ago.

Defending & Extending a business only works when it is in the Rapids of market growth.  When growth slows, the market is moving on.  Trying to somehow stop that shift never works.  Only an arrogant internally-focused manager would think that the company can keep markets from shifting in a globally connected digital world.  Consumers will move fast to what they want, and if they see a block they just run right over it – or go where you least want them to go (like to pirates out of China or Korea.) 

They only way to deal with market shifts is to get on board.  "Skate to where the puck will be" is the over-used Wayne Gretzsky quote.  Be first to get there, and you can create a new Success Formula that captures value of new growth markets.  And that's a lot more fun than getting trampled under a herd of shifting customers that you simply cannot control.

Preparing for the shift? – Apple, Dell, Microsoft, Google – Smartphones vs. PCs

by | Aug 21, 2009 | Current Affairs, Disruptions, General, Innovation, Leadership, Lock-in, Openness

Smartphones will outsell PC by 2011 according to Silicon Valley Insider:

Smartphone sales

Your first reaction might be "interesting chart, so what's the big deal?"  That's the way a lot of people react to news about market shifts.  Like the shift is important maybe for the suppliers, but what difference should it make to me?  That's kind of how a lot of people reacted to PCs when they came along – and those businesses ended up with IT costs that were too high and processes that were too slow.

Market shifts affect us all.  As the number of smart phone users keeps doubling, the number of new PC buyers doesn't.  You may not care today that there will be more smartphones sold in 2011 – but if you think about it, you should.

  • Do you deliver information across the internet?  If so, are you formatting content for access on a PC screen – or on a smartphone?
  • Are you publishing information for long-format page views like a PC, or short-format small views like a smartphone?
  • Are you planning to continue sending people information on email, or will texting be more efficient and practical soon?
  • Do your on-line ads present well on a smartphone?
  • Do you print things you should send immediately via smartphones?  Could you stop printing?
  • Do you have a PC in your family room – and will you need to have one there when everything you want to know is available on a smartphone?
  • If you can access 90%+ of your information on a smartphone, will you still carry around a laptop?
  • Will fax machines become obsolete?  What will that do for land-line demand?  What does this portend for maintaining land-line service to your home or business?

These are just a few thoughts about how things could change as smartphone sales grow.  There will be more.  The biggest risk in this chart isn't that the lines meet in 2011 – but that as we get into 2010 smartphone sales keep growing on a log (rather than linear) line and PC sales don't recover anywhere close to the projections shown here.  Realizing that forecasts tend to be wrong by more than 25% as often as they are correct within 10%, we can realistically expect that in 2011 smartphone sales might be more than 500MM units, and PC sales might be less than 250MM units – or rougly double!!!  When that sort of impact happens, we see sales fall off a cliff of old technology.  Do you remember when every admin had a typewriter – then suddenly none did – like in a matter of months.

So, are you preparing for this possibility?  If you did, could you gain advantage over your competition?  If you were the first to aggressively plan for, and implement, smart phone technology use can you lower your cost?  Better connect with customers?  Find new customers?  React faster to customer needs?  Offer new services?  Promote new products?  

If you wait, what can your competitor do to you?  How could she clip your customer relationships?  Lower her prices?  Expand her offerings?  If you wait, how could you find yourself doing poorly?

This will be a big deal for the technology companies.  This shift is the kind of thing that could expose the great weaknesses in Microsoft's and Dell's horribly Locked-in  Success Formulas.  It also could catapult Apple, Google — or maybe an outside player like Motorola (largely given up for dead) into a leadership position.  Positions could change very fast if the adoption rate turns more aggressive.  Is your investment portfolio prepared?

We see these kind of charts all the time.   But do you do anything about it?  Market shifts happen.  They obsolete old Success Formulas.  They put businesses at risk that aren't paying attention.  They create new winners out of companies that aggressively pursue the shifts.  We often see the shift coming – but Lock-in keeps us from doing anything about it.  Perhaps you need to consider Disrupting your status quo and setting up some White Space to see what you can do to improve your position!