Most people misunderstand evolution. They think that changes happen slowly. Imagine an animal with a 12 inch tail. Every generation or so it's imagined that the tail gets a little shorter, then a little shorter, then a little shorter until after some very long time it simply disappears. But that's not at all how evolution works.
Instead, most of the animals have a long tail. Some small number of animals are born each year with very short or no tails. For the most part, this matters little. If the tail is valuable – say for warding off parasites – those without tails may suffer and die off quickly. And that's the way things are, largely unchanged, for decades. But then, something happens in the environment. Perhaps the emergence of a predator able to catch these animals by the tail and hold them in place to let the pack kill it. Within one generation almost all of the tailed animals are killed by the predator, and only the no-tail animals survive. Some of these have developed an immunity to the parasite. So then this "evolved" animal becomes dominant. No-tail animals replace the tailed animals. That's how evolution really works. It happens fast, with drastic change (and this time of change is referred to as a punctuated equilibrium.)
Once we know how evolution really works, we can start to better understand business competition. A Success Formula works for a really long time, until something changes in the marketplace. Suddenly, the old Success Formula has far poorer results. And a replacement takes over.
Consider newspapers. They played a very important role in society for at least 100 years (maybe 200 or 300 hundred years.) But with the advent of the internet, their role is no longer viable. Printing and delivering a daily paper is too expensive for the value it can provide. So think of newspapers as the long-tail animal. And digital news delivery is a short-tail animal. The internet is the attack pack that kills the newspapers. And within short order, the world is a different place – in a new equilibrium. And everything about the surrounding environment is shifted. Regardless of how much you enjoyed newspapers, they simply cannot compete and new competitors are a better fit in the new marketplace.
Now consider Netflix. Netflix played a major influence in obsoleting traditional movie rental shops – like Blockbuster. Netflix was a winner. But markets – new attack packs – keep emerging. And the latest shift are products like the Kindle and Apple Tablet (as well as other tablet PCs.) These products make Hulu and YouTube a lot more viable. Suddenly, Netflix is the long-tail animal, and the short-tail animals are doing relatively better.
According to The Wall Street Journal, in "Apple Sees New Money in Old Media" Apple is close to a deal with several newspapers to deliver their content to readers via their internet device. They also are negotiating rights to deliver movies and television (small format) entertainment. Simultaneously, Amazon keeps marching forward as MediaPost.com reports in "Take That Apple: Kindle Introduces Apps." We see that there are a LOT of potential different versions of the short-tail animal. Tablets, phones, netbooks, etc. Which will be the biggest winners? Not clear. But what is clear is that the old long-tail competitors (newspapers, print magazines, network television, traditional PCs) are not going to flourish as they once did. The market has permanently shifted. Those competitors are in the back end of their lifecycle.
Simultaneously, this market shift causes ripple effects through the environment. The market shift affects ALL players – not just the one most visibly being attacked. So, as SiliconBeat.com reports in "Looks Like Netflix is Dead, Again" this change suddenly imperils Netflix which has mostly counted on postal delivery rather than digital. And it provides a boost to short-tail players like Hulu and YouTube which could see much larger revenue given their digital-based delivery models.
And this affects you. What do you print, or say, that could be better handled on a mobile device? Could you deliver user instructions via an iPhone or Kindle app? If so, why aren't you doing it? Are you still working on traditional web pages, with embedded text in graphics that can't be seen by a mobile phone, when most people are likely to find you first on their mobile device? Are you busy working on your web site, while ignoring having a Linked-in or Facebook account? Are you advertising on television, or in newspapers, and ignoring Facebook ads – or YouTube links? Do you have a YouTube channel with short clips to instruct users on your product, or how to install an upgrade, or even why to buy? Are you still competing with a long tail, while the pack is rapidly killing off the long-tail species?
Market shifts are happening fast today. If you don't react, you just may find yourself deep into the pack with declining results. Or you can shift with the market to keep your business competitive.
Over the last week everyone has heard stories about how Facebook, and Twitter, became primary communication conduits for people with connections in Haiti. Telephone and slower communication vehicles simply have not been able to connect family and friends in this crisis like Facebook. When shift happens, it accelerates as new uses come to the forefront quickly. For everyone trying to connect with employment candidates, suppliers and customers this shift has immediate and important impact on behavior.
For advertisers, the impact is significant. Where should ad dollars be placed? On a traditional home page and search site – like Yahoo! – or on Facebook?
And it's not just the sites themselves, but how long people are on these sites. From an advertising point of view, you can start to think about Facebook – and YouTube – almost like a "channel" from early television days. Where the audience comes back again and again – offering you not only a large audience, but more opportunities to reach them more often. Facebook and YouTube are beginning to dominate the "user views."
Of course, the impact isn't just regarding the web, but how any business would use media to reach a target audience. Most advertising agencies, and ad people, are still focused on traditional media. But, as we can see, that WILL shift — even more than it traditionally has.
Anybody investing in newspapers, expecting a resurgence in value, is pretty foolish. Newspapers are going to lose ad dollars – not gain. Relatively, newspapers already are getting too much of the ad spend. Talk radio has growth. And clearly the web. Since we can expect that newspaper and magazine readership will continue recent downward trends, and television is fragmenting as well as stalling, the big growth is on the internet.
The market shift is really pretty clear. We aren't speculating about the market direction with this data. The question becomes, will you be an early adopter of these new media channels or not? Given that the web and mobile have the lowest ad rates of all media, why wouldn't you? Over the last 2 months Pepsi has decided to NOT advertise on the Super Bowl, instead putting the money into social media. And after introducing the Granite Concept car at the Detroit auto show, even behind-the-times GM is now considering a launch of this vehicle, intended for buyers under 35, using only web advertising.
So what are your plans? Do you have scenarios where Facebook and YouTube are integral to your marketing? Do you have pages, groups and channels on these sites? Do you post content? Are you using them to interact with potential customers, vendors and employees? If not – what are you waiting on? Do you need a Disruption to create some White Space and get started? If so – isn't it time to get going?
How do you pick a movie to see – whether at the theatre or at home? The movie studios think you pick movies by what you see on TV ads, according to the Los Angeles Times "Studios struggle to rein in marketing costs."
I remember the old days when my friends and I grabbed a newspaper and shopped the ads looking for a flick to go see. And we were influenced by television ads as well. But, as time went by, we started asking each other, "Is that movie any good, or are all the best parts in the ad?" (Admit it, you've asked that question too.) Then we found out we could get sneak peaks from shows like "Siskel & Ebert at the movies," so one of us would try to watch that and see if we liked the longer scenes. And we didn't ever agree with the critics, but we could listen to hear if they described a movie we would like. Now, not only myself but my sons follow the same routine. Only we go to the internet looking for a YouTube! clip, and for reviews from all kinds of people – not just critics. Mostly when we see a TV ad we hit the mute button.
Everywhere, businesses are still wasting money on old business notions. For movie studios, they keep trying to get people to watch a big budget by advertising the thing. (To death. Until nobody watches the ad any more because they have it memorized. And get angry that the ad keeps showing.) But even the above article admits that studios know this isn't the best way any more. With the internet around, we all listen less to advertisements, and gain access to more real input. From web sites, or Twitter, or friends on Facebook, or colleagues on Linked-in. We watch a lot less TV, and what we watch is more targeted to our interest and available on cable. Or we download our TV from the web using Hulu.com. Yet, the studios are so Locked-in to their outdated Success Formula that they keep spending money on TV ads – even though they know the value isn't there any more.
So why do the studios spend so much on advertising? Because they always have. That's Lock-in. Lacking a better idea, a better plan, a better approach that would really reach out to potential viewers they keep doing what they know how to do, even as they question whether or not they should do it! The industrial era concept was "I spent a fortune making this movie, and distributing it into theatres, so I better not stop now. Keep spending money to advertise it, create awareness, and get people into the theatres." The studios see movie making as an industrial enterprise, where those who spend the most have the greatest chance of winning. Spend a lot to make, spend to distribute, spend to advertise. To industrial era thinkers, all this spending creates entry barriers that defends their business.
And that's why movie studios struggle. It's unclear how well those ideas ever worked for filmmaking – because we all saw our share of blockbuster bombs and remember the "American Graffiti" or "Blair Witch Project" that was cheap and good. But for sure we all know the world has now permanently shifted. Today, small budget movies like "Slum Dog Millionaire" can be made (offshore in that case – but not necessarily) quite well. The pool of new actors, writers, directors, cinematographers and editors keeps growing – driving production quality up and cost down. And distribution can be via DVD – or web download – between low cost and free. A movie doesn't even have to be shown in a theatre for it to be commercially successful any more. And any filmmaker can promote her product on the internet, building a word of mouth driving popularity and sales.
From filmmaking to recordings to short programs to books, the market has shifted. Things don't have to be big budget to be good. The old status quo police, like Mr. Goldwyn or Mr. Meyer, simply have far less role. Digitization and globalization means that you don't need film for movies – or paper for books. Thus, democratizing the production, as well as sales, of "media" products. Thus the old media companies are struggling (publishers, filmmakers, magazines, newspapers and recording studios) because they no longer have the "entry barriers" they can Defend to allow their old Success Formulas to produce above average returns. And they never will again. The world has changed, and the market has permanently shifted.
Is your business still spending money on things that don't matter? Does your approach to the market, your Success Formula dictate spending on advertising, salespeople, PR, external analysts, paid reviewers or others that really don't make nearly as much difference any more? When will you change your approach? The movie studios are preparing to spend hundreds of millions of dollars on summer ad promotions for new movies. Is this necessary, given that the downturn has increased the demand for escapist entertainment? Is your business doing the same?
If you want to cut your cost, you shouldn't cut 5% or 10% across the board. That won't help your Success Formula meet market needs better. Instead, you need to understand market shifts and cut 90% from things that no longer matter – or that have diminishing value. Quit doing the things you do because you always did them, and make sure you do the things you need to do. You want to be the next "Slumdog Millionaire" not the next "Ishtar." You want to be Apple, not Motorola. You want to be Google, not Tribune Corporation. Spend money on what pays off, not what you've always spent it on.
