Betamax vs VHS – which advice model are you?

I’ve clearly had too much time on my hands. (Long COVID – what a b*tch, and definitely the subject of a near future post!)

My social algorithms are a thing of confusing beauty. Equal parts music production techniques, Minecraft How-To’s and of course the lead-up and follow-on from Consumer Duty and associated chatter relating to our wonderful profession.

One curious thing popped up recently on YouTube, it was a piece on the story of the early 80s race for supremacy in a business model which those of us the wrong side of 50 will remember first hand – VHS versus Betamax. It struck me that a lot of the dynamics relating to that particular struggle have parallels with a big challenge faced by a lot of the firms I’ve been working with: What is the “best” advice model, and how best to tool-up for success?

Once upon a time there were two large companies competing for world supremacy. They both saw the dawn of a huge potential demand for recording what was on the telly, so they developed two competing and highly incompatible standards, Betamax (Sony) and VHS (JVC).

They each approached the problem from different angles. You already know the ending – Sony lost. But why, and how is this relevant to our advice profession today? Well, it was a number of factors but here’s a few key relevant ones.

1.??????? Understanding the target market.

While technically superior in terms of video and audio quality, Sony’s solution could only record an hour of video. But people wanted more than an hour of recording time. They wanted to record all of Alien when it aired after 9pm on Channel 4 (no Red Triangle in those days!), not have to change the tape at the bit where John Hurt has his rapid and very unnecessary surgery. VHS on the other hand could record up to 2 hours, and from a consumer perspective, this desire for higher recording length trumped the desire for better picture quality at the time.

2.??????? Marketing and licensing.

While Sony’s core strategy with Betamax was to own the standard, JVC aggressively embarked on a licencing / open approach which allowed many other manufacturers to utilise VHS within their own machines. While this generated lower margins than simply selling an all-in-one solution, it also created huge manufacturer demand and ultimately significantly greater sales revenue for the company. The marketing for VHS machines focused on their core strengths, and consumer perceptions / buying decisions gravitated towards them very quickly.

3.??????? Consumer value, adoption and innovation.

As the number of manufacturers adopting VHS exploded, competition became fierce. Prices for VHS machines dropped rapidly, and manufacturers needed to innovate in order to differentiate their solutions. Critically though, it opened video recorders up to a section of the market who could never have afforded a machine perhaps two or three years earlier. As the size of market increased, VHS was able to bridge all the initial technological gaps while keeping costs significantly lower than Sony.

4.??????? Unforeseen / emerging market segments.

The rapid expansion of the rental market for pre-recorded home video was an event that neither manufacturer could have predicted. And clearly this hugely favoured VHS, so not only were manufacturers drawn to the standard, but also movie studios and the stores that stocked their content. Consumers found a far greater range of titles available on VHS, further accelerating the demise of Betamax.

Sony had invested heavily in the development and promotion of Betamax. They lost a load of cash and the failure reflected very poorly on the brand. However clearly that’s not the end of the story. As a result of this failure, Sony shifted its business strategy to diversify its products into areas such as gaming, high end audio equipment, digital imaging and other emerging technologies. They began to place more emphasis on collaboration and standardisation within the industry and in less than five years had developed and licensed the Compact Disc standard in partnership with Philips.

So what?

Hopefully you can see the parallels. Many of the firms I meet see their core value and differentiation being a do-it-all approach. They celebrate the technical complexity of what they do . They keep it all in-house. They provide vast documents that nobody will read. They meet every client whether that client wants / needs to be met or not. They assume that their clients value all this, because they’ve never done it any other way. They believe that things aren't really going to change. And they charge handsomely for it too. This is the Betamax advice firm folks!

An increasing number of firms are licensing or outsourcing from specialists. They know their target market incredibly well. They use technology to the best of their ability and they really, truly understand the value of what they do. They're curious and they encourage debate and a change mindset within their staff. They’re actively looking for new ways to engage with clients and lowering the barriers to entry. They know what they’re good at. They take time to innovate and collaborate with other firms, learning and adapting as they go. They also charge their customers less for this privilege. They’re the VHS firms and the future is bright for them.

So are you VHS or Betamax?