Careful! There’s pee in your company's pool. And it just might destroy your business!

A few years ago, I took a well-deserved staycation at a hotel along one of Barbados’ many beaches. On the last day of my staycation, I decided to jump into the hotel pool to cool down from the baking Barbadian sun. A few minutes into my dip, I was joined in the pool by a mother and her child. They were adorable as they frolicked, laughed and bonded while swimming!

After a few minutes, the child started getting restless and started yelling that she wanted to use the bathroom. I fully expected the mother to get her child out of the pool and take her to the bathroom, but instead, she ignored her child’s pleas. This went on for a few minutes with the child insisting that she needed to use the bathroom and the mother completely ignoring her child’s wailing. All of a sudden, the cute, adorable kid stopped yelling and went back to frolicking in the pool. It was quite obvious (to me at least) what had happened, and I swam to the far end of the pool and climbed out. I spent the rest of the day on the beach instead of the pool.

Sometimes, as business leaders, we need to read the signs, know when there is pee in the pool (metaphorically of course), make a swift exit and move our business to a more favorable location. Metaphorical pee in your industry’s pool isn’t just a gross inconvenience – it can be a business killer. Don’t believe me? Here are a few examples.

For those of us who were around in the 1990s (yes, I’m looking at you, “Zillennials”!), you probably remember that Blockbuster, the video rental company, was the 1,000 pound gorilla in the home entertainment industry. At its peak, Blockbuster operated nearly 9,000 stores and, at one point in time, was worth over $5 billion. In 2000, the company made $800 million in late fees alone. Blockbuster’s late fees thrilled its executives and shareholders, but were reviled by the company’s customers. Unfortunately, Blockbuster didn’t recognize that the very thing it was celebrating (its $800 million in late fees) was metaphorical pee in the company’s pool and a signal that it needed to change its business model!

When Netflix appeared on the scene offering its DVDs by mail service, Blockbuster customers moved en masse away from the video rental service and towards Netflix. As digital technology improved, Netflix ditched the DVD model in favor of streaming via the Internet and the rest, as they say, is history. Netflix is now worth billions while, Blockbuster, as you probably know, filed for bankruptcy in 2010 and has now shuttered all but one of its stores. Blockbuster had every opportunity to proactively get out of the video rental pool and embrace new technology to change its business model. In fact, as business lore has it, in the early 2000s, Netflix co-founder, Reed Hastings offered to sell his upstart company to Blockbuster for US$50 million, but Blockbuster turned down the offer. Blockbuster was so addicted to its late fees that it chose to merrily stay in the urine-infested pool until it was too late. ?

Here’s another example. British entrepreneur James Dyson is one of this generation's most prolific inventors. His company, Dyson Limited, revolutionized the vacuum cleaner industry and now also manufactures a range of other products including hair care, lighting and air treatment products. He is responsible for pioneering the cyclone technology and digital motors that power many of his company's products. Dyson's first major success as an entrepreneur came when he set out to create a better, more reliable vacuum cleaner after he became dissatisfied with existing vacuum cleaners that were unreliable and that lost suction over time.

Dyson's entrepreneurial journey wasn't easy. In fact, the inventor created 5,126 failed prototypes before he finally perfected the design of his bagless, cyclone technology vacuum cleaner. But, his entrepreneurial challenges didn’t end there. Dyson knew that there was a "vacuum" (see what we did there?) in the market for his innovative cyclone technology and pitched his new technology to existing vacuum cleaner companies. Instead of embracing this Dyson’s new innovation, they all turned him down. These companies refused to embrace Dyson’s bagless cyclone technology because they knew it would hurt the sales of their highly profitable replacement bags for their existing vacuum cleaners. Instead of recognizing that there was pee in their pool and that the era of replacement vacuum cleaner bags would soon come to an end, they decided to stay put. James Dyson eventually decided to start his own vacuum cleaner business and took major market share away from the leading vacuum cleaners at the time. Dyson is now one of the UK's most valuable brands.

Here's a third example. It may come as a surprise to some readers (again, I’m looking at you, “Zillennials”!) that once upon a time, cell phones didn’t come automatically bundled with powerful digital cameras, and that photography buffs used film-based cameras to take pictures and capture memories. Compared to the ease at which we now take pictures on our phones, post them to our social media accounts and store them in the cloud for safety, taking pictures back in the day was an arduous process. Photographers had to go to the store (there was no Amazon back then), purchase rolls of film (that, if I remember correctly, allowed for 12, 24 and 36 shots a roll), load it into bulky cameras, take pictures, drop off the used rolls of film at photo-developing stores, then come back to pick up their prints after a couple of days.

Back in those days, Kodak was the undisputed leader in the film photography industry. By some estimates, in 1976, 90% of all film and 85% of all film cameras sold in the US were produced by Kodak. But, things were a-changing! Propelled by improvements in technology, digital cameras started to flood the market and Kodak lost its stronghold in the camera market. The advent of digital technology ushered in a new era in photography – an era that allowed photographers to bypass the traditional film-based approach to taking pictures and go completely digital. But, here’s where things really get interesting. The first digital camera was developed by a young engineer by the name of Steven Sasson. Sasson’s digital camera was rudimentary at best, but he knew that he was onto something and predicted that digital cameras would disrupt the conventional film photography market. Sasson presented his innovative product to his bosses who, instead of seeing the opportunity, decided to lock it away so that it would never see the light of day. As you might have guessed by now, Sasson worked for Kodak. Sasson's bosses ignored the opportunity to take first-movers advantage in the exciting new digital photography market. Why? Because in much the same way that Blockbuster refused to change its business model because it would cannibalize its highly profitable late fee revenue, Kodak executives knew that digital cameras would make its highly profitable film division obsolete. Basically, Kodak peed in its own pool, then refused to get out of the pool.

Companies that recognize when there’s pee in their pools and get out at the right time have a much better chance of survival because they know when it’s time to update their services, reinvent their brands or exit?a dying industry before it's too late. Here are a few quickfire examples of companies that got out of the pool at the right time and moved into other markets.

Western Union was founded in 1851 as a telegraph business but, in 1871, once it recognized that the telegraph would eventually become a dying technology, the company wisely diversified its business to include its money transfer service. In the 1900s, Western Union continued to innovate with new technologies, from ticker tape to commercial satellites, and is now a leading financial services company worth billions. If Western Union had decided to cling onto outdated technologies (like Kodak and Blockbuster did) it would undoubtedly be out of business.

Nintendo started off in 1889 in Japan producing hanafudo, a Japanese-styled type of playing cards. But as the market for playing cards declined, the company moved into toy production and then, eventually into video game consoles. American Express was established as a freight forwarding company in 1850. In the 1950s, the company introduced a charge card, offering customers a new and convenient way to pay. Fast forward a few decades and American Express is now one of the largest global payments networks on the planet. If American Express hadn’t diversified its business, it’s highly unlikely that it would be the financial powerhouse that it now is. Before Slack became the billion-dollar business communications platform it is now known for, its precursor was a multiplayer online game called Glitch in which players scavenged for items and talked to each other. When it was clear that the game wouldn’t be a financial success, the company ditched the game and focused instead on a single element of the game – the platform that Glitch players used to communicate with each other. Slack is now reportedly used by 65 of the Fortune 100 companies.

Play-Doh was first sold in the 1930s as a wallpaper cleaner by a Cincinnati-based soap company called Kutol. When demand for the product dropped in the 1950s, the company considered discontinuing the product. Fortunately, in 1954, a nursery schoolteacher by the name of Kay Zufall started using the wallpaper cleaner for her kids to make Christmas decorations.?Kutol, recognizing the potential as a fun toy for kids, repurposed the product by removing the detergent from the dough and adding an almond scent and some coloring. Today, more that 100 million cans of Play Doh are sold annually.

Blackberry was once the leading smartphone company in the world until competition iPhone and Android stole away virtually all of Blackberry’s competition. After a few years in the wilderness, Blackberry exited the smartphone market and focused on the main reason that the company originally became known for – its highly impressive security features. Blackberry has now pretty much turned its back on the consumer smartphone market and has transformed itself into a highly successful cybersecurity company. If Blackberry had insisted on competing with iPhone and Android devices, Blackberry would surely have become defunct by now.

Western Union, Nintendo, American Express, Slack, Play-Doh and Blackberry (as well as several other highly innovative and successful companies across the world) each recognized that there was pee in their pool and got out at the right time. Here’s what all this means for you. Because of factors such as the mind-bending advances in technology that are occurring almost every day, and the ever-changing preferences and demands of consumers, I can guarantee with almost 100% certainty that is definitely pee in your pool. Right now, right this moment – even if you don’t realize it yet. The exact amount of pee may depend on the industry that you’re in, the rate of change in your industry and your brand positioning in your industry. But there is most definitely pee in your pool. And, in order for your business to survive, you need to get out of the pool and find greener pastures to move your business towards. (I know, I know, I’m mixing metaphors here, but I think you get the point). You may not need to completely overhaul your products and services, but at the very least, you need to continually update your business model. If you don’t, chances are that you’ll end up with the same fate as Blockbuster and Kodak.

Successful business leaders keep their eyes and ears sharp to recognize changes in the market to determine when it’s time to make a change to their business models. Unsuccessful business leaders either don’t recognize when it’s time to make a change or refuse to listen to what the market is telling them. Wait, do you hear that silence? That’s the sound of the kid in your pool who’s just stopped yelling that she needs to use the bathroom. Maybe it’s time to swim to the other side of the pool, climb out, and move to a more welcoming section of your industry. Your move. What will you do?