How to accidentally on purpose kill a new product that could save your business

"He not busy being born is busying dying" --Bob Dylan

Are you fumbling the future while holding on to the past?

Steven Sasson invented the first self-contained digital camera at Eastman Kodak in 1975. In January 2012, Kodak filed for Chapter 11 bankruptcy protection

Former Blockbuster John Antioco thought Netflix was a "very small niche business” and passed on acquiring it. The company filed for bankruptcy protection in 2010.

The story of how Xerox invented the future but failed to realize it has become a popular urban legend in tech circles. Steve Jobs, after visiting Xerox PARC and seeing the Xerox Star with it's graphical interface and mouse in 1981, stated later “They [Xerox management] were copier-heads who had no clue about what a computer could do… Xerox could have owned the entire computer industry.” Xerox is about to disappear into Japan’s Fujifilm, its longtime joint venture partner in Fuji Xerox.

In June 2018, General Electric, an icon of American business, was kicked off the Dow Jones Industrial Average. Once the world’s most valuable company, GE was be replaced by Walgreens Boots Alliance Inc., the Deerfield, Illinois-based drugstore chain, created in 2014 merger. 

Why does this happen?

Because leaders don’t realize that winning in a market is not forever. And leaders and their employees invest their efforts in the ‘as is’ business and fear change and the ‘to be’ business. I mean it could ‘fail’ right? So they hang on to the existing, fighting for its life, even when it's dead or dying. All the resources of the business are invested in the current and not the future because the future is so ‘risky’. 

We don't change until we have to. Or when it's too late. And that kills businesses. 

Let's briefly revisit the opening of Ted Levitt’s 1960 ‘Marketing Myopia’:

“The railroads did not stop growing because the need for passenger and freight transportation declined. That grew. The railroads are in trouble today not because that need was filled by others (cars, trucks, airplanes, and even telephones) but because it was not filled by the railroads themselves. They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business. The reason they defined their industry incorrectly was that they were railroad oriented instead of transportation oriented; they were product-oriented instead of customer-oriented"

And as the core business is slowly dying and we refuse to admit true fate, we look around for lifeboats that can save us: A merger? An acquisition?  That new technology we ignored for years that may be promising? "I know, how about that new offering we ignored or underinvested in---- that could be our new hope!"  

We also can become convinced that the skills that brought us success in our current business around are transferable to other markets and they can easily apply these to new offerings and we can repeat the success. Two words: ‘If only’. As difficult as it was winning the current market, and the length and time and challenges in making it successful will be the same in new markets. So you can't start that when you are failing.

These efforts are of desperation. And often too late to change the state of the business. 

We need to always remember that the more successful a company or organization is, the more unassailable its competitive position appears, the greater the forces that gather to beat it. These are not just direct competitors, but substitute and indirect competitors.  Competition comes in many forms, based on new technologies, business models, segmentation, etc. 

News flash: Your competitive advantage is not a permanent gift. It's temporary. That period of time could be one year or a hundred. But the time is fixed. That's the hard truth. 

Products and businesses, all of them, have a lifecycle. Cash cows die. Stars flame out.  Despite what one of my former CEO’s said that ‘lifecycles don't apply to products in our business’ they do. All of them. Remember the pace of product life cycles—and eventual death-- and their associated companies, is accelerating. The average lifespan of a company listed in the S&P 500 index of leading US companies has decreased by over 50 years in the last century, from 67 years in the 1920s to just 15 years today, according to Professor Richard Foster from Yale University.

To quote Bruce Springsteen ‘Everything dies, that's a fact’ And when they do come back to solve a problem that still exists it's usually in a different form, provided by a different vendor or market player. 

One classic is not understanding your products/offerings lifecycle is consistently investing in your business solely, or worse, when in the ‘hunker down’ mode, attempting to cut your way to prosperity by cutting investments across the board in all your businesses/offerings, thereby suffocating your cash cow and any new opportunities. Again, trying to hold on to glory days. Disregarding the reality of changing markets. And a sad attempt of trying to maintain wealth instead of finding sources of new wealth.

And there are other factors:

Successful, mature businesses cannot be simply managed ‘as is’ and expected to continue to grow and succeed.  Let that sink in. Your brand will not win forever. They die. 

And it's not just competition, product lifecycle, and poor portfolio investment decisions. Believing that all the issues that affect success in a market are externally driven is also pure drivel. Thinking that structural market changes are temporary disruptions and that the, when things turn around the market, will come back to you, falls in the category of ‘hope is a strategy’. For example, ‘When the market turns down we always increase our sales’ is one of those classic ‘the market will come back to us’ paradoxical refrain is straight bullshit. 

And to that point, markets change. Sometimes permanently. It's called the ‘new normal’. Ask yourself if you are struggling in your market due to temporary changes or structural ones. The worst decision you can make is thinking they are temporary when they are structural. That where the companies we use as examples of failure, some mentioned in the opening of this article, made their worst decisions. If only we can hang on, cut expenses, hunker down for a year or two, it will come back!  And if it doesn't?

And so while we all know the risk involved in new offerings and their failure rate, we often feel the existing offerings are somehow more secure, only to watch them die slowly or in step functions, as we attempt to hold on to their past glory. We are so afraid of the risk involved with new inventions, innovations and business models, that we would rather hold on to a business that has ‘had its day’ or is even dying. We accelerate killing both the new and the existing business simultaneously. Brilliant!

Let's think about a couple of examples. Can you imagine the guts it took to essentially ‘kill’ the Apple iPod, and its most prominent feature, the ‘wheel’, for song selection? That product literally saved Apple, and go to a touchscreen and the phone marketplace in 2009? That took guts. In most other companies the existing leaders would have stayed with the MP3 player, saying it ‘was the brand’ and made all the money. After years of struggling, they had found a new market winner! Why would we change? Well, they did because they saw that the MP3 market was a feature and not a product, and as a result, Apple wouldn't be a trillion-dollar valuation company today. That's a culture of innovation. 

Similarly, Apple didn't kill the original Apple iPod MP3 player before it even got started by saying ‘hey that's niche business. Were a computer company!’. They didn't cut the investment in the MP3 player because the desktop business was in decline. 

Let me finish this on a personal note highly relevant to the subject of holding on to glory days too long and not understanding the changes in a market. I understand very personally because I lived it. I grew up in a city, Pittsburgh, that held onto the belief that the steel industry would come back someday. In January 1983, the regional economy officially -- that is, numerically -- bottomed out. Unemployment in Allegheny County, where Pittsburgh is located, hit 13.9 percent, a rosy figure compared to the rest of the Pittsburgh metropolitan statistical area, where the adjusted unemployment rate hit an astonishing 17.1 percent (unadjusted, the number was actually higher, 18.2 percent).

It had never been that high before, at least not since the government counted, and it hasn't been that high since. Regionally, the number of unemployed hit 212,000. 

The steel industry never came back and it never will. At least for Pittsburgh. Once the center of the American steel industry, and still known as "The Steel City", today the city of Pittsburgh has no steel mills within its limits. We could hope and wait, or think some politician will come and fix it so they come back, but that ain’t happening, Time to move on. 

Ted Levitt used a similar example of the ‘buggy whip’ market in his Marketing Myopia paper: Westfield, Mass., still known as “Whip City,” once had over 40 businesses that made whips, tools, and carriage parts. Today, only Westfield Whip Manufacturing, founded in 1884, remains. The buggy whip business is dead. No amount of cost-cutting or branding could have changed that. 

The lesson is simple but so difficult to do: 

Businesses should concentrate on their customers’ needs, not on specific products.

Hold on while I turn on my VCR and put in a tape. 

Oh wait.