What's down the road for your business?

Whether you were a whaler in 1903, in the midst of the oil rush, Kodak Eastman in the 1990’s, choosing not to adopt digital photography technology, or you’re watching as your traditional customer base is simply fading away, all have the same outcome.

In fairness to the whalers, (then the primary source of oil), a strategic outlook was not a hot topic within business schools of the time. That really didn’t happen until the early 1960’s when American academic Alfred Chandler Jr published his work titled Strategy and Structure (1962). Boiled down to its central idea, Chandler “applied to the social world the relational mode of thinking”. To paraphrase, he considered business in relation to the social world it operated within.

Taking that further, in the late 70’s Michael Porter introduced his 5 Forces model, looking at industries and their competitiveness/attractiveness relative to their customers, competitors, and potential competitors or replacements within the broader economy or social sphere. He also asks the not so simple question, “what business are you in”. Not what you do, what technology you employ, how you earn your revenue, but what need are you meeting. I take the perspective of a marketer first, and manager second, and McDonalds makes an interesting business to consider in this context. At its core, McDonalds is a real estate business, making its money from the rentals on the properties their stores operate from. Its focus is on finding good locations, as closely packed as possible for each to be viable and pay rent. That rent is indexed annually, so their returns continue to grow with the value of the property, and their revenue base continues to grow. Their food is sold for the store owners to sell, in order to make a reasonable return on their investment and pay their rent. But what business are they in? What need are they meeting? McDonalds are selling fast, safe, cheap, convenient food and beverages. Of course, they started with their 7 burgers, fries and soft drinks, and their offer has continued to evolve, and remained relevant, different markets having local versions of the McDonald core favourites, but it has never departed from meeting the need Ray Kroc identified. The Golden Arches are recognised all over the world, and everyone knows what they will get when they walk or drive in.

Needs remain consistent and are often universal. Technology continually evolves. It’s seldom if ever an enduring competitive advantage, unless you can protect it somehow, but even patents have a life span. And so, exploiting a technology as a business model also has a life span. Even digital technology as a product continues to evolve, and by its nature, it’s speed of development shortens the life span of the technology it replaces. However, the need it is seeking to meet does not change, and so businesses in the digital space spend their lives looking for better, faster, simpler ways of meeting needs.

In much slower moving industries where technology is not as obvious a driver, the inevitability of a limited life span is no less terminal. Unless that industry finds new ways of meeting the need it is satisfying, it will cease just as certainly as whaling.

When Korean book makers invented moveable type in the 14th century, and Johannes Gutenberg perfected the letterpress printing press in 1436, a revolution occurred. Information ceased being the domain of the church and the aristocracy, books became cheaper and easier to reproduce, and for the first time, knowledge became accessible to the masses. Letterpress printing machines evolved but were eventually replaced with other kinds of printing technology, such as gravure, lithographic and digital. Digital printing evolved to a point where “a printer” as a trade, was no longer required to print advertising, documents, books or other materials. Everyone has a printer at home and print at home (or office) brochure is common. One of the most revolutionary technologies to impact human history is now the domain of specialty and super high-volume manufacturers. Those that thought they were in the “printing industry”, have all but disappeared, because they failed to appreciate what need they were meeting, and how else, and how better they might service that need. Had they been in the brochure business, or the advertising business, their businesses might have evolved to meet the need with a changing technology.

And so, to my headline. What’s down the road for your business? What need are your satisfying? And more than that, if you’re not unique, why would someone choose you to satisfy that need, and not someone else. How are you differentiating yourself? I hope that differentiation is technology based, because anyone can buy technology, and you you’re the same as the next guy.

A lack of strategic perspective is terminal to any business. As a friend said to me recently “you can’t save your way to prosperity”. That’s not to say you should be wasteful, but a shrinking top line sales number, and a lack of new customers entering the market is a sure sign your business is dying. You’d best ask yourself why. If you’re not thinking about what need you are meeting, and why a customer would choose you over someone else, your business is going to die. It’s just a question of when, and how much pain you’ll go through in the process.