Who Ate My Lunch? Protecting The Cash Cow

We all have this uncanny attitude to stick to what is working and reject whatever will disrupt what is working. There is a saying that backs that up even, “if it ain’t broke don’t fix it.” This statement has ended the life of many businesses.

Xerox, Kodak, and Borders are some of those companies. Other companies ate their lunch because they were so focused on milking their cash cow that they were unable to see what was coming. Some of them even invented what would eventually kill their business but refused to deploy it because it will affect their cash cow.

Cash cow makes business leaders lazy to innovate for the future. They get to believe that the cash cow will continually produce for them for as long as possible.

In 2011, I traveled to Kentucky and noticed that Borders was selling its books at a great discount because it is closing. I question why would such a big business be closing. That got me to understand a lot about the company. Borders held on to the traditional way of selling books without embracing the internet like Amazon and Barnes & Noble.

While B&N invested in beefing up its online store and sales and developed the Nook, its e-reader, Borders expanded its physical stores, refurbished some old stores, and outsourced its online sales operation to Amazon. A great mistake you will say in hindsight. However, it was a great strategy for them then. As such, most people to go Borders to find a book, then order online.

Since more people were beginning to embrace buying books online, its profit was being shared with Amazon and it couldn’t sustain its stores and pay its staff. It died not because of Amazon or B&N, but simply because it held on to its cash cow.

Kodak also had this irresistible urge to reject new ideas that disrupt its main revenue stream. As a result, many businesses ate their lunch. It invested the digital camera. But on careful analysis, they discovered that rolling out the digital camera will impact their cash cow negatively. Selling printing films, chemicals, negatives, and papers were their cash cow. They were more into the hardcopy photo business. And it brought in huge revenue.

No executive in his right mind can approach the shareholders or Board of Directors and hope to get an approval of a product that will disrupt their cash cow. No one will approve that. So they did what they believe was right: store the product. The same product they rejected ended up killing them.

Most people don’t know that most of the products Apple used on its desktop were first created by Xerox. The mouse, GUI, and so on. But they abandoned all of this for the copying business. They would have been the first Apple. They would have employed Steve Jobs. They would have bought Apple. But they refused to do all that. What would have challenged their main business became what killed them.

Companies that protect their cash cow end up not producing new products. They stop innovating for the future. They assume that their future will just be like the present. It is much more deceptive when you are the dominant player in the market. You won’t want to start something that will stop your dominance.

This reminds me of a story shared by John C Maxwell in his book, 21 Irrefutable Laws of Leadership. It was during the time when Henry Ford was developing his car. Before then, the horse drawing a carriage was used as a form of transportation. People had a need: they wanted speed. Some people had been in the business of making canes for the horses. They have been making research to develop canes that when used on a horse will motivate the horse to run faster. What they don’t get is that there is a limit to the speed of a cane.

The cane was their cash cow. There may be a possibility that they could have invested in what Henry Ford was developing. However, they may have rejected it because it will likely disrupt their business. At the end, their business died when Henry Ford succeeded.

One company that succeeded by killing its cash cow was Apple. The iPod was Apple’s cash cow when Steve Jobs took over. It was bringing them tonnes of money. They would have continued producing it. However, many started copying them including Sony. Rather than continually compete head-to-head with Sony in the music player market, they killed the iPod and embed it into the iPhone. By so doing completely shifting the market away from Sony and others.

Once someone buys the iPhone, they buy the iPod too. They have developed a capability and new market that no one can reach. Then they created iTunes and transform Sony into a partner and customer. They had a strategy of continually killing their cash cows.

To create the future, your cash cow should not become a sacred cow. It should be open to disruption. When you disrupt your product, you transform the market. But when your cash cow becomes a sacred cow, someone will definitely eat your lunch. It's just a matter of time. You should know that sacred cows make the best burgers.

Do you have a sacred cow? Why not make the best burger from it?

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