The Competitive Runway

I read the following headline recently in the Wall Street Journal:  “Consumers crave [PRODUCT], but [PRODUCERS] enjoying their best profits ever are reluctant to switch.”  (The words I’ve bolded here were specified in the article, but I’ll get to that in a minute.)

Headlines reminiscent of this have been written many times in business history.  They are often prelude to disaster in the form of self-imposed obsolescence.

runway

Regarding Kodak, for example, one might in the late 20th century have written [digital technologies] and [film manufacturers] in the respective slots.  The profitability on film was so great that Kodak persisted in making and selling it, and famously did not invest soon enough in a switch over to digital. This was a titanic strategic blunder from which the company never recovered, eventually filing for Chapter 11 bankruptcy in 2012.

Willful ignorance

It happens constantly, in all industries, that consumer preferences migrate — sometimes so slowly that it’s hard to notice — until the change has become the new normal.  It’s more noticeable in B2C industries than B2B, but it happens in the latter too.

What makes these changes especially difficult to respond to is our near-universal tendency to gloss over and ignore that which could be unpleasant — or even fatal.  Our “all good news, all the time” corporate cultures make it tempting to look the other way and hope such problems will resolve themselves before metastasizing.

On the other hand, companies that have an innovation philosophy that demands that they “Obsolete ourselves before someone else does” have the upper hand.  Intel and Jobs-era Apple were famous for thriving under such regimes of continual, relentless self-betterment.

Read the rest of this entry »