Editor’s note: This article was first published in January 2016. Its figures and situations are as of then: Netflix shares up almost 3,000% over the previous 10 years, WhatsApp as the most popular messaging app of the moment, and legal film downloads costing over 10 euros.
The only constant in business is change and, curiously, change is entrepreneurs’ worst enemy, because we’re sometimes reluctant to accept it. Some companies fight to keep their business model unchanged, others adapt to change, and others simply are the change.
So in this era of change, how do business leaders stay in the industry and win the battle?
Tony Robbins once used a chess analogy: business is three-dimensional chess. Every move we make creates what comes next, and to succeed we have to be in control. Anticipation is power. The leaders of every industry must find a way to become the chess player, not a piece on the board.
Succeeding in business isn’t only about creating value; it’s also about following trends and anticipating the challenges that will reach our market.
These are two of the biggest crisis triggers that can wipe out a business or an entire industry, and we can’t always see them coming.
1. A big move by your competition
In any business, an aggressive move by a competitor can put you out of business if you don’t adapt quickly.
Fortunately for us, and unfortunately for many companies, we’ve witnessed moves like this in recent years. There are many examples, but we’ll mention Blockbuster, a company that became a giant of film rental and sales and, in the blink of an eye, watched its empire collapse.
It never took Netflix’s business model seriously until Netflix, together with the shift towards the internet, took the business away from it.
Netflix has been one of the most profitable stocks of the last 10 years, with its share price rising by almost 3,000%.
Business lesson: Blockbuster had the chance to evolve the same way Netflix did. In fact, Netflix executives have said that if Blockbuster had rolled out a streaming subscription, taking advantage of its customer base, Netflix would have struggled to become the leader in this market. But Blockbuster’s executives decided they didn’t need what their competitor was selling.
Sometimes it’s the whole industry and culture that changes. For example, Harley-Davidson used Hollywood to build a brand with loyal followers. The problem it faces is that most of its sales come from people aged between 35 and 55, with 60% of the total coming from those aged between 40 and 45.
Will today’s new 40-year-old men and women really rush out to buy a Harley? Very probably not, so the company is forced to innovate.
Lesson: we need to know the tastes and trends of the next generation.
See also: 10 psychological techniques to sell more by using your customers’ thinking errors
2. A change in technology and culture
Telecom companies have lost billions on the text messages we no longer send, even though practically everyone now gets free SMS. Over time, the trend is for these companies to lose even the phone-call business.
Mark Zuckerberg (Facebook) realised this and didn’t let WhatsApp, the most popular messaging app of the moment, get away.
Little by little, telecom companies will lose practically all their old businesses, and they’ll be left only with the new ones, provided they don’t take too long to get into them.
Business lesson: Ask yourself which technology could change or improve your business, or with which technology you could be a creator and driver of change. Also ask yourself which technology could kill your current business, because if you can picture one, it may very well end up happening.
We’ve also seen many companies try to fight the inevitable, as with piracy.
On the one hand, people, citing freedom of expression, “have managed to get something that someone else sells without having to pay for it (free downloads)”. And although that would fit the definition of stealing, the truth is that the industry didn’t know how to fight the problem.
There’s no point calling your potential customers thieves if you don’t give them a motive and a reason to stop “stealing”.
iTunes (Apple) gave users a reason to pay a fair price for what they wanted, and gave the industry the chance to keep making a profit. Steve Jobs’s official biography describes how hard it was for Jobs to convince the industry that it would be better to let users pay for a single song rather than forcing them to buy the whole album at an outrageous price.
And there’s still a way to go: we still see that legally downloading some films costs more than €10, and that a book costing €14 in print is priced at €8 in digital format.
Business lesson: Ask yourself which cultural changes are under way, which of them you can take advantage of to make money, and which could affect your business.
Finally, being the creator of change is undoubtedly the most effective and profitable option. But since that isn’t always possible, as business owners and leaders we must at least have the skill, capacity and agility to adapt quickly to the new business environment. Only then can we stay in business.
Featured image: Dwight Burdette, CC BY 3.0, via Wikimedia Commons.
