Thursday, March 8, 2018

The circle of life - From MTV to YouTube and Sears and Roebuck to Amazon.

MTV was made possible by the advent of cable television, just as YouTube was born out of the Internet. The idea was to show music videos from popular artists. They were like a radio station for videos. But ratings didn’t hold up. They decided to add shows not related to music at all, and some that one could maybe stretch a connection to the music world to, but fewer and fewer actual music videos. It looked like that particular form of entertainment was dead.

Not so fast. Here comes Vevo and YouTube. Now, not only can you watch music videos on your phone, computer, TV, laptop, whatever, but you get to pick the artists, songs, genres, and compile them in playlists with no annoying DJ breaking in to tell you about the time he/she met Beck. Yes you have the occasional commercial, but you have the option of skipping it most of the time, or you can pay a premium and have no commercials at all. Not only did music videos not die, they’re thriving.

Sears and Roebuck was once a place you could go and look at a lot of great products. Some were for sale, but most were on display so that you could evaluate and hopefully order them. They also did catalog sales. They had great products. So much so that people were willing to order them and wait for days or weeks for the product to arrive. They gradually got away from the catalog/showroom model and expanded store floor space to accommodate inventory. They got into the same game as Walmart and Target and took a beating. It remains to be seen if Sears will survive. Their rival in the catalog/showroom retail biz also crashed and burned; Montgomery Wards. The business model just seems obsolete.

But wait, along comes Amazon. Amazon is the ultimate catalog store. Delivery is faster, but the model is much the same, and as Walmart, Amazon, Target and others battle it out, it’s becoming clear that the future of retail is a hybrid that includes a physical showroom/pick up location as well as online catalog of quality products. The catalog/showroom model is not obsolete, in fact, it’s probably the future.

There are other examples. The way Kodak went down in flames you’d think nobody takes pictures any more. Nothing could be further from he truth. So where did these companies take a wrong turn? I believe a key factor is consumer choice.

Behavior studies have shown that people don’t like to be restricted (most people I should say). When presented with limitation, they tend to push back against it. In the case of MTV, yes they offered music videos of all genres, but you didn’t get to pick the time, the genre or the video. You had to watch what they were playing. When a model came along that allowed the user to choose, people flocked to it. In the case of Sears, bringing inventory into physical stores necessitates limiting choice. It’s also expensive when you’re selling large, heavy items like appliances and tools. Online retailers can offer a huge selection of products from countless different companies. They can ship to your house or to a store for pick up. Consumers can’t get enough of it. Kodak was very late to the game in digital imaging. People love taking and sharing pictures, but evidently, that’s not how Kodak defined their business. They thought they were in the film and camera business. Oops.

The take away is that people’s interests haven’t changed so much as the products and services available to address them has. As a business owner or manager, stay alert to new choices in the market. Pay attention to your competitors. Don’t get defensive, get inquisitive. Is there a different, better way to provide what you provide? Are you sure you’re clear about what it is you provide? Why do customers come to you? How can you do it better? If you don’t find the answers to these questions, somebody else will. Viva la market.