A long time ago I heard the term “fast follower” used by many companies to describe their approach to technology and disruption. I was always offended by this. I would often think of the old saying “if all your friends jumped off a bridge, would you?” Many companies seem to enjoy jumping off of bridges. Business as of late have spent more time, running scared, or chasing something. They are investing in technology regardless of business strategy, just because “others” are doing it. I watch “talking heads” advising businesses up and down on how they are doomed if they don’t do whatever. I would suggest that they may be doomed either way, especially if they do not understand who they are.
I have always been fascinated by the retail industry and how they are often missing what is right in front of them. You have seen the headlines, Macy’s, J.C. Penney, Sears, Kmart (okay Sears and Kmart are poor examples of anything; someone should just put them out of their misery) and so many others closing stores left and right. They blame the lack of traffic in their stores. In an effort to save themselves, they have the same answers as in prior years; Customers want more sales and coupons! Sorry coupons will not get me back in!
Life events are causing me to take a fresh look at the intersection of technology and business disruption. In recent months I have been helping my in-laws with a non-profit religious radio foundation they started 18 years ago. Radio is one of the most disrupted businesses out there. We have seen consolidation throughout the industry, yet listenership and valuations continue to see dramatic declines. So many radio stations are consolidating and automating everything. In these efforts to improve “margins” they are missing the key aspects that makes radio special. The two Philadelphia area radio stations their foundation own have a long history dating back 60-70 years. As I look through the old images, I see the same thing over and over again. Pictures galore of local events in the community. We have doubled down on investments in local programming. It is content that others could never offer. We have invested in the technology to broadcast from anywhere. We are reaching people in new ways, enhanced by technology. Here are a few key points we learned:
- Technology Disruption Highlights Faults – As radio has become less focused on the local community, it is no longer differentiated from other content sources. This lack of differentiation is destroying the industry because listeners can obtain content with less advertising elsewhere
- Know Who You Are – If you spent time chasing others, you are not focused on what you are best at. Regardless of what others are doing, you must know and understand your business
- History Has Lessons – Before jumping on technology, start by taking a deep look backwards. Disruptions have happened before and they will continue to happen but history can provide key insights. Radio was disrupted in the past with TV, then with cable TV and today with the internet. Does this mean it will go away? No but the key is understanding how to compete.
Radio is not the only business seeing dramatic disruption. In fact the news industry has been disrupted for years. They reacted the same way as in radio. They consolidated ownership and cut employees, especially in the newsrooms. We are just starting to see a recovery in the newspaper business. Companies like the NY Times and Washington Post are now growing their newsrooms. Why? The key differentiation for newspapers was never the paper it was printed on. It was the news! This is not brain surgery, but it is often a common sense point of view that is missed by Wall Street and business leaders.
J. C. Penney will probably be a long case study in the retail business missing the boat. A few years back Ron Johnson, formerly from Target and Apple, took over as CEO. He started to implement a new strategy for the organization that de-emphasized 50% off sales or other ridiculous pricing/sale price in honor of “every day” pricing. He also began implementing a plan to refresh the look of the stores. The board was initially very supportive of the plan, but as sales declined over a period of 17 months, the board let the CEO go and immediately shifted back to the prior focus of the organization. In 2017 the initial plan is for the company to close 14% of locations in an effort to saving themselves. I wonder if it will only expedite their negative return.
Macy’s a number of years back purchased their largest competitor, May Department Stores. I am sure their was much excitement at the company at this opportunity to end the competition with May company owned brands, such as Marshal Fields, Strawbridges and so many others. May company could easily be a study in what killed retail. They bought many historic retail brands, changed the strategy to “pile it high and make it fly” while removing extras in the retail experience such as restaurants or unique displays to something that they would scale among all their stores. When Macy’s took over May, they discontinued the other nameplates and simply brought in their merchandise. They closed numerous stores throughout the county. Of course many of these closures were in malls that Macy’s was already in. I am sure many people within Macy’s were excited to close these stores thinking it would increase revenue for their remaining stores but instead revenues started to decline! They took another reason to go back to the mall away. Smart business move!
Macy’s should take a look backwards! What they would find is department stores including Macy’s were not about these stupid coupons or 50%-75% or 99% off sales (whatever they are nowadays). They were about an experience, one that would often be a full day experience. People would often dress up and bring their family and friends. It was a special day! The last time I went to the mall, I only found people behind registers with lines (why would I wait in line trying to do the math combining the % off with the coupons I have, when I could simply go online find the same item, often cheaper?). Technology is pointing out the flaw in the existing business model. Now imagine if you re-imagined the store experience based on the historical business and then layered that with technology? Now that would be something special. It would also provide a reason to shop in store and online.
Before concentrating on technology as the answer, concentrate on why you are in business in the first place!