Addressing a Need
Let’s take as an unquestionable premise that the purpose of every business is to make money. The vast majority of businesses generate money by supplying a solution that solves a problem of would be customers; with the exception being those companies that simply make profit by trading on markets. The problems being addressed by businesses encompass a vast array of human wants and needs.
If we break down these needs to their simplest level, we can answer this question – “what is your solution trying to achieve?”. At the highest level, these needs almost never disappear. For example, while blacksmithing as an industry may have died long, the need to expertly manufacture complex goods still exists today, and will always exist.
The needs of Kodak’s customers weren’t to purchase cameras and film – those were simply the tools that Kodak provided. Kodak didn’t go broke because the needs of their customers shifted, Kodak went broke because it forgot about it’s own marketing campaign – the Kodak Moment.
Imagine if the leaders at Kodak recognised that the problem they were addressing was the desire of their customers to capture and share memories. Instead Kodak were desperate to continue to sell cameras and film, even when the digital photography technology that they invented was obviously about to boom.
By contrast IBM has identified that the major need of their customers is to do business as efficiently as possible. They went from building calculators 100 years ago, to software and analytics as the biggest revenue drivers for their business in 2012.
Industries That are in Big Trouble
Car manufacturers are starting to hit a major wall – almost everyone in the developed world that could own a car, does own a car. Often, they own more than one. A lot has been done to continue making a profit, even though the need for owning a car is growing thin. An example of some of the approaches they are taking:
- Expanding into developing markets
- Convincing people that they need more than one car
- Making their cars at lower cost
- Releasing cars with newer technologies and better safety features
Why is it that they are so desperate to sell more cars? As a driver my need is not to own a vehicle. My need is to get to a location of my choosing at a time that is convenient for me. Imagine if Google perfects the driverless car and as a result, you no longer need to own one. When you need a car, you request for one to come and pick you up and take you to where you need to go. The number of cars needed at any one time would significantly decrease, and auto manufacturers would be in a panic.
Record Labels spend vast amounts of time and money identifying talented individuals that could be popular. They recoup this money by greatly limiting royalties on artists that “break through” and using their dominance of distribution channels to sell their products at as high a price as possible. There’s nothing wrong with this, per se, but it’s definitely not sustainable.
The ability to copy and share music digitally has had a massive impact on sales. In an attempt to combat this piracy, record labels have engage multiple strategies:
- Aggressively pursue copyright violators
- Tip-toe their way into digital distribution (e.g. spotify)
- Hold onto their current revenue models for dear life
Unlike the car manufacturers, the record labels have not made any real effort to adapt. This is because their main objective is to “sell music”. What they are failing to understand is the need that they are actually fulfilling: Humans are deeply affected by music and as a result have an innate need to listen to music.
Print Media is in dire straights and everyone recognises it. When the printing press was invented it addressed a need that most of the world didn’t even recognise it had – the need to have access to knowledge and information. That need no longer needs to be fulfilled by printed words. For example, when visiting my family the other day, I noticed they had received a delivery of the Yellow Pages. The Yellow Pages… in 2012.
Here’s a controversial idea: Print media is run by baby boomers to address the needs of baby boomers. For a long time this was a winning strategy – baby boomers were in the majority when they were younger and are in the majority now that they are older. But even baby boomers are adopting iPads and notebooks as their standard way of accessing information. Media is about disseminating information to people, not about printing text.
Staying Profitable
From what I can gather, businesses that are refusing to adapt to changing times are worried about how they will make money if things change. Kodak was a pioneer in digital technology but was concerned about cutting into the revenue of it’s film business. Instead of trying to build a new business model around the new technology, they put their fingers in their ears, closed their eyes, and hoped that nothing would change.
How can car manufactures make money if they don’t sell cars to individual people? How can record labels make money if they don’t sell music from artists they discover? How will print media make money if they can’t put advertising next to printed text?
The truth is I don’t have the answers to those questions. But I can say this: How are they going to make money if they keep doing the same thing they’ve always done while the world changes around them?