Change, and Change, and Change — Or Cease To Exist.
How businesses use change to propel them to the top while other’s resist and pay the ultimate price.
Too often successful businesses fail to see the writing on the wall. They depend on their past experiences and successes while allowing their ego to get in the way of correctly viewing a world that is constantly evolving and moving forward. We have seen organizations change the way our society lives yet fail to change as society continued to evolve. Lets take a look at a few instances of how change has both propelled organizations to great success while failure to make the changes necessary ultimately doomed others.
In the early 80's while watching your favorite MASH or Alf episode you may remember the spaghetti sauce commercial that came one juxtaposing the two bowls of pasta side by side. On one side Ragu spaghetti sauce is poured on top of the pasta and sinks straight to the bottom of the bowl. In the other bowl Prego spaghetti sauce is poured, which sat right on top of the pasta. This commercial signified a significant shift in the spaghetti sauce industry. Ragu had dominated the market for the 70's and the early 80's and Prego was on the brink of extinction. The top brass at Prego decided to hire one of the brightest consultants available to fix their business. They wanted them to create the perfect spaghetti sauce. These consultants toured America from coast to coast, creating over 40 different sauces while surveying Americans. It turns out that the perfect spaghetti sauce did not exist — only perfect spaghetti sauces. They discovered that Americans could be divided in to three distinct types of spaghetti sauce consumers. One third of Americans preferred plain spaghetti sauce, one third of Americans preferred spicy spaghetti sauce, and one third of Americans preferred chunky spaghetti sauce. It turned out that it was that last piece of data that was so critical because chunky spaghetti sauce did not exist in the market place. Prego went on to create the worlds first chunky spaghetti sauce, turned it into a billion dollar line of product, and saved their brand. Here is an instance of an organization recognizing a need in the market place that is not being met and willing to shift their business priorities to be the first to meet that need. This billion dollar business was due to changing just a small handful of ingredients.
In 1985 the first Blockbuster store opened in Dallas, Texas. This wasn't just any video store though. Founder David Cook created a business plan that tailored each Blockbuster store to the neighborhood’s it served. Stores were loaded up with films geared at specific demographic profiles, while also offering new releases and significant collection of catalog titles. Blockbuster’s growth exploded in the early 1990's through various acquisitions and was eventually purchased in 1994 by Viacom to the tune of $8.4 billion. But the video rental market began to shift in the late 90's and early 2000's as rivals Netflix and Redbox offered simple and unique ways to deliver videos to customers. Neflix was founded in 1997 by Reed Hastings over his disgust of paying late fee’s at Blockbuster. This revolutionary service allowed customers to order video’s online and have them delivered to their door through the mail. Blockbuster even had an opportunity to purchase Netflix in 2000 for $50 million, but declined. Then in 2002 Redbox began offering kiosks in local shopping center’s that allowed customers to purchase video’s on their way out the door after grocery shopping. At the height of Blockbuster’s business it claimed to have more than 43 million household members. But their inability to see the market moving in a direction against brick and mortar stores ultimately cost them their business. Ultimately the lack of vision to continue to pursue change ended with this one time American behemoth filing for Chapter 11 bankruptcy in 2010.
On December 12, 1980, Apple Inc. went public with a share price of $22. The IPO generated more capital than any other since 1956 and created more millionaires than any other company in history. Apple was able to find success with it’s high end Macintosh computer series due to it’s advanced computer graphics capabilities. But in the 1990's Apple released a number of failed consumer targeted products. Attempts to compete with Microsoft Window’s proved futile and eventually led to crippling financial losses, a 3 year record low stock price, and finally in July of 1997 CEO Gil Ameilio was fired and replaced by Steve Jobs, an original founder of Apple. Immediately Job’s created a partnership with Microsoft that allowed Microsoft Office to be released for the Macintosh and additionally Microsoft would make a $150 million investment into Apple. Job’s was able to use this infusion to create the iMac and purchase a number of strategically valuable corporations such as Macromedia’s Final Cut which established it’s position in the digital video editing market. Then in November of 2001 Apple released the first iPod portable digital music player and in 2003 Apple launched the Apple’s iTunes store which offered digital music downloads for $.99 and integration with the iPod. These technological advances would also lead to the iPhone and iPad which changed the way users access the internet. Apple recognized early on that while the PC was a staple in the market there was a new market to be created with mobile devices and with the creation of products like the iPod, iPhone, and Ipad Apple was leading the charge. In July of 1997 when Steve Jobs took over Apple the stock price saw a low of 13.68. By June of 2012 Apple had reached a market capitalization of about $660 billion, which at the time was the highest nominal market capitalization ever reached by a publicly traded company. Not only did Apple change how consumers used media on the go but they transformed their business in order to do so.
Apple, Blockbuster, and Prego were pioneers in their industries. Paving the way for how consumers use their products. They each challenged the status-quo and created new markets. Unfortunately for Blockbuster they failed to see the writing on the wall as their business evolved. As consumers began to rely on the simplicity of transacting over the internet, Blockbuster was late to capitalize on this market shift and it ultimately cost them their business. Both Apple and Prego recognized that there were needs in the market place that weren't being met and were able to change their businesses accordingly to be the first to meet those needs. If businesses aren't willing to improve their mousetrap then someone is likely to build a better one — it’s only a matter of time.