Going Out of Business….

Back in the late 1970s a machine came out called the VHS recorder.  You could tape things that you watched on TV and you could buy movies on VHS cassette tapes.   With that revolutionary technology came the birth of a market that was once dominated by Blockbuster video.  Blockbuster started renting and selling movies in October of 1985. By 1992 Blockbuster had almost 3,000 stores when it was sold to Viacom for $8.4 billion in 1994.  A little company called Netflix was started in 1997 by Reed Hastings, who states he started the company after being charged $40 in late fees by Blockbuster for returning a video late.  He takes Netflix public in 2002.   Ten years later in 2004 Blockbuster is at the peak of its success with approximately 9,000 stores worldwide.  By 2010 Blockbuster files for bankruptcy protection, which only exacerbates the inevitable.  By 2013 Blockbuster closes all remaining stores.  Bet the owners of Blockbuster didn’t really pay attention to that little known startup.

Many years ago you can almost be assured that Google, Oracle or Microsoft never thought an online company that sold books would be chipping away at cloud computing services.   Better yet the technology gurus at Apple most likely never thought the same company would have a virtual assistant that would be better than their famous Siri.    One can also be assured that those who own medallions for taxicabs never imagined a company born out of tech juggernaut in Silicon Valley would change the way that people got around.

That is the nature of disruptive businesses.  A new way of thinking that disrupts how the actual market in that sector operates.  Most of the time as we can see from the above examples there is a paradigm shift in that market’s structure.    As technology progresses so does the time it takes to disrupt a market.  Fast forward a bit and guess what, many of today’s leading companies will be gone within the next ten years or so, where it used to take fifteen to twenty years.

In the case of Amazon, the disruptive power is far greater.   The company started as a bookseller and then moved to publishing.  After that it was some household supplies, electronics and other goods.   Then it ventured into cloud computing services, personal electronics as well as lending.   Now Amazon has reached a new pinnacle with its acquisition of Wholefoods.  Amazon is breaching the barrier between online and retail establishments.   (It was only a matter of time)

Many pundits think that Amazon’s entrance into this market will cause more competition in the grocery sector.  This will translate into lower prices for consumers and more access to different types of foods. While that is a good thing for the prices of food what does it mean for the overall market and Amazon’s hold on the average household? (See our next article on that topic)

As companies like Amazon erase the lines between the physical and digital markets its disruptive power has increased ten fold.    If history has taught us anything is that today’s industry darling is yesterday’s business case.  As mentioned above, Uber used the use of smartphone technology to disrupt the taxi market.  While companies like Skype and WhatsApp have disrupted the telecommunications industry to the tune of over $300 million in the last 6 years.

Just because they have succeeded for a certain amount of time companies believe they can continue succeeding.   Unfortunately old structures cannot always support newer products.  As well the older way of operating or separate operating teams or divisions, each an operating business sector from all the other ones is a defeated concept.   Companies can no longer afford to operate different divisions each with their own operating budget and employees.   The continued attempt to manage in the status quo will make the majority of the current roster of large companies go the way of Kodak, Sears and Nokia.  These companies were once the largest companies in the specific sector they were in. But along came more intuitive and well thought out businesses with capital and effective operators.  That has led these companies become smaller and having a reduced market share.   Or the equivalent of the business being sent to Siberia.

In today’s market place companies have to be poised for disruption and attentive to threats in every direction. Companies have to innovate in order to remain competitive and must focus on ways to utilize their current positive market share to continue their foothold.   Unfortunately you adapt and/or innovate causing disruption on your own or get eliminated…

Corporate America, which do you prefer????????????????????

 

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