It’s very common for a new business to rethink its business model. If the original idea isn’t working—or if a better opportunity appears on the horizon—then the business will “pivot” and redirect its efforts toward the new goal, while using its existing model to anchor the process. Startups in VC incubators do it constantly. Now, though, we’re in an era where established businesses in almost every industry face disruption, and they must either pivot or be left behind. Size, prestige and history—none of those matters. Disruption is like a tidal wave: It doesn’t care if the buildings in its path are historic.
One of the more successful recent pivot examples is Netflix. It started life in 1999 as a DVD rental service, disrupting the then-dominant video stores with the online convenience of a subscription model. The company was successful. But, it saw the future and pivoted to streaming (ahead of competitors, in 2007), signing digital content deals to ensure quality offerings for its customers.
It pivoted once again, in 2013, when it became an early provider of original streaming content (e.g., “House of Cards” and “Orange is the New Black”). This will bind (and has already bound) the company’s subscribers more tightly to it, and it’ll attract yet more who don’t want to be left out of the viewing party. With 34 Emmy nominations in 2015 and seven wins, Netflix has proven their original content model, while also adding deals for highly desirable programming from DreamWorks, Disney and more.
Whether as a survival tool or an expansion tactic, pivoting is…well…pivotal. Those who stick to their original models without boldly pursuing new opportunities are left behind to wither. (As of last year, only 51 of DVD rental heavyweight Blockbuster’s 9,000 stores remained; Dish, which acquired the remains of the company from its 2010 bankruptcy, has retired everything else with the Blockbuster name.) Even when they take action, those who delay and pivot after the starting gun end up scrambling to catch up.
We pivot in MI, too. Our heritage in the music products industry has been defined by responding to trends and pivoting to survive.
We created the school music market that we serve as a response to the technology disruptions of the early 20th century: radio, the phonograph and talking pictures. We got through the shortages of World War II by finding new revenue streams in repairs, lessons and used instruments. Those with vision capitalized on the market for rock ‘n’ roll, DJ equipment, folk instruments, recording gear and more. We pivoted into new product categories, new business models and new markets.
We’re more fortunate than many industries are. The entire automotive business might change—not only dealership models, but also how car makers make vehicles, whom they market them to, how they’re paid for and who (if anyone) drives them. Do they buy into the model of shared driverless transportation? What if they’re wrong or, worse still, what if they’re already too late? Does Ford buy Uber and become the first vertically integrated transportation company? Automakers can’t be sleeping well these days.
Luckily, we can look toward a future where people still want to pluck a string, hit a drum or blow into a horn. Although the technology of recording, sound reinforcement and DJ gear will change, people will still want to make and listen to music, whether alone or in groups. Our manufacturing, distribution and retail models might change, but our core business is intact. Well…sort of.
However, we should all be scrambling NOW to position ourselves for the industry to come. We must re-examine some fundamental questions, even if we think we already know the answers.
Do I have the resources and the temperament to compete for the customers I target? If you want to sell lots of high-end combo gear, you need a different skill set than that of a local purveyor of entry-level goods, a folk shop or a school dealer. But your target might not be the market, so now ask…
Who really ARE my customers? I don’t mean whom you want to sell to. Ask yourself who is walking into your store, looking for information and willing to buy. It isn’t always whom you aimed at, but it is the market at your door.
How can I better reach and attract—and involve—my market? Of course, social media is a powerful tool. However, engagement isn’t involvement. “Liking” a post is fine, but it doesn’t mean that person will take action and BUY FROM YOU. If you can get that person involved and in your store, you have a better chance. Of course, some companies will thrive in online sales, but that raises the next issue.
The answers you come up with will tell you how realistic your current model is, and what you might have to do to pivot. Now, ask yourself a final question, bearing in mind that this is what disruption does: What if the market as I see it went away? We’ve already had to figure this out when national chains hit, as well as with Internet sales. But we have to ask it again today.
For example, look at the larger marketplace. Amazon is pivoting. Despite its dominant position in online retail, it earns ever-greater revenue from its Cloud Services, Amazon Fulfillment and Amazon Fire streaming: a litany of things-as-a-service. Just announced last December, Amazon is working to lease an air fleet, and Amazon-branded delivery trucks have hit the road in Seattle. They’re into logistics, and UPS and FedEx can look forward to some fun times as Amazon applies tech efficiency to a service ripe for disruption.
So, if a dominant, arguably successful business like Amazon (despite notorious misses like Amazon Payments and Fire Phone) is seizing new opportunities, we should be doing so, too. Shoring up existing models or soldiering on complacently might buy time, but doing so will just make it harder to pivot later.
You might not buy into my vision of the future…and I’m not asking you to. But, I do think you should take some time to think about the future as you see it and plan accordingly. I think that every time we start asking the question, “How do I preserve what I’ve got?”, the question should be, “What’s coming next?”
If you think you have the answer, then pivot.