Tuesday, June 11, 2013

Digital Disruption: Know the Fundamentals of Your Business

Digital Disruption lesson #4: Know the fundamentals of your business. This is the 4th in a five part series about Digital Disruption.

Borders Booksellers operated for more than 40 years, growing from a local Michigan retailer to a national megastore with arguably the largest inventory of books, magazines, CDs and DVDs. But around the mid 1990s, rather than embracing the digital distribution of content, they doubled down on physical inventory. They even outsourced their online sales channel to a competitor, Amazon.

They misidentified the fundamental product they offered their customers. They “thought” their customers wanted books - you know, those physical artifacts with covers and pages that require shelf-space, and if you are my wife, must be dusted once a month to retain their bookiness. What their customers really wanted was information, relaxation, enjoyment, and convenience.

Oh sure, I still love a good book. I treasure my copies of Mark Twain, Sherlock Holmes, and Harry Potter. But, a buying digital copy of The Tipping Point by Malcolm Gladwell at $10.00 off the physical copy price is a little too much inducement, especially considering the Kindle app was free for the Android tablet I had already purchased for other purposes.

Borders missed it. They missed the fundamental product their customers were buying, and so when the environment changed, they didn’t adequately consider the threat posed by online bookstores.

Digital Disruption lesson #4: Know the fundamentals of your business

Somewhere, there is some quiet digital tinkerer, cannibalizing code snippets from previous failed forays into economic graffiti. S/he is not a banker, a retailer, or a giver of advice. Frankly, he’s not even sure how to monetize his idea. He just knows that if his idea gets the attention of the masses, like kittens to crème, he can leverage it into revenue.

He’ll give the core value of his service away for free, just so he can skim off a few partial pennies from each click-through into his Cayman Island accounts. All because S/he accidentally uncovered the assumption you thought was immutable, like … people want books.

People want low interest mortgages with low closing costs, and a hassle-free application, right? No, people want a home they can call their own and do with as they wish.

Consider how the world might look in ten years if these concepts grow at their current rate:

  • 3D Printing / Digital Manufacturing
  • Digital Media
  • BitCoin / Digital Economy
  • Robotics / Digital Services

How will your industry survive? Go ahead, say it... “That idea will never go anywhere, it says so right in my college textbooks.”

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