Your Company May Be a Buggy Whip

“You know, at one time there must’ve been dozens of companies making buggy whips. And I’ll bet the last company around was the one that made the best buggy whip you ever saw.”
~Danny DeVito (Lawrence Garfield) — Other People’s Money (1991)

Many businesses find themselves locked in a status quo paradox; they don’t change because change may disrupt their business.

An example of this can be found in Kodak, who at one time were the world’s biggest film company. Kodak could not keep up with the digital revolution, for fear of cannibalizing its strongest product lines. They ignored a number of opportunities to steer the company in a different direction and ultimately their hesitation to fully embrace the transition to digital led to obsolescence. They dipped their toes in the water, investing billions of dollars into developing technology for taking pictures using mobile phones and other digital devices. However, they held back from developing digital cameras for the mass market for fear of eradicating its all-important physical-film business. Another example of missed opportunity was Kodak’s acquisition of a photo sharing site Ofoto in 2001. However, instead of pioneering what might have been a predecessor of Instagram, Kodak used Ofoto to try to get more people to print digital images. Kodak filed for bankruptcy in 2012 and after jettisoning most of their product streams, re-emerged in 2013 as a much smaller, consolidated company focused on serving commercial customers.

Of course, another aspect of this paradox is if you don’t change your business, your customers will change and leave you.

An example here is Blockbuster, a video rental company that did not keep up as its market transformed with the availability of other entertainment options in a digital world. Why did blockbuster fail? The video-rental company was at its peak in 2004. They survived the change from VHS to DVD but failed to innovate into a market that allowed for delivery (much less streaming). While Netflix was shipping out DVD’s to their consumer’s homes, Blockbuster figured their physical stores were enough to please their customers. Because they had been the leader of the movie rental market for years, management didn’t see why they should change their strategy. Caught off guard by the emergence of Netflix and other competitors, Blockbuster ultimately filed for bankruptcy in 2010.

Differentiation and innovation are perhaps the most significant factors between successful and failed companies. The perils of engineering profits and not investing in customers can ultimately lead to an ignorance of the value of differentiation. Companies who are not committed to constant reinvention and finding new customers will likely fail.

I’ve used the movie “Other People’s Money” in the past to underscore the importance of innovation, it is also apt in illustrating the importance of being willing to ‘kill your own product.’ Any company not willing to innovate their products and invest in developing new products, will eventually pay the price. In my theatrical example, the last buggy whip maker squeezed cost, efficiency and engineered profits to the bitter end, ignoring the changing needs of their customer. Had they sought this perspective they might have seen the oncoming automotive boom and eventual obsolescence of horse drawn carriages. This revelation should have motivated buggy whips companies to kill their best product (the buggy whip) and seek a way to differentiate themselves perhaps with customers who need accessories for their cars, not horse carriages.

The most practical evidence for evolving with your customer lies in the economic truth that it costs more to acquire a customer than it does to retain an existing customer. Beyond this is the truth of how a product lifecycle plays a role in the customer lifecycle. Wanting to have a customer for life and keeping them can be a paradox unless a company understands the product life cycle. Along with the willingness to kill your best product to innovate, an entrepreneur must invest in a service culture to retain fickle customers who will eventually flock to the best product and service, even if it isn’t yours.

Jeff Heinzelman is the founder of MostlyWest with 25+ years of experience in leadership, business process, customer experience and product innovation. I have led teams in many sectors, relying on a personal philosophy of people, process, and technology to deliver innovative products. I am an advocate of customer-focused product management connected to data-driven results. I am also a husband and father of two boys, and live in Austin, Texas where I enjoy Tex-Mex, BBQ, and football. Not necessarily in that order.