Tag Archives | book excerpts

3 Mistakes in Managing Risk and Uncertainty

фотосессия во Вьетнаме

Not long ago, I stood on a pier near Cape Canaveral, Florida and watched a SpaceX rocket launch.

People were wearing SpaceX t-shirts and talking excitedly. SpaceX has brought the thrill back into space exploration.

Founder Elon Musk figured that by developing a way to reuse rockets, just like airplanes, he could reduce the cost of travel to space by a factor of a hundred.

He’s well on his way to achieving that. The company created the first commercial spacecraft in history to shuttle cargo to and from the International Space Station, and has already cut the cost of launching into space to less than a tenth of its prior level.

His ultimate goal, however, is to colonize Mars, making human life inter-planetary.

How’s that for a bold vision statement?

Continue Reading →

When you’re being attacked by new competitors, make a new friend

boy with headphones paid at gograph gg66916184

Every industry undergoes change.

The players who devise a different and better way of capitalizing on these changes are the ones that emerge as winners.

Few arenas have experienced more change in the last decade than the music industry. It was the first mass-media industry to be hammered by the digital revolution, shrinking from $25 billion in annual revenues in 2002 to only $15B in 2014.

This industry provides a dramatic example of how revenue sources can quickly shift as new businesses and business models are introduced into the market.

New ways to sell music appear every year, and old ones whither. Years ago, performers made their money selling albums, and went on tour mainly to promote those albums. Now the economics have flipped: concerts comprise more than half of industry revenues, and bands release albums mainly as marketing pieces to attract fans to fill concert halls.

Performers now have new sources of revenue, including merchandise sales, YouTube ads, licensing to television and film productions, iTunes downloads, and royalties from streaming music services such as Spotify, Rhapsody, and Muve Music, and from Internet radio stations including Pandora, Slacker, and iHeartRradio. Music industry revenue hasn’t just shrunk; it’s coming from completely new sources.

What should you do when your industry is shrinking, or when it’s being attacked by new competitors and new business models?

  • Offer new value to your customers.  In the 1930s, flour mills noticed that women were using flour sacks to make clothing, and so began to package their product in colorful printed fabric. Cleverly, the label was designed to wash out. Women entered nationwide sewing contests to show off their creations, and learned to select their brand of flour based on the most attractive fabric. The packaging became a large part of the value of the product. Is there new value you could offer customers?
  • Adopt new pricing models. What new ways could you price your offering? How about a subscription model? How about a low upfront price, followed by fees for ongoing services? How about offering a bundled price for a set of products? Changes such as these can not only stimulate demand for your product, they can encourage customers to buy what you want them to buy. One manufacturer I know increased its prices for low-volume, difficult-to-make products, and as a result, drastically improved its plant efficiency.
  • Ally with new partners. When you are being attacked, sometimes the best course of action is to find a new friend. Look to partners who can bring new technology, provide a new channel to market, or who can influence customers to choose your product. One company I know allied with a partner who could help them gain access to the Asian market. In return, the company helped its new partner to sell into its historic home turf.
When the ground is shifting under your feet, look for new ways to add value, and new alliances. Industry turmoil can create amazing new opportunities.

Adapted with permission of the publisher, Jossey-Bass, from The Agility Advantage: How to Identify and Act on Opportunities in a Fast-Changing World by Amanda Setili. Copyright (c) 2014 by John Wiley & Sons, Inc. All rights reserved. This book is available at all bookstores and online booksellers. Read a sample chapter here

When revenue sources dry up, step up the experimentation: Bezos transforms the Washington Post

IMG_7680Are you making money the same way now as you were five years ago?

Have some of your prior revenue sources disappeared?

Have you created new revenue sources—new products, services, customers or geographies—to maintain your business growth?

The newspaper industry is an apt example of a sector where revenue sources have shifted—and shrunk—over time.

Newspapers used to rely on advertising and subscription sales, but as these revenue sources have dried up—with print ad revenue dropping from $44.9 billion in 2003 to $18.9 billion in 2012—publishers have worked hard to find new revenue sources, such as conferences and marketing services.

Amid all this turmoil, Amazon CEO Jeff Bezo chose to purchase The Washington Post for $250 million dollars.

At the time, he conceded that the business looked “hopeless” from the outside, but called the newspaper a “black box” for experimentation and development.

Said Bezos, “There are so many knobs that can be turned and things we can experiment with, that I’m confident there’s something we can find that readers will love and will be engaged with—and that we can charge for.”

Since acquiring the Post, Bezos has indeed started to experiment. He has:

  • Embedded technology positions directly within the sales team, so that software engineers sit side by side with journalists, working to innovate new value for customers.
  • Taken steps to sell the Post’s back end content management system to local and regional newspapers.
  • Shifted the Post’s news coverage away from local Washington DC events, and toward national and international news.
  • Created visually appealing, magazine-style formatting for tablet users, and provided Amazon’s Kindle Fire users with a pre-installed package of unique morning and evening news.
  • Hired 100 new journalists to support digital efforts, creating confidence and optimism among the staff.
  • Hired the right editorial leadership to bring back the Post’s old journalistic mojo, to the point where New York Times media critic said, “The once-embattled newspaper is…turning the kind of reporting that journalists—and readers—live for.

If you are going to stay in business these days, you need to continuously evolve, change, and stay a step or two ahead of your competitors.

How is your industry changing, and what are you doing to experiment and adapt?

Adapted with permission of the publisher, Jossey-Bass, from The Agility Advantage: How to Identify and Act on Opportunities in a Fast-Changing World by Amanda Setili. Copyright (c) 2014 by John Wiley & Sons, Inc. All rights reserved. This book is available at all bookstores and online booksellers. Read a sample chapter here

Image credit: “Bezos’ Iconic Laugh” by Steve Jurvetson is licensed under CC BY 2.0.