One Trick Ponies

When was the last time you used a standalone camera? I don't mean your phone or PC or tablet - I mean a camera that only takes pictures. With film. A still image camera.

In 1976, Kodak owned 90% of the film market. It's name was so much a part of our culture that the phrase "Kodak moment" became synonymous with photography. Everyone knew what a "Kodak moment" was. The company was founded in 1889, so they understood how to successfully manage a profitable business. In fact, for decades, Kodak was considered a must-have blue chip stock that no portfolio was complete without. Yet 2007 was the last year that Kodak turned a profit. On 1/19/12, Kodak finally filed for bankruptcy, and no longer makes cameras, digital photo frames, or pocket video cameras.

Lest you think that Kodak didn't try to change with the times, the company actually invented the first digital camera in 1975, and sued to protect its patents. And, even if they had dived into digital cameras full throttle and right from the start, bear in mind that, as I write these words, you can't give digital cameras away.

The real problem wasn't that Kodak changed too slowly. The problem was and is that Kodak is a one-trick pony in a world that demands that gasoline - as "old economy" a product as you can get - serves more than one function (cleaning your engine while powering your vehicle). We live in a time when even toilet paper manufacturers better come up with a few more ideas if they don't want to go down the drain.

The days of the single purpose product are over. Do you really believe that books will still be printed on paper 20 years from now? (Maybe 10.) Cars are another product ripe for a paradigm shift; even the manufacturers ran out of anything new to say decades ago. If it doesn't fly or teleport, a car is essentially a car, and sliding brand loyalties show that Customers know that. (Tupperware, I'm talking to you, too.) Even multipurpose products like Blackberries are falling by the wayside because they aren't multipurpose or intuitive enough.

It's no longer enough to simply buy a smaller, sexier company on the edge of technology to drive your share value. Shareholders understand that it's a ploy, and that you're only going to ignore the acquisition to death while you conduct business in the same old legacy organization way. Even the old mantra "Adopt, adapt, improve," will only keep your doors open for so long.

Spread out to reduce risk caused by downturns in one segment of the economy. That includes spreading out so that you cover more Customer demographics. Don't underfund or overfocus on particular segments, divisions, or departments. And, perhaps most important, don't share revenue.

To be successful, every segment must support itself from day one.

Give each segment the autonomy to make its own decisions and build its own infrastructure. All you should care about is whether or not the segment is profitable. Once you have one or two that are, listen and watch how they do things to see if their way of doing business can be applied to less successful segments. And do your best to make sure that the people who run each segment are new people, not your cronies, and that they come from outside your core industry. (Why in the world would you want to create a line of unsuccessful clones?)

Sooner or later, every market and every product goes away.

Making your products perform multiple functions that increase Customer convenience and that don't require an owners manual because they are instinctive to use as a hammer will increase your company's lifespan, but they won't make you immortal. To do that, you have to keep creating, finding, and funding wildly creative answers to problems that consumers don't even know they have.

And just so you don't think that this concept only applies to the GM's of the world, even if you build funky wooden shelves that you sell at art fairs, how many other out-of-work guys do you think go into that business every year, or women who think they can make jewelry for a living, or couples who think they can make a go of a restaurant? Almost all of these businesses fail. They have no POD's. They are all one trick ponies. But how about some earrings with built-in wireless ear buds or a bluetooth headset, a shelf with a built-in iPad charger/stand you can watch a movie while cooking, or a restaurant that has treadmills instead of chairs?

Take a look at Kickstarter.com to see what John Doe thinks is worth funding. There's a lot of noise, but there are some gems there (not least the whole idea of crowdsourcing venture capitalism). Many of the ideas are already out there.

The secret is not to be first. The secret is to be best.

Price vs. Cost

As we've discussed before, language defines culture. Putting a word to something conjures an image and an expectation of the thing named. That's why shamans and occultists put so much store by names - they understood that naming a thing gave them power over it. And for any business that sells any good or service, nothing is more important than the definition of and the distinction between cost and price.

Price is the sticker on that new car. It is a liquid word, and implies flexibility and negotiation. It also identifies the thing to which the price is attached as a commodity... that is, an item that exists in identical form at the business down the street. Anything that is a dime a dozen has a price, and we just named it. (But we'll give you fourteen for that same dime if you buy today.)

Cost is a fixed quantity. In the Customer's mind, it is an immovable object. "The cost of X is Y." There can be no negotiation with cost; it is what it is, and that's what it costs.

Now here's the part where you learn a new language: Everything sold has a cost. Nothing has a price. Ever. This is not a negotiating tactic, nor is it a sales formula. If price has ever passed your lips, you have used the incorrect word. That is a fact, and I can prove it to you:

To have a price, an item must be a commodity - that is, an identical item must be available elsewhere. If you have the only one of a given item that exists anywhere in the world, what you charge for it is not negotiable, simply because it does not need to be. The Customer cannot purchase the exact same item elsewhere, so he must pay what you ask or go without.

"But we sell X," you say, "and the guys down the street have X, too."

To which I say, "No, they don't. No one sells what you sell. And you know why? Because X is not what you sell. X may be included in what you sell, but what you sell is you - your organization and how you do business. Your customer service, your terms, your speed of delivery and accuracy of execution, your satisfaction ratings, your industry awards, your knowledge, and on and on. That is what you sell. And it has a cost."

Make a list of these things (they're called Points of Differentiation, or POD's). Trumpet them. Be the best at them. Don't make anything up or spout half-truths. Make them things that you can say to your kids or your reflection without blinking, looking away, or laughing. Make sure that everyone in your organization - not just the salespeople - knows them by heart. And if you don't believe them, sell your business to someone who does and go home, because you have already given up. Why take everyone else down with you?

One final note: Slap anyone who says that a service has a price, ever. A service is as individualized as you can get - no two haircuts are any more alike than two snowflakes or the services performed by hookers in Vegas.*

*Or so I'm told.