The demise of once-dominant companies like Polaroid and Blockbuster proves that no company is impervious to the effects of intense competition and missteps. Still, as I study the bountiful lessons left in their wake, it’s jarring to see worldwide behemoths lose their way.
Here is a history lesson, of sorts—actually three lessons you can learn from the struggles of leading, once-unstoppable companies:
1. Focus on delivering real value.
The most critical element of long-term success is not cash, marketing or market share. It’s value. When you solve an actual consumer need, you’ve added value to their lives. That’s the motivator for them to return and compensate you for your product or service. Once you stop delivering that value for customers, you’ll likely lose them.
This is the tale of the American auto industry, which once enjoyed market domination, only to watch it disappear to foreign car manufacturers. Detroit is still recovering from the Big Three downturn, but it wasn’t the first time that industry giants General Motors, Ford and Chrysler lost market share when it failed to recognize the value consumers want.
In the 1960s, Japanese automakers launched new small Kei cars. As a counter to motorcycles, these tiny automobiles had small engines, were more affordable and guzzled less gas. During the subsequent oil crises of the 1970s and recession of the 1980s, consumers wanted small, inexpensive cars. The Japanese cars delivered higher value to the market, and the masses followed. Japan became the largest car-producing nation in the world in 2000, and in 2008 Toyota surpassed GM as the world’s largest car manufacturer.
Need more proof? Dr. Barry Nalebuff was at a grocery store and couldn’t find a beverage he liked—water was too boring, soda was liquid candy and diet drinks were dangerous. So he and former student Seth Goldman created Honest Tea, which successfully took off in a very crowded beverage field dominated by large, deep-pocketed companies. How? Nalebuff calls it the “Princess and the Pea” theory, after the children’s tale: “If something out there’s annoying you, that’s an opportunity.”
In other words, deliver value for the consumers—and they’ll pay for it.
2. A lead is never large enough to allow you to lose focus.
Take basketball as an example. If a team is up by 10 points in the fourth quarter, the coach might be inclined to call a timeout. He’ll warn his players not to get overconfident, that the game is far from over and that they need to play with the same intensity as if they were down 10 points.
Large companies often fall into that trap. They look at the market and see themselves as the dominant player, so they get too confident, not realizing their competitors are quietly building up market share and taking away their customers. Usually they don’t wake up until the tide has turned and they are trailing their competition.
Remember Blockbuster? Well, a small company, Netflix, came to the scene offering new benefits in home video rental, like no late fees, lower prices, easier drop-offs and streaming services.
Blockbuster could have adapted, but they remained flat-footed. Instead of acknowledging the way consumers wanted to get their entertainment, Blockbuster remained attached to their ways of doing business. Six years after Netflix launched, Blockbuster finally decided to test drive the popular movie-by-mail model, but it was too late. When video on demand was introduced, it served as Blockbuster’s death knell. They couldn’t keep pace with surging Netflix, so the once-dominant Blockbuster, which in 2004 boasted 9,000 stores, filed for bankruptcy and liquidated.
If you fixate on what made you successful and frequently fail to notice when something new is displacing your product or service, you’re setting yourself up to fail. Because that moment you get complacent, you forfeit market share to competitors whose hunger and creativity will outshine any secure position in the industry.
3. Maintain balance between today and tomorrow.
As a business owner, you need to straddle two worlds—you need to be able to focus on your business today and anticipate trends in the marketplace of tomorrow.
Borders is a great example. Louis and Tom Borders built a bookselling empire and enjoyed tremendous growth through the ’90s. But by the start of the 2000s—and the growth of Amazon—customers were changing how they shopped for books. The Internet was disrupting the industry, and Borders responded by continuing to sign long leases on new locations. Bad move. As they were building stores, Amazon was gobbling up its customers.
If you want to stay relevant, you need to serve your consumers today but anticipate what will happen to your industry in the future.
Android is a company that got it right. When the startup was founded in 2003, it was with the intention of building an operating system for cameras. When Google acquired it, it shifted the focus to mobile handsets. Why? Because they were trying to anticipate the next steps and in doing so recognized that camera sales were sliding and mobile sales were increasing. Now Android accounts for 80 percent of global smartphone market shipments.
Great companies work hard to serve their customers—while they also keep an eye on tomorrow. They listen to the people buying their products, read trends, pay attention to experts and anticipate the next steps of their industry.