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Out of Our Minds
Wednesday, December 07, 2005 11:31 AM
You're in the Wrong Business...Now What?
David Batstone on Business

You feel stuck. The product offering that put your organization on the map has gone stagnant. Your gut tells you that your customers are moving in a different direction. But changing your core business model feels impossible, if not risky.

If that scenario describes your organization, you are not alone. It is not just the business enterprise that is getting lost in transition; a large slice of not-for-profit organizations also sense they are waking up in the wrong era. The rapid pace of change we are experiencing leaves no organization untouched. The cause for our condition cannot be narrowed to any one factor - I prefer to describe it as the perfect storm of significant economic, technological and cultural shifts.

The music industry feels the crisis in dramatic fashion. The CD has 18 months to live - at least that was the diagnosis of the Wall Street Journal in a recent feature story. My friend T-Bone Burnett - the stellar music artist and producer - tells me that in a couple of years the vinyl album will outsell the CD. That's not because vinyl will make a huge comeback. To the contrary, CDs will tumble. Vinyl at least has a rarified customer base who crave its distinct sound.

Imagine that you make your livelihood in the music industry. The CD is today your bread-and-butter inventory item. Yet you know you have a terminal illness and your business model must undergo a radical therapy. The path forward is not clear. Where do you turn next?

In some respects, the music industry may be lucky to know its future demise. The Next Reality is more murky to other sectors. And with heavy fog impairing its vision, the organization is likely to err on the side of the status quo.

Most managers, frankly, will cling to their present operational model even if it requires a good dose of denial to do so. They have invested resources to sustain the present infrastructure and feel as if there is no turning back. In other words, they have to get a return that will justify the past investment. In other cases, personnel and material resources are so geared to keeping the train running down the current track that it is almost unthinkable to consider a different course. Or it could be that a founder launched the enterprise and cannot imagine running the enterprise with any other configuration. \n\nOne of my favorite Peter Drucker stories places him in a room with Jack Welch not long before Welch assumed the CEO post at General Electric. Welch reports that Drucker asked him two simple questions that rocked his world. 'If you weren't already in a business, would you enter it today?' Drucker led with a deft right. 'And if the answer is no, what are you going to do about it?' he added with the left hook. \n\nYou know the rest of the tale. Welch determined that a GE business unit must stand at No. 1 or No. 2 in its class. If not, he ordered the unit to be fixed, sold or closed. \n\nIt was Drucker's brilliance to cut to the chase. The first step in a self-assessment is to re-evaluate your foundational assumptions. If you were to start your organization today would you feature the same products or services that currently stand at the core of your enterprise? Or could it be that a different product or service would better address the needs of your constituency and fulfill the mission of your enterprise? \n\nIf the legacy model is no longer mission critical, it will deliver diminishing returns. Meanwhile, other organizations that are not bound to your legacy will emerge to engage your constituency in a more direct and relevant way. Even if you are a leader in your niche, you cannot afford to drain your resources in the wrong products while simultaneously building new product lines. You will be surpassed in due course by a more focused competitor.\n\nLeadership today requires the wisdom to discern when a legacy should be buried, and the courage to give painful birth to new organizational life. \n


Laura Bergells - 12/8/2005 12:56:58 PM
Today, we had the Grammy nominations. Last week, the Billboard Music Awards. The week before, the American Music Awards.

The music industry seems to spend an awful lot of time congratulating itself. And the same performers. Over and over.

But too many sugarplums can make one positively ill. It's a wonder that the mainstream artists who consistently win these tiresome awards have any time to create new and interesting work that anyone would want to buy.
Kent - 12/7/2005 2:18:31 PM
The CD may die, but that doesn't mean the music industry will. Not all of the music that folks are listening to on all those iPods is pirated -- a lot of it was purchased through iTunes, which now has become one of the top 10 music retailers in the country.

The music industry is changing for the better. CDs always were overpriced and lacked the graphic wallop, warm sound and good vibe of vinyl. Musicians will continue to make a living by touring, and many will sell their music themselves, either through CDs, downloads or vinyl. The fact that big labels no longer are the gatekeepers for what the public gets to hear is a welcome development.

Don't know how much this speaks to your larger point, other than to say creative destruction is a good thing. To quote REM, 'It's the end of the world as we know it. And I feel fine.'


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