There is a lot of talk about the businesses that have already gone into administration as a result of the global credit crunch. The truth is they were never going to survive long term because they didn’t adapt to serve their digitally evolved consumers.
I used to go to Woolworths about 10 years ago, there is one smack bang in the centre of my home town of Frome in Somerset. It was probably the biggest shop in the town. The last time I went past a Woolworths I had a look inside and it was exactly the same as I remember it being 10 years ago, selling exactly the same things in exactly the same way. Although Marks & Spencer are not in great shape they have completely changed their consumer offering while maintaining brand values.
The fact is Woolworths, which some people look at as a national institution, was an incredibly badly run business because they didn’t talk to their consumers and as a result had no any idea about the way their spending habits and lifestyle had changed. Why? Because they are not networked.
Had they over time become a digitally networked company that diversified the way their business made money they wouldn’t have been forced into administration. The same is true of Zavvi. Why would one of the country’s most successful entrepreneurs want to sell a business? Because the asset doesn’t have the potential to deliver a return large enough to sustain itself let alone deliver a profit.
- I am aware that both businesses had websites. But they didn’t offer consumers a serious alternative to the quickly established new boys on the block of digital entertainment sales.
Reading a piece David Cushman, Director of Social Media at Brando-Digital, wrote on Monday about fear in 2009 got me thinking on these paths. I commented on his article at the time.
At £50 a pop it will be interesting to see how games sales hold up this year. I suppose the marketplace on Xbox Live, which allows users to download cheaper additions to games, like the upcoming add on for GTA, will help diversify their revenue streams which will hold up a possible downturn in hard copy sales.
Reading this morning about the success of the iPhone app store http://tinyurl.com/7q6wy8 reinforces your point about business models that don’t fit the networked world. This one does and it will be HUGE in ’09, perhaps helping to balance out their hardware business, which is in decline.”
Me on Who’s afraid of 2009? – http://fasterfuture.blogspot.com
It is businesses that have diversified their offering which allow for changes in consumer behaviour that will not perhaps prosper in the current economic climate but certainly ride out the storm and not get themselves into the same trouble that Woolworths did by staying exactly the same.
I’ll finish with a quote (sales pitch) from Duncan Stewart that resonated with me today.
During recessions, the companies that follow bold strategies and make significant investment decisions are the ones that succeed when the economy recovers”
Duncan Stewart, Director Research Technology, Media and Telecommunication at Deloitte Canada
Duncan’s words are well worth taking heed of for companies that need to adapt and invest wisely over the next two years in order to emerge on the other side of the current economic downturn with a diversified range of offerings that are again primed to deliver serious dividends.
