One rule to survive industry changes

One rule to survive industry changes

There are many stories about once legendary companies going under water during major industry changes. Most of these changes were influenced by changing consumers choices with opportunities new technologies provide. You can find many reasons why this happens over and over again. In very different industries. From transportation to video entertainment, from home appliances to books.

“Experts" name very different reasons why companies fail. Why even huge corporations can’t initiate or at least adapt to major industry changes. However, success stories of companies like Amazon, Nike, Disney, Nest, Netflix and many others have something in common. As well as failures of their rivals.

Andrew S. Grove, the legendary former Intel CEO, said, “Only paranoid survive.”This is true, but what does it really mean? Do you have to be obsessed over your competition? Does being paranoid mean you’ll always be only a fast follower?

Major difference between winners and losers is this: “Winners don’t confuse product with format.”

Differences between product vs. format.

How product differ from business format? Product is the value or need company serves, format is how you present it. Netflix rise and Blockbuster failure could serve as an example. Netflix understood that core product is video entertainment. This allowed company to move from DVD by mail subscriptions to digital streaming and other initiatives. Blockbuster thought of their business as physical video (and games) rentals shops. Even though Blockbuster also shifted to video streaming, it was too late and once giant company with 60.000 employees went bankrupt in 2010.

Having a clear sense of what your products are, you have a freedom to innovate. You are no longer stuck with old concepts about product features, product distribution, packaging. You can innovate everything from your pricing models to marketing and new product launches.

Confusing your product with format leads to serious trouble. For example, Kodak. Kodak product was image capturing, editing and sharing. They thought of it as analog cameras. Despite the fact that Kodak literally invented digital photography, it was stuck with the film-based solutions. Who knows, maybe with a different approach they would have created Instagram or action cameras.

Another example is operated by US-based Priceline. Not because I think they would go out of business. They won’t. They thought of their business as online accommodation booking but didn’t explore this vision to full potential. Why? Because if their focus really would have been accommodation, they would have experimented with private accommodation earlier. Well, filled this place.

The most recent loser is iTunes. It clearly missed the train of music streaming while being stuck with digital music sales. Following years will show Apple's true vision behind Beats acquisition.

Two possible reasons for failure:

  • Companies think of a format, as a product itself.
  • Fear of cannibalization. Apple is a great example of how you shouldn’t be afraid to cannibalize your current products sales. They launched iPhone knowing what will happen to iPod. Also launched iPad, knowing what might happen with laptops (although, worst case scenario didn't happen). Unfortunately, fear of iTunes sales cannibalization led to missed opportunity and huge Spotify’s growth.

Clear product/service idea can guide decisions in very important business areas:

  • New products and ecosystems
  • Product innovations (improvement)
  • Partnerships/acquisitions
  • Marketing

New products and ecosystems

Netflix. Video content. As mentioned before, Netflix is a great example of clear product conception. While understanding that their product really is video content, Netflix was able to successfully migrate from DVD subscription to video streaming. Also, expand to content production. Let me emphasize this. Since Netflix product is video content, they are not only innovating product delivery (from DVD to digital), but also redefining other parts of their business. Their own original content secures user base as well as gives more flexibility to try new distribution channels without new negotiations with content owners.

Dolby. Highest quality audio and video experiences. Founded in 1965, company is still around and growing stronger every year. It started as a noise reduction system for professional recording studios, but Dolby’s true products are the highest quality audio and video experiences. Based on this concept Dolby created a whole ecosystem for sound (with Atmos launched in 2012) and vision (with Dolby Vision launched in 2014). Dolby unifies every aspect of the value chain for audio and video experiences. From content creation to cinema formats and hardware specification for TVs. Dolby could have stayed in professional audio/video systems, but a clear concept of their true product allowed them to think broader and reshape any possible touchpoint. It includes everything, from product features, distribution, pricing to marketing etc.

Disney. Family entertainment. Founded as Disney Brothers Cartoon Studio, Disney now has everything from cable companies to entertainment parks. Their clear vision drives them to innovate and search for new ways to enrich family experiences on any medium Disney manages. Check out one of their recentinnovations.

Google. Information creation, management, and accessibility. Google is an interesting example of how clear product concept can give you the freedom to innovate or acquire right companies. For now let’s not think about recent Google acquisition marathon, which includes companies like Boston DynamicsNest, and others. What is common behind main Google products: Search Engine, YouTube, Gmail, Google Docs, Maps? They all help you to create and/or access data in one form or another. Search is, of course, giving you info, but as well as videos, email, documents and maps. There’s more products, like Chrome or Android that serve as tools providing you with more opportunities to access data.

Product innovations

Amazon. Fastest, cheapest, reliable shopping experiences. Amazon would fit in all categories, but this company ideally serves as an example of stable product improvements. Clear vision for the most convenient, cheapest and fastest delivery shopping led them to create 1-click, recommendations, Marketplace, Look Inside, Kindle and many other innovations or service improvements. This vision drives Amazon to focus not only on the end user features, but also on the internal business operations (like operating inside their partners warehouses or printing rare books).


Nest. Home automation. In 2011, Nest introduced Nest Learning Thermostat. Nest entered this space with Thermostat but understood that the real product is comfortable living and home automation. This wider approach led to the creation ofNest Protect - a smart smoke alarm. Nest also created Works With Nest program, which recently added 15 new partners. Partnerships strengthen your products promise and serve as shortcuts to faster ecosystem creation.


GoPro. Hero lifestyle. GoPro, like other companies in this article, may fall into several categories (ecosystems, product innovations etc.). GoPro has a ton of accessories. From selfie sticks to dog mounts. Yes, dog mounts. But the company understands that the actual product is a promise of a hero lifestyle and capturing it. This led to taking a throne from RedBull in content production and probably spending 10-20X less on events and sponsorships. Content also strengthens their brand emotions, making it "the ultimate escape" product. Even office clerk can become a hero. This is what we call: "selling a dream". And GoPro does it perfectly. The overall GoPro ecosystem will be even more powerful with soon-to-be-launched consumer drones.