Liberal media sites often highlight the positive trend of solar and wind power. In contrast, Mr. Jenkins, a Wall Street Journal opinion columnist, concentrates his energy-related columns on the well-known flaw of solar and wind energy not being as reliable as fossil fuels. He suggests wind and solar will be niche energy sources. Jenkins is wrong. He has fallen into a trap called mistaken (and sometimes hidden) assumptions. Jenkins assumes the intermittency flaw is a constant. But battery technology is continually improving, and its use in power storage to solve the intermittency problem is spreading in many countries. Battery technology is advancing so quickly and effectively for automobiles that one can now reliably predict when petroleum-powered cars will become more costly to produce and run. No wonder Tesla is worth more than Toyota. There are always naysayers to change. The Kodak Board was…
Is your market niche defensible?
I love niche businesses. Companies pursuing a niche strategy serve narrow target markets with a product or service uniquely designed for that market. Most start-ups are niche businesses, like Exact Sciences. It brought one noninvasive cancer test (for colon cancer) to the market. The company disrupted the invasive colonoscopy market and opened testing to younger patients and those reticent to have a colonoscopy. The only problem with a niche strategy is that there’s no guarantee today’s non-competitors will stay in their swim lanes. If they move into yours, you may not be able to defend your market position. Let’s look at some examples. The New York Times’ coverage of Amazon’s cloud computing business, A.W.S. (for Amazon Web Services) offers one case study. A.W.S. now packages software as part of its web-hosting offering. A.W.S. users find it easier to get their software needs…
Disruption is great, but make sure you answer five key questions correctly before investing.
2019 is the first year in a long time when IPOs are generating lower returns than existing stocks. Has the era of disruption come to an end? Not for a minute, if you ask me. Finding ways to disrupt a market to deliver more value to a group of customers will always be at the heart of strategic, market, and economic success. The renowned economist Schumpeter taught us this fact decades ago. The generation of wealth since WWII in free markets versus planned markets was proof of his thesis. So, of course, the market loves disruption and awards start-ups, some with “Unicorn” (i.e., > one billion dollars) valuations. But some disruptions are duds. WeWork, the shared office space company, is one example. WeWork recently withdrew its IPO as potential investors raised questions about its underlying financials. Others are not all they are hyped…
Forgotten wallets, Brennan’s, and Disruption in the Food Business
A trip to my local grocery store is an almost-daily ritual, as I hate to plan dinner ahead of time. The store is also a lovely 15-minute walk from my La Jolla home, making last minute dinner decisions doable without driving. The checkout staff contains familiar faces. When I recently forgot to bring my wallet to the store, I asked Bob if he would let me sign an IOU. He’s the round-faced 35-ish-year-old clerk who always looks like he is thinking of songs rather than codes as he rings up my produce prices. “After all, I’ll be here tomorrow … just like I was here yesterday.” “No way! It’s not our policy,” Bob replied, with a tone implying I was trying to pull a fast one over him. Did his response make sense in an era when Amazon acquired Whole Foods, and two-hour…
How to Expand Without Exploding
“Brands Expand Into New Niches With Care, but Not Without Risk,” a recent NYT article, was full compelling brand extension stories. It also contained examples in which I found myself saying, “What were they thinking?” Here are some examples from the article of both ends of the spectrum. The tagline of British luxury sports car brand Aston Martin (if you have to ask the price, you cannot afford it) is “The Art of Living.” Its recent extension into exclusive Miami Beach condos makes sense, following the tracks of its luxury speedboats, menswear, and jewelry. Aston Martin is selling exclusivity. Appreciate its designers, and you will enjoy Aston Martin’s world. Harley Davidson did the same thing, extending into clothing, home furnishings, and experiences, albeit for a different target market. But as to lighter fluid manufacturer Zippo moving into women’s fragrances, what were they thinking?…
The steep costs of misperceptions
The breakthrough financial success of the new Wonder Woman film contains an important lesson. For years, women super-heroes were outside the scope of movie producers’ considerations. Why? A 2004 film, Catwoman, also starring a female superhero, had failed to achieve its commercial aims. An assumption – female superheroes do not fill seats – became a belief that shaped future investment decisions. No river is ever the same at any one point on the shore. The analogy holds true in the business world. An idea that failed in the past does not necessarily mean the idea has no merit today. And winning ideas that won in the past may lead, today, to your business’ disruption. Beliefs born from assumptions are shortcuts that make our world faster to navigate. Brushing our teeth is good for our health and social life. But beliefs can shrink our…
What do Whole Foods, Netflix, and oxygen monitors have in common?
Whole Foods Market, once the darling of the grocery industry, is facing a whole lot of problems. Poor shareholder performance threatens founder and CEO John Mackey’s position. New directors have been added to deter activist investors and improve relationships with major institutional investors. Some argue that for all its previous success, Whole Foods has not mastered Retail 101 and that is why it is failing. Perhaps – no retailer gets away with poor service and unnecessarily high prices these days. From my perch, however, the core issue facing Whole Foods is its business model. Organic and healthy was once a unique niche within the grocery industry, warranting a separate store. Now, fresh and organic are mainstream. Niches are alcoves — protected places. They exist in our natural world. In our economy, they’re specialized markets. By serving a narrower target market (Four Seasons versus…
The Healthcare Sector Braces for More Transformation: Is your business model ready?
The Xconomy San Diego Forum on the Human Impact of Innovation offered a window into how information technology and science, marching hand-in-hand, will shape healthcare. “IBM’s Watson is not the only breakthrough game in healthcare,” was the best summary of the afternoon. Today’s unpredictable markets demand that as you maximize performance from your current business model, you must in parallel be designing and developing new business models to disrupt the current cash generators. Otherwise, start-ups will turn your company into a dinosaur. In doing this leadership work, consider four key trends highlighted in the conference. Each one alone portends major changes for a number of players in the industry and the combined effect of which will surely reinvent the entire sector. 1) Advances in “micro” medicine Healthcare technology is increasingly leading to a better understanding of what’s happening at a genetic level. For…
KOHL’S: Will Another One Bite the Dust?
Kohl’s Corporation, headquartered in Menomonee Falls, Wisconsin, started with a unique business model: just the soft goods. It offered consumers a comfortable buying experience at lower-than-department store prices. Some people, especially Midwesterners, swore by the brand. My sister-in-law— born, raised, still living in Milwaukee, and likely never to leave — visits Kohl’s regularly for good deals and an easy shopping experience. As it grew, Kohl’s extended its geographic reach to about 1,200 stores, creating a publicly traded stock that made for a good story until it wasn’t. Along the way, the company added more design-driven merchandise, deploying its design center located in the heart of NYC. Kohl’s became omnichannel, as all good retailers must. (Read this report on the retail industry.) Kohl’s. Macy’s. JC Penny. Is there a difference? How can you win in an environment of too much retail for a…
Apple’s winning business model keeps winning
“Apple is finally getting serious about pushing into our living rooms,” according to New York Times reporters Kate Benner and Brian X. Chen. Apple’s already in our bedroom, bathroom, subway ride, vacations and, if we’re not diligent, meals with family. Why not the living room? What else is left? Apple might not be in everyone’s living room, but it’s already in mine. It’s a box that sits next to my cable box that transforms my TV screen into something equivalent to my iPad screen, full of apps such as Public Radio podcasts, movies, TV shows, the HBO channel, etc. (Amazon and Roku are competitors.) Because Netflix streaming has very few of our favored old movies, my husband and I opted for Apple TV as our streaming solution. I will also use Apple for my music once I take the time to download my…