By contrast, the descent of Blockbuster during the last decade shows what can happen when a company isn’t imaginative enough about the new possibilities of a technology. To be fair, Blockbuster didn’t have an easy task in front of it. It had thousands of stores, many owned by franchisees who had rights that restricted how quickly Blockbuster could change. Still, Blockbuster apparently never even imagined a world without stores, any more than Kodak imagined a world where photos didn’t require film and chemicals. So while Netflix plotted for a decade to make its world-class mail-distribution system irrelevant, Blockbuster clung to its stores and made itself irrelevant. It filed for bankruptcy protection in 2010.
Don’t just play defense.
While many companies respond to technological change by clinging to their traditional markets and business models, Hasbro shows how an old-line business can claim new territory too. In the face of increasing competition from electronic games and entertainment, many of Hasbro’s products seemed tired, and the market in which they were competing was in decline. Transformers—basically, robots that could disguise themselves as cars—were more than a quarter-century old. G.I. Joe went all the back to the early 1960s. But Hasbro invigorated sales by leveraging its brands beyond toys and games, for instance making them the basis for a series of big-budget Hollywood movies. Hasbro also effectively adapted Scrabble to modern technology. Rather than just fight a rearguard action and protect sales of Scrabble boards, Hasbro now lets people play Scrabble on smart phones and other mobile devices.
Make sure you look good naked.
Textbook publishers have traditionally been all bundled up. They relied on their lobbying with states to win the right to sell books, rather than having open, continual competition based on price, quality, or anything else.
The situation is beginning to change because of consumer uproar about the cost of college texts, budget cutbacks at schools, and reforms in the educational system. Now technology is poised to destroy the traditional textbook business model altogether, because the spread of electronic devices is reducing the need for books and creating an open field for innovation. Some smart publishers are starting to experiment with new ways of delivering their content that will look great naked—meaning it won’t be wrapped in the traditional format of a book. They’re doing it because costs will be reasonably low and because the benefits will be enormous. Basically, the textbook can become the electronic hub for educating a student.
Johnny won’t just read a book on his tablet. He’ll be able to tap into other resources right from his textbook, like teacher notes, videos, and tutors. When Johnny finishes his homework, the computer will correct it for him immediately and make suggestions about what to do differently. Parents will be notified that Johnny has done his homework (or not). The teacher will get an e-mail that night showing which problems caused problems for the class, so the teacher can address those the next day. School administrators will, over time, get information about which teachers are having success and which aren’t. Textbook publishers will get data about areas that are confusing students and will be able to test different wording and different teaching methods.
Any list of the most successful companies in the U.S. would see about half of its members drop off every decade, and we’re willing to bet that the turnover in the next 10 years will be even higher than that. Companies will have to adapt to a world in which they don’t control the conversation with their customers. Customers will talk with each other, talk back to the company, talk to other companies, and on and on. Every permutation will be possible, and companies will struggle to innovate adaptations.
But as Schumpeter saw, every act of destruction provides an opportunity to create. Although seizing those opportunities will be tricky because it’s hard to discern exactly how the future will look, we find ourselves turning back to one of the famous sayings of our old friend and colleague, computing pioneer Alan Kay. He says: “The best way to predict the future is to invent it.”
Paul B. Carroll and Chunka Mui are co-founders and managing directors of Devil’s Advocate Group, a consultancy that helps businesses test their innovation strategies. They are also co-authors of Billion-Dollar Lessons: What You Can Learn From the Most Inexcusable Business Failures of the Last 25 Years.