You are an entrepreneur, or aspire to be one. And, over and you, you hear three mantras for success in our digital world: Make the best product you can. Maintain focus. Track your competitors closely, and mimic what they do when they succeed.
But, in fact, you need to think again. Why? Because Following these mantras is precisely why many companies fail.
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Two challenges face nearly every business today: getting noticed and getting paid. These challenges aren’t new, but they are amplified when product clutter is abundant and ownership rights are hard to establish — in short, the very things that happen in the digital world.
Media and entertainment companies have faced these challenges longer than most other businesses, but all will face them in the end; therefore, it’s essential to learn from their experiences. And those lessons are clear: Success comes not from focusing on products, or “content” — companies actually need to be wary of that trap. Success comes from creating and fostering connections.
As I describe in The Content Trap: A Strategist’s Guide to Digital Change, three types of connections are key.
1. User connections: Create to connect.
Create a product that’s good, and you may draw in consumers. Connect users to one another, and you can beat a superior product. Thirty years ago, Apple made a beautiful machine to compete against personal computers — and ended up with less than 3 percent of global market share. Reviewers raved about the Macintosh, but users bought PCs because those computers let them connect with other users. It was only when Apple began to think in terms of connections that its fortunes changed.
The possibility of the “best” product losing is particularly strong in networked markets. In video, VHS beat Betamax; in games, success increasingly comes not from making the games perfect but from making them social. And consider the Norwegian firm Schibsted, a newspaper company that managed one of the most successful online transitions in the media world. Its success came not from posting great content online but from capitalizing on the winner-take-all dynamic in classifieds, a product that connects buyers and sellers.
Some two trillion dollars of market value has been created by a handful of digital giants. Their success in most cases came from connecting users. And, to the chagrin of traditional media firms, nearly every one of those companies is playing an increasing role in content.
So, the message is: Don’t just create; create to connect.
2. Product connections: Expand your product horizons.
Another common trap is focusing exclusively on your core product and neglecting complements to it. Complements are products or services that increase the value your core product delivers to users. Some are obvious: Hardware is useless without software; razors are useless without blades.
Others are more subtle. The Kindle ebook reader was revolutionary not because of its technology, battery life, storage capacity or adjustable fonts — those features were already present in Sony’s ereader that had launched a year earlier — but because of something Sony had missed: wireless capability.
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A tire manufacturer starts publishing restaurant guides; movie theaters decide to offer child care next door. The conventional wisdom of sticking with one’s “core competence” would advise against such expansions. But view them through the lens of complements, and they make perfect sense: Exploring new restaurants often involves driving, and parents may forgo movie theaters for lack of babysitters. Define your business too narrowly, and you might miss important complements.
It pays not just to offer complements but also to recognize when your product is a complement to someone else’s. That company has a strong incentive to make your product as widely available and inexpensive as possible. A book publisher or a recording studio that sees itself as purely in the content business may fail to notice that digital firms competing in hardware, software or advertising will try to drive down the price of content so that they themselves can capture more value.
Such a publisher or recording studio would also miss large, value-creating opportunities. Declining CD prices didn’t just shift value to consumers, as is commonly believed. That scenario shifted value to broadband internet providers, MP3 players, concerts and other complements. From 1980 to 1995, increases in concert ticket prices roughly tracked inflation. But when file-sharing exploded, ticket prices did, too. The reason is that concerts had been essentially advertisements for CDs. Once piracy made CD prices hard to sustain, the dynamic flipped: Free music became ads for concerts.
Recognizing and leveraging complements doesn’t just preserve value; it can also get your product noticed. Traditional marketing strategy relied on spending more. That doesn’t work in a world of product clutter — because everyone’s doing the same. Piggybacking on other products or brands is more fruitful.
The Cuckoo’s Calling, a novel by the pseudonymous “Robert Galbraith,” sold just 1,500 copies in two months. When the author was revealed to be J. K. Rowling, the book quickly sold more than a million copies. For aspiring musicians today, success doesn’t necessarily require creating new content; recording YouTube covers is often more effective. When traditional marketing faces too much noise, piggybacking can work.
3. Functional connections: Dare to not mimic.
“Copy your competitors” and “Embrace best practices” are two of the oldest prescriptions in business. Yet, in a rapidly changing digital landscape, they are just plain wrong.
The New York Times found success with its paywall — but most of the U.S. newspapers that followed suit did not. It’s useful to observe what others do — but what's more important than indiscriminate mimicking is an understanding of the context within which those others acted.
Often, decisions work because they are tied to many others. The Times’ paywall wasn’t just a matter of charging for digital content, it was a series of decisions that linked digital prices to print; these were decisions that erected a paywall, while simultaneously and intentionally making the paywall “leaky.” These decisions also recognized how preferences of different groups of readers connected to one other.
Decisions in one area of an organization are often intimately tied to those in others; they're functional connections. Managing functional connections requires strategic clarity and organizational alignment. Many organizations fall into an “initiatives trap,” with various units charged with identifying discrete initiatives. In those cases, the yield is incrementalism, undifferentiated choices and misalignment.
What seems sensible in isolation may be misguided within a broader strategic context. Walmart doesn’t try to improve store ambiance, and Southwest Airlines doesn’t worry about better food options. Both companies recognize that those upgrades might lead them to compromise on features customers really care about (low cost and quick turnaround times, respectively).
Success comes from being different, not similar. That will always be the root of competitive advantage.
In summary, two themes predominate: One, there’s no substitute for understanding your customers, what they really care about and what you can deliver in a unique way. And, two, don’t focus only on content; also recognize and leverage connections.
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Create to connect. Expand to preserve. Dare to not mimic. Many businesses trying to navigate digital waters ignore these lessons and flounder as a result. Heed them, and you will avoid the content trap.