BERKONOMICS – Business insights from Dave Berkus

The “buggy whip” trap.

by on May.16, 2013, under Growth!, Protecting the business

Surely you’ve heard the buggy whip analogy.  A business making those necessary items ignored the signs of progress and found itself without a market.  Perhaps that happened to sword smiths upon the invention of the rifle, and certainly to the makers of cassette tapes upon the dawn of the CD.

I found myself in the middle of such a slow-rolling change twice in my career.  First, in the late 1960’s (yes, I know, a long time ago), there were 31 phonograph record manufacturing plants in Southern California alone.  By 1975, there were only two.  That is sudden change, brought about by the fast acceptance of the cassette, which in turn gave way to the next technology, CDs, after a rather short lifecycle.  Record plants were noisy, dirty places, using chemicals I can only imagine now rest somewhere in the ocean, to electroplate the “stampers” and press the records.  Cassettes, in contrast, could be manufactured in small rooms with much less expensive equipment and no damage to the environment.

Three_Berkonomics_Fronts_blackThe second time I learned the buggy whip lesson was at the dawn of the personal computer age, and this time we guided our firm without a hitch from minicomputers to networked PCs, even growing the business as we gave up the lucrative $100,000 hardware sales in return for service fees to network our customers’ systems, install our database, and migrate to customer-purchased desktop and servers.

[Email readers, continue here...]  Here it is, not so many years later, and the signs are more subtle yet, but the speed of obsolescence is much faster.  Take for example, the public’s quick acceptance of Facebook, Zinga, Mixi, and other social networking portals, leaving early leader MySpace wondering what happened to their comfortable lead and large fan base.  With rapid sharing of information and recommendations, a fickle public can change its mass preferences seemingly in an instant.

How do you spot the buggy whip trap and differentiate it from a simple business cycle slump?  The answer is simple, but somehow out of reach for most senior executives and entrepreneurs.  Micro trends may seem to be a whisper, as mini-trends follow with leading adopters making a bit of noise.  It is those leading adopters who take the chance on new technologies, new companies, new styles, and new idioms.  That is why so many larger companies pay specialty marketing firms to find, court, and listen to those individuals who lead the pack in taste and action.

For those of us who don’t have the resources to hire these expensive market trend-watching firms, there are more simple yet effective opportunities.  Usually, technology and style trends begin with those aged between 15 and 23.  And which of us doesn’t have at least one close relative or child at or near these ages?  Have you ever asked for an hour of such a relative’s time to discuss what’s “cool” or “coming” or “must have” in their lives?

It is human nature to protect one’s investment of money, time and brand in an enterprise.  That leads naturally to a resistance to change and inability to willingly move to replace your own product with something new that will kill its revenues.

But we all know that if we do not do it when offered the evidence of obsolescence, someone else will.   So, are you investing in your own form of buggy whip product or service today?


4 Comments for this entry

  • Murray Kalis

    Smart article, Dave. I think you can add Make It Work to the list.

  • Harry Keller

    Join several LinkedIn groups for your market segment and pay attention. Even participate. Establish relationships with those directly involved.

    The shift from desktop computers to tablets and smart phones in education has been ongoing for many years now. I first noted it just after the iPhone first appeared but dismissed it as a fluke. The iPad changed my thinking. I must address this market.

    The difficult part for me is not so much spotting trends because I am deeply involved with everything going on, but finding the means to adapt. Small businesses have small budgets. Moving our software from computers to tablets is a huge undertaking for us. We already spent a year on phase one of this effort. The result is a more potent, faster, and slicker product on all platforms.

    Rewriting our 50,000 lines of software is not an option. We’ve been seeking alternatives. Because we use the most popular computer language on the planet, they’ve been coming, but slowly. We’re now involved in phase two of our plan. I hope that a good migration path is ready when we start phase three, the actual coding and deployment for multiple, incompatible platforms.

    I could go through examples of previous adaptations to change that we’ve made, but these were too technical to explain well in this forum. I’m simply pointing out that the buggy whip problem has two faces. One is recognition of the trend. The second is finding a way to adapt. Sometimes, the latter is much more difficult than the first for a variety of reasons that may be technical, cultural, and/or merely financial.

  • Michael

    Opposable thumbs:
    The thing that makes capitalism so dominant is the ability to adapt and respond.It has been proven that studying data “trends” will show you you whatever you want to find. Investing in trends is a slippery slope that I stay away from. The fundamentals have not changed in 300 years…

  • Tim Nguyen

    I started my first business at 18. Back then I was the “youngin” who knew what the future was supposed to look like. But now, here I am relatively young at 33, and I feel sooooo behind. Even our 26 year old co-founder at times seems like a dinosaur. I didn’t quite realize this until I spent more time with my now 18 year old sister.

    This reminds me of a way I live my life that I often times forget… that, in order to sell to consumers you have to be a consumer yourself.

    For example, my wife and I love waiting in line even when we may know the owner of the venue we are attending, because you have to use all your senses and experience everything from the consumers perspective… otherwise lose it and your view of the world.

    I don’t believe reading reviews, and even talking to others is quiet enough. I’d recommend jumping into it head first. Buy it, use it and be it.

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