The Big Picture of Business: Critical Decision

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Ceasing CD production will harm an already ailing music industry, where technology is not the answer: Analyzing the music industry and changing technologies.

Certain forces in the recording industry have announced intentions to cease production of compact discs and convert their music marketing to digital downloads. trimming the fat and criticizing incorrect activities in the organizational structure.

That is a dangerous course of action and stands to further devastate a music industry that has systematically killed the golden goose over many years.

The CD issue (including those who advocate obliterating the medium) is symptomatic of the bigger watersheds that have crippled and ruined large chunks of the music industry:

  • Not understanding the business basics.
  • Taking decisions away from the creative people.
  • Focusing only on the technology, not on the creative output.
  • Not understanding the totality of the music industry, with recording as a prime stakeholder, not as the stake driver that it tries to be.
  • Failure to learn from the past.
  • The trends toward over-formatting of radio.
  • Failure to understand and nurture the relationship with radio.
  • Failure to understand and nurture the relationship with television.
  • Deregulation of broadcasting.
  • Failure to collaborate, bundle products or combine efforts to create and sustain advantage.
  • Failure to understand and nurture relationships with the retailing industry.
  • Failure to plan for the present.
  • Trends toward homogenization of culture that resulted in drastic cuts in the quantity and quality of original music programming available.
  • Trends away from utilizing and showcasing music.
  • Trends away from spoken word and educational usage of recordings.
  • The music industry responding to changes and uncertainty by scapegoating the wrong people.
  • The international marketplace responding as entrepreneurs by taking up the slack and addressing the ‘missed opportunities’ by the American music industry.
  • Making knee-jerk decisions based upon partial information and wrong hunches.

In 1877, Thomas Edison introduced the cylinder, developed originally for business office use. It was the earliest Dictaphone, whereby messages would be recorded by a needle on a rolling tube. In 1888, Emile Berliner invented the phonograph record, for the purpose of transporting music to consumers. Columbia Records (now Sony) was founded in 1898, followed by RCA Victor Records in 1901. Edison missed his chance to influence the recording industry by sticking with the cylinder medium, not converting to phonograph records until 1912 and finally getting out of the recording business in 1929.

The radio industry began as a multi-city network that piped recorded music into department stores. In 1920, the first radio sets sold by Westinghouse to promote its first station, 8XK in Pittsburgh, PA. In 1926, NBC Radio signed on the air, followed by CBS the next year. In addition to news and other entertainment shows, a large portion of radio programming was attributable to music, and a long growth relationship with the record industry was sustained. Stars came on variety shows to promote their releases, and the era of radio disc jockeys was firmly secured in the public culture.

The media of music distribution was the 78RPM record. It was bulky, breakable and limiting the amount of music on each side. Record companies put multiple discs into sleeves and began calling them ‘albums,’ the terminology still existing today. Those albums started as collections of ‘sides’ but became thematic. Further packaging enabled various-artist albums and collections of ‘greatest hits’ (those two categories currently accounting for half of all CD sales, a big chunk of business to be wiped out by going all-digital).

The two major labels went into research and development on non-breakable records that would play at slower speeds, with thinner grooves and more music on each side, producing a cleaner sound (without pops and scratches). The results were Columbia (owned by CBS) introducing the 33-1/3RPM long playing vinyl record in 1948 and RCA Victor (owned by NBC) introducing the 45RPM vinyl record in 1949. Why those speeds? They were combined derivatives of 78RPM, known by engineers as ‘the mother speed.’ Not surprisingly, today’s CDs play at 78RPM, a technological updating of Emile Berliner’s 1888 invention of the phonograph record.

The 1930s and 1940s were massive-growth periods for the recording and broadcast industries. Along came other record labels: Brunswick, Decca, Capitol, Coral and jazz imprints. Movie studios got into the record business. Entrepreneurs brought Atlantic, King and other labels to showcase black artists and country music (two major growth industries attributable to the interrelationship of radio and records). Then came the international recording industry, which is the major user of CD technology.

The 1950’s saw exponential growth of the recording industry. There were more retail outlets for the music than ever before or ever since. One could buy music at every grocery store, department store and many unexpected locations. There was an industry of sound-alike records, sold at reduced prices. The result was that all families had phonographs, and music was going into cars via radio, thus stimulating record sales and thus encouraging other technologies to bring music into cars (emerging as homes in our mobile society).

The emergence of teens as the primary record buyers was fed by TV shows, increased disposable income and recording artists catering to younger audience. Due to broad radio playlists, there was ample airplay for every musical taste, and the record industry continued to grow. Independent record labels proliferated, as did recordings by local artists around the country.

With the British Invasion of the 1960’s came the reality of the international nature of entertainment. To package and market emerging modern music, media were implemented to make the best possible sounds and reflect the plastic portability of youth traffic. Along came music available on cassette tapes, then 8-track tapes. The music industry experimented with Quadraphonic Sound, with the ballyhoo associated with the Ipod, and that experiment fell flat after one year.

At every juncture, there were transition periods in the adoption and acceptance of new media. For the first 11 years of 45RPM records and LPs being manufactured, there were still 78RPM discs on the market. Throughout the tape formats, there were still records. With the advent of Compact Discs, there were still records and cassette tapes on the market. To now rush to conversion of all music to digital downloads is short-sighted and stands to kill markets and after-markets for CDs that still have another 20 years to run.

To kill the CD makes poor business sense. 78RPMs were phased out because better technology was developed. Quadraphonic was technology glitz but did not make good business sense. 8-track tapes were only meant to be an interim medium, until CDs were developed. CDs are the dominant medium and are economical to produce.

Killing CDs is a bean counter move and is contrary to the heart of the music business. CDs enable local bands to have records. Computer downloads are convenience items and impulse purchases. People’s listening frequency and intensity is different (and significantly reduced) through computer downloads.

Nothing still says ‘record’ like a CD in a plastic case, where the album is as much in the packaging as the content material on the disc. Lose the ‘record album,’ and the music industry will never be the same.

This is the juncture where the music industry must step back, analyze their decline over the last 30 years and understand the reasons why they must create new opportunities and move forward.

If I were advising the industry, I would steer them toward:

  • Stimulating a culture where excellence in music would be encourages, thus improving the quantity and quality of music being recorded.
  • Creating a music industry where the products would be more worth buying. There are still higher profits in album sales, rather than Internet song downloads (the modern equivalent to the 45RPM single).
  • Thinking of music distribution in directions other than just the Internet.
  • Stimulating the global record industry.
  • Encouraging TV shows to once again have theme songs.
  • Encouraging movies to get back to real musical soundtracks (not just the current drum crashing noise effects). This would re-boot the soundtrack album industry.
  • Recognizing that nearly half of all record sales and downloads involves repackaging older music product for new audiences.
  • Finding ways to promote local acts around the world.
  • Working with radio programmers to get playlists expanded. Music has to have the interactive exposure via radio. Nurture programmers of internet radio shows as the best new opportunity for expanding music exposure.
  • Understanding better the after-market of music resellers, and stimulate that series of opportunities for expanding the reach of musical products around the world.
  • Recognizing downloads as ‘low hanging fruit.’ Do not put all your industry’s distribution in one area, because that one area will always change.

The much-needed regeneration of the music industry to make a comeback and reclaim its past dominance takes time, energy, resources and lots of heart to produce. Couch planning as the only way to avert a crisis. Changing technologies does not equate to planning and strategy development.

People get what they pay for… always have, always will. Things are never simple for one who must make decisions and policies. Many factors must be weighed.

One cannot always go the path that seems clearest. One who thinks differently and creatively will face opposition. With success of the concept, it gets embraced by others. Shepherding good ideas and concepts does not get many external plaudits. The feeling of accomplishment must be internal. That is a true mark of impactful changes and success.

About the Author

Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.

The Big Picture of Business: Lessons About Business Planning To Be Learned from the Y2K Bug

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The U.S. economy spent between $800 billion and one trillion dollars fixing and treating the so-called Y2K Bug. Certainly, aspects of the bug were treated successfully, and troubles were averted because of professional actions. No doubt, public hype contributed to a ‘sky is falling’ situation that made computer consultants rich.

Technology constitutes less than 1% of any organization’s overall Big Picture. Computer activity constitutes less than 1% of the technology picture. Thus, efforts to treat a fraction of one percent took resources away from addressing the other 99.999% of companies’ full-scope planning.

My concern was that money was diverted from most other aspects of organizational wellness toward treating one symptom of one disease. I advocated a balanced approach toward planning, visioning and the Big Picture.

Rather than bash those who neglected other aspects of the organization in favor of Y2K Readiness, let’s refocus what we did and learned toward other future applications.

Among the lessons which we learned from the Y2K Bug exercise were:

  • When they want to do so, company leadership will provide sufficient resources to plan for the future, including crisis management and preparedness (of which computer glitches are one set of ‘what ifs.’)
  • When they want to do so, company leadership will provide leadership for change management and re-engineering… two of the many worthwhile concepts that should be advocated every business day.
  • People are the company’s most valuable resource, representing 28% of the Big Picture. Today’s work force will need three times the amount of training that it presently gets in order for the organization to be competitive in the millennium.
  • Change is good. Like change… don’t fear it. Change is 90% positive. Without always noticing it, individuals and organizations change 71% per year. The secret is to benefit from change, rather than become a victim of it.
  • Pro-active change involves the entire organization. When all departments are consulted and participate in the decisions, then the company is empowered.
  • Fear and failure are beneficial too. One learns three times more from failure than from success. Failures propel us toward our greatest future successes.
  • When we work with other companies and the public sector, we collaborate better. All benefit, learn from each other and prepare collectively for the future.
  • In the future and in order to successfully take advantage of the future, make planning a priority, not just a knee-jerk reaction.

Calculating Each Organization’s High Costs

People and organizations are wont to throw money at things that pop up at the moment or that look good at external publics. It is easier to tinker with machines than to admit that the organization has deep management and philosophical issues. After all, 92% of all organizational problems stem from poor management decisions.

Our society is infested with the band-aid surgery way of treating things as they come up. This approach costs six times that of doing things correctly on the front end… meaning planning, sequential execution and benchmarking progress.

Each year, one-third of the U.S. Gross National Product goes toward cleaning up problems, damages and otherwise high costs of doing either nothing or doing the wrong things.

On the average, it costs six times the investment of preventive strategies to correct business problems (compounded per annum and exponentially increasing each year). In some industries, the figure is as high as 30 times…six is the mean average.

The old adage says: “An ounce of prevention is worth a pound of cure.” One pound equals 16 ounces. In that scenario, one pound of cure is 16 times more mostly than an ounce of prevention.

Human beings as we are, none of us do everything perfectly on the front end. There always must exist a learning curve. Research shows that we learn three times more from failures than from successes. The mark of a quality organization is how it corrects mistakes and prevents them from recurring.

“They can’t hang you for saying nothing,” quipped President Calvin Coolidge in the 1920’s. He spent more time doing chores at his farm and taking long naps than taking care of the nation’s business. Coolidge prided himself upon doing little and, thus, failed to see crises brewing during his presidency. This ‘keep your head in the sand’ mentality is prevalent of people who move on and let others clean up the damage.

Doing nothing becomes a way of life. It’s amazing how many individuals and companies live with their heads in the sand. Never mind planning for tomorrow… we’ll just deal with problems as they occur. This mindset, of course, invites and tends to multiply trouble.

7 Categories of High Costs

  1. Cleaning Up Problems. Waste, Spoilage. Poor controls. Down-time. Lack of employee motivation and activity. Back orders because they were not properly stocked. Supervisory involvement in retracing problems and effecting solutions.
  2. Rework. Product recalls. Make-good for shoddy or inferior work. Poor location. Regulatory red tape. Excess overhead.
  3. Missed Marks. Poor controls on quality. Fallout damage from employees with problems. Undercapitalization. Unsuccessful marketing. Unprofitable pricing.
  4. Damage Control. Crisis management. Lawsuits incurred because procedures were not upheld. Affirmative action violations. Violations of OSHA, ADA, EEOC, EPA and other codes. Disasters due to employee carelessness, safety violations, oversights, etc. Factors outside your company that still impede your ability to do business.
  5. Recovery and Restoration. Repairing ethically wrong actions. Empty activities. Mandated cleanups, corrections and adaptations. Employee turnover, rehiring and retraining. Isolated or unrealistic management. Bad advice from the wrong consultants. Repairing a damaged company reputation.
  6. Retooling and Restarting. Mis-use of company resources, notably its people. Converting to existing codes and standards. Chasing the wrong leads, prospects or markets. Damage caused by inertia or lack of progress. The anti-change ‘business as usual’ philosophy. Long-term expenses incurred by adopting quick fixes.
  7. Opportunity Costs. Failure to understand what business they’re really in. Inability to read the warning signs or understand external influences. Failure to change. Inability to plan. Over-dependence upon one product or service line. Diversifying beyond the scope of company expertise. Lack of an articulated, well-implemented vision.

Remediating the High Costs

7 Primary Factors of The High Cost of Doing Nothing™:

  1. Failure to value and optimize true company resources.
  2. Poor premises, policies, processes, procedures, precedents and planning.
  3. Opportunities not heeded or capitalized.
  4. The wrong people, in the wrong jobs. Under-trained employees.
  5. The wrong consultants (miscast, untrained, improperly used).
  6. Lack of articulated focus and vision. With no plan, no journey will be completed.
  7. Lack of movement really means falling behind the pack and eventually losing ground.

What Could Have Reduced These High Costs:

  1. Effective policies and procedures.
  2. Setting and respecting boundaries.
  3. Realistic expectations and measurements.
  4. Training and development of people.
  5. Commitments to quality at all links in the chain.
  6. Planning.
  7. Organizational vision.

7 Levels of Handling Problems, Determining Effectiveness

  1. Do Nothing. Think that things will work themselves out or that causes of problems will go away. Research shows that doing nothing results in creating 3-6 more affiliated problems.
  2. Deny, Actively Avoid. Don’t see problems as such. Keep one’s head in the sand and remain impervious to warning signs of trouble. Go to great lengths to put positive spins on anything that may point back to one’s self, department or organization as being problematic.
  3. Cover Up. Cover-ups cost 6-12 times that of addressing problems upfront. In addition to financial, cover-up costs can include the effects upon morale, activity levels, productivity, decision making, creativity, adaptation and innovation. Even after the cover-up has fully played out, there is an additional cost: the period of recovery and restoration of confidence.
  4. Partially Address. Perform band-aid surgery, at such time as action is demanded. Address signs and symptoms, without addressing root causes. This shows that something is being done, but it is often the wrong thing at the wrong time.
  5. Handle in Politically Correct Terms. Some problems are addressed, partially or fully, because bosses, regulators or stakeholders expect it. Some are handled for fear of repercussion. This motive results in tentative actions, with lip service paid to deep solutions.
  6. Address Head-On. Problems are, of course, opportunities to take action. Everyone makes mistakes, and success lies in the way that problems are recognized, solved and learned from. The mark of a true manager is to recognize problems sooner, rather than later. The mark of an effective leader is the ability and willingness to take swift and definitive actions. The mark of an empowered team is its participation in this process. The mark of a successful organization is its endorsement and insistence upon this method of action.
  7. Address in Advance, Preparing for Situations. Pro-actively study for patterns. 85% of the time, crises which are predicted, pre-addressed and strategized are averted. The skill in pre-managing problems is a fundamental tenet of a quality-oriented organization.

If postured properly, the process of planning and visioning remediates opportunity costs before they occur. Running a profitable and efficient organization means effectively remediating damage before it accrues. Processes and methodologies for researching, planning, executing and benchmarking activities will reduce that pile of costly coins from stacking up.

About the Author

Hank Moore has advised 5,000+ client organizations worldwide (including 100 of the Fortune 500, public sector agencies, small businesses and non-profit organizations). He has advised two U.S. Presidents and spoke at five Economic Summits. He guides companies through growth strategies, visioning, strategic planning, executive leadership development, Futurism and Big Picture issues which profoundly affect the business climate. He conducts company evaluations, creates the big ideas and anchors the enterprise to its next tier. The Business Tree™ is his trademarked approach to growing, strengthening and evolving business, while mastering change. To read Hank’s complete biography, click here.

Guardrails: Keep Your Projects Out of the Weeds

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StrategyDriven Strategic Planning ArticleThink about if there were no guardrails on the freeway. It would be all too easy to run off the road and find yourself hurt and way off the fast track to your end destination.

Business is a fast and zigzagging road – a road that needs guardrails to keep businesses and projects on track. On your road to success (whether it be to increase profits, become an industry leader, capture more market share, etc.), you need to establish your own guardrails so you do not drive your company or project into the weeds.

Establish Guardrails

I worked in several large companies during my corporate career, and I can’t tell you the number of pet projects that became my pet peeves. I saw literally millions and millions of dollars flow into projects that had no real metrics and timeline in place. In other words, these projects had no guardrails.

You can ensure that your projects don’t waste time or money by simply putting the correct boundaries in place. You must think, “this is what we’re trying to drive to and if we don’t get to it at this point, we’re going to go back to the drawing board to go after the next idea.”

Proper Boundaries

To establish proper boundaries, you must do the following:

  1. Identify the major steps (or zig zags) that will take you to your goal. Example: Zig #1: Drive to profitability – have product bring in $20K in revenue.
  2. Define when you have completed your zig zag. Example: We will have sold 15K units of product.
  3. Set a deadline to assess your team’s progress. Example:We will have sold 15K units of product and bring in $20K in revenue by April 2012, or we will go back to the drawing board.

Zigzagging to Success

Establishing guardrails is just one element of the entire Zig Zag Principle. I encourage you to be strategic and deliberate about the way you approach your business. It may seem counterintuitive, but zigzagging to your goal (rather than charging straight for it), with the correct guardrails in place, will lead you and your business to success.

About the Author

Rich Christiansen describes himself as ‘a perfectly good business executive, turned entrepreneur.’ Before becoming an entrepreneur, he was a skilled executive and market innovator in the corporate world. He was General Manager at both Mitsubishi Electric and About.com. After 20 years in the technology industry, he discovered that his true passion and talent is in launching start-up companies.

Rich has founded or co-founded 32 businesses. These ventures were bootstrapped with just $5,000 to $10,000 of starting capital. Eleven of those businesses were miserable failures, but eleven have became wildly successful multi-million dollar businesses. Rich has identified The Zig Zag Principle as his secret formula for optimizing success while minimizing failure. It is also his methodology for setting goals and living a happy, healthy life. To read Rich Christiansen’s full biography, click here.

Recommended Resource – What I Didn’t Learn in Business School

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What I Didn’t Learn in Business School: How Strategy Works in the Real World
by Jay B. Barney and Trish Gorman Clifford

About the Reference

What I Didn’t Learn in Business School: How Strategy Works in the Real World by Jay Barney and Trish Gorman Clifford reveals the shortfalls of the principles learned in the idealistic academic environment when applied directly to the messy, unpredictable and politically charged business world. Through a storied approach, Jay and Trish reveal the inadequacies of modeling to fully predict business outcomes and the challenge of creating alignment among leaders with differing points of view and personal agendas. They go on to illustrate the power of moving leaders past the limits of these barriers and their own collective experience to gain significant marketplace advantages and organizational prosperity.

Benefits of Using this Reference

StrategyDriven Contributors like What I Didn’t Learn in Business School because it so clearly illustrates the premise for our website, namely, that while highly beneficial, academic principles must be adapted from the ideal environment of the classroom to the unpredictable environment of the shop floor in order to provide real value to any organization. Furthermore, no single model or performance measure can adequately portray a given situation in such a way that a definitive decision can be made. Rather, multiple models and measures should be employed to create a complete picture of performance from differing perspectives to enable robust decision-making.

Its well supported, fully illustrated assertion that strong business performance is achieved through the application of sound academic principles tempered by real-world business experience makes What I Didn’t Learn in Business School a StrategyDriven recommended read.

StrategyDriven Podcast Video Edition 2 – What makes an organization StrategyDriven?

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StrategyDriven Podcasts focus on the tools and techniques executives and managers can use to improve their organization’s alignment and accountability to ultimately achieve superior results. These podcasts elaborate on the principle, best practice, and warning flag articles found on the StrategyDriven website.

Episode 2 – What makes an organization StrategyDriven? examines the qualities and characteristics of a StrategyDriven organization as well as the benefits these organizations realize over competing firms not so well aligned.
 


 
Learn more about how to become truly StrategyDriven by reading: The StrategyDriven Organization.

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