Can companies like HMV reinvent themselves?

Businesses have had to confront change since the dawn of time: 

There were sledge makers who felt the squeeze when someone annoyingly went and invented the wheel. 

England's Longbow men, so successful at Agincourt in 1415, got right royally stuffed by the Frenchies in 1453 when they sneakily brought along cannons to the battlefield and managed to slaughter 4000 of Les Rosbifs; I would imagine there wasn't quite the same demand for Longbow makers by 1454. 

Richard Arkwright, the father of modern manufacturing, came up with his ingenious 'Spinning Jenny' in 1775, which put the kibosh on the hand-spinning cotton business.

So change is inevitable in nearly every business but somewhat bizarrely most businesses are appalling at dealing with it. Maybe because we are only on this planet for three score years and ten, (or a bit more if we're lucky), we're not very good at identifying change and we rather like the status quo, so we tend to think businesses will stick around for ever.

In fact a study by the London School of Economics of the top 100 companies between 1912 and 1960 showed quite the contrary; 50% of them disappeared and 25% of them went bankrupt!

So when you think about it (and I have quite a lot), it would make sense for a company to employ a person within the organisation whose sole role is to identify transformational change. They wouldn't have to work within the normal strictures of the business; they would have free license to roam; they would have access to the top brass, and their views would carry considerable clout.

Conversations might go like this:


"I've seen this person making circular things out of stone in a cave in the next valley. I think it's going to badly affect the dragging business'.

"I've heard of a new invention coming from China, it can project balls of metal huge distances. I think it's going to make arrows look a bit puny"

"I've come across a patent for a Spinning Frame by this chap Richard Arkwright. It's not looking good for the cottage industry".

Or indeed as I and my colleagues said to HMV in 2002, "I think the biggest threat to your business is the internet and specifically downloading. It's not looking good for CD sales".


However, very few businesses want to hear this kind of news and often when huge change is just around the corner coincides with making the biggest profits. Everything appears to look rosy, "We just had an order for 20 sledges; we just delivered 4000 Longbows; we can't find enough cottage workers; (or in the case of HMV) we just IPO'd and are worth £2billion".

But some companies do manage to transform and reinvent themselves and it's not always obvious why but let me try and put my theory forward and see what you make of it.

In 1890 there were 13,000 businesses in the USA linked to the wagon and carriage industry but a few years later, the internal combustion engine had done for most of them ("I've seen someone driving around in this carriage without a horse").

Amongst those 13,000 businesses were an awful lot of buggy whip makers - a buggy whip is the thing that gets the horse moving and in 1960 Professor Theodore Levitt, a Harvard Business School Professor wrote a paper called, 'Marketing Myopia', in which he put forward the theory that if buggy whip makers had concentrated on their customers’ needs, not on specific products and thought of themselves as being in the 'personal transportation' business, providing a stimulant or catalyst to an energy source, they might have survived into the automotive era. 'Marketing Myopia' got reprinted hundreds of thousands of times and 'focus on the customers' needs' got accepted in to marketing wisdom. But the problem is that he was wrong.

Some companies did survive the arrival of the horseless carriage but they weren't the ones who thought of themselves as in the 'transportation business', they were the ones who had skills and expertise which could easily be adapted to anything that moved. Companies like the Timken Company (a Fortune 500 company today), which made roller bearings for carriage wheels and could readily adapt to making automotive parts.

Most buggy whip manufacturers and carriage makers (who worked in wood), simply faded away; however a notable exception were the Studebaker Brothers, who had started as a blacksmith shop in 1852 and managed to buy in the precision metal working skills needed to adapt to the automotive industry. Studebaker lasted until the mid-sixties.

So coming back to my theory, I don't think HMV would have survived if it had thought of itself as in the 'entertainment industry' and indeed latterly it tried to adopt this positioning. What it completely lacked in 2002 was any understanding of the internet, either theoretical or technical. HMV were outstanding shopkeepers: they understood merchandising, stock control, hiring music savvy staff and all the other myriad of skills necessary to be a good bricks and mortar retailer. But these skills were not readily adaptable to the internet and even less adaptable when physical product actually started moving in to the ether.

So listening to your customers' needs is no doubt very important but they are definitely not the people who are going to tell you that transformational change is about to knock on your door. Your customers don't know it's coming and only after they've seen it will they want it!

So make it someone's job to spot transformational change, to identify the necessary skills and expertise you are going to need, and importantly to act on it, otherwise you too will be a Kodak, a Polaroid, or an HMV.

You might be interested to know that there is one buggy whip company which survived and is still in business today; it's the The Westfield Whip Company, founded in 1884 and doing rather nicely thank you very much.

So who knows, maybe there will still be room for one record store in a hundred years time.