The Ultimate Business Irony

by | May 21, 2012 | Archives

The Ultimate Business Irony Brings Us Opportunity.

This ad on YouTube by Sony is the ultimate business irony because YouTube may be responsible for putting Sony Pictures out of business.

In 1989, Sony Corporation purchased Columbia Pictures Entertainment, Inc.   Then later they created Columbia TriStar Pictures by merging Columbia Pictures and TriStar Pictures. Then they expanded growth by acquiring the Hollywood studio, Metro-Goldwyn-Mayer.  They have built a huge film production business but are in trouble.

24/7 Wall St. has created a new list of brands that will disappear in 2012, which includes Sony Pictures.  An article at the 24/7 website says:   Sony has a studio production arm which has nothing to do with its core businesses of consumer electronics and gaming. Sony bought what was Columbia Tri-Star Picture in 1989 for $3.4 billion. This entertainment operation has done poorly recently. Sony’s fiscal year ends in March, and for the period revenue for the group dropped 15% to $7.2 billion and operating income fell by 10% to $466 million. Sony is in  trouble. It lost $3.1 billion in its latest fiscal on revenue of $86.5 billion.

This is in part due to YouTube and other similar competitors creating increasing amounts of their own content.

An excerpt from a Bloomberg Business Week article entitled “Must-See YouTube” explains why:  Late last year, Google’s (GOOG) video-sharing site announced it would spend $100 million to support video programming. YouTube is funding filmmakers, artists, writers, and proven online hitmakers with grants that range from a few hundred thousand to a few million dollars. It will eventually have about 100 new channels.

By building a library of professionally produced programming that is closer to Charlie’s Angels than to “Charlie Bit My Finger,” Google hopes to attract more viewers, reduce the need to negotiate with Hollywood studios, and woo some of the big-name advertisers who have been reluctant to put their products next to cat videos.

YouTube’s competitors also are focusing on original, Web-exclusive content to lure viewers and advertisers—and to get around the major studios that produce most of the nation’s entertainment. Netflix is streaming its mob drama Lilyhammer and has new shows in the works from The Social Network director David Fincher and Weeds creator Jenji Kohan. It also bought the rights to new episodes of the cult TV hit Arrested Development. Hulu is producing a faux-documentary sitcom, Battleground, set in the world of Wisconsin politics. The creative development arm of (AMZN), Amazon Studios, recently said it would start soliciting ideas for children’s and comedy programming and back the best proposals.

YouTube, the dominant online video site with 181 million monthly visitors in the U.S., may have the most to gain. For years the site has tried to secure studios’ permission to stream Hollywood material on the Web—and has little to show for it other than a slow-moving copyright lawsuit brought by Viacom (VIA). “We could have bought their content and given them deals that were good for them and lost a large amount of money,” says Google Executive Chairman Eric Schmidt. “That is not how Google works.” James McQuivey, an analyst with Forrester Research (FORR), says the channels venture is “nothing less than the circumvention of the monopoly control” Hollywood has over premium content.

YouTube is betting there’s an entire class of material that might languish on cable but will find an audience on the Web.

This is also why big store book sellers are going down the drain and big publishing companies too.

Take for example  the Encyclopedia Britannica. It is regarded as one of the most scholarly of English language encyclopedias.  And the publishers have been progressive.  The Britannica is the oldest English-language encyclopedia still being produced. It was first published between 1768 and 1771 in Edinburgh, Scotland.  In 1933, the Britannica became the first encyclopedia to adopt “continuous revision”, in which the encyclopedia is continually reprinted and every article updated on a schedule.

Yet in 2012, the company stopped  publishing its printed editions and now is only online.

To succeed and remain successful businesses have to continually adapt.

A Harvard Business Review article (linked below) reminds us of this fact in an article entitled “Reinvent Your Business Before It’s Too Late”  by Paul Nunes and Tim Breene.

Here is an excerpt: Sooner or later, all businesses, even the most successful, run out of room to grow. Faced with this unpleasant reality, they are compelled to reinvent themselves periodically. The ability to pull off this difficult feat—to jump from the maturity stage of one business to the growth stage of the next—is what separates high performers from those whose time at the top is all too brief.

The potential consequences are dire for any organization that fails to reinvent itself in time. As Matthew S. Olson and Derek van Bever demonstrate in their book Stall Points, once a company runs up against a major stall in its growth, it has less than a 10% chance of ever fully recovering. Those odds are certainly daunting, and they do much to explain why two-thirds of stalled companies are later acquired, taken private, or forced into bankruptcy.

There’s no shortage of explanations for this stalling—from failure to stick with the core (or sticking with it for too long) to problems with execution, misreading of consumer tastes, or an unhealthy focus on scale for scale’s sake. What those theories have in common is the notion that stalling results from a failure to fix what is clearly broken in a company.

Having spent the better part of a decade researching the nature of high performance in business, we realized that those explanations missed something crucial. Companies fail to reinvent themselves not necessarily because they are bad at fixing what’s broken, but because they wait much too long before repairing the deteriorating bulwarks of the company. That is, they invest most of their energy managing to the contours of their existing operations—the financial S curve in which sales of a successful new offering build slowly, then ascend rapidly, and finally taper off—and not nearly enough energy creating the foundations of successful new businesses. Because of that, they are left scrambling when their core markets begin to stagnate.

About the Research

In our research, we’ve found that the companies that successfully reinvent themselves have one trait in common. They tend to broaden their focus beyond the financial S curve and manage to three much shorter but vitally important hidden S curves—tracking the basis of competition in their industry, renewing their capabilities, and nurturing a ready supply of talent. In essence, they turn conventional wisdom on its head and learn to focus on fixing what doesn’t yet appear to be broken.

Thrown a Curve

Making a commitment to reinvention before the need is glaringly obvious doesn’t come naturally. Things often look rosiest just before a company heads into decline: Revenues from the current business model are surging, profits are robust, and the company stock commands a hefty premium. But that’s exactly when managers need to take action.

The Harvard article links to a Yale Press article entitled “Stall Points – Most Companies Stop Growing–Yours Doesn’t Have To” that says:   Very few large companies manage to avoid stalls in revenue growth. These stalls are not attributable to the natural business cycle. Rather, careful analysis reveals that the vast majority of such stalls are the direct result of strategic choices made by corporate leaders. In short, stoppages in growth are almost always avoidable. This extensively researched book analyzes the growth experiences of more than six hundred Fortune 100 companies over the past fifty years to identify why growth stalls and to discover how to rectify a stall in progress or, even better, avoid one.

This article points out:   Top Four Reasons a Firm May Stall:

• Premium position captivity

• Innovation management breakdown

• Premature core abandonment

• Talent shortfall

This article also leads to the Stall Point Initiative  that drives a global network of more than 14,000 executives from 80% of the Fortune 500 and more than 4,700 leading corporations and not-for-profit organizations. Our membership programs encompass all major functional areas of the large corporate and middle-market sectors.  This site offers a “Red Flag Diagnostic” aimed at helping CEOs spot danger signals in the evolution of their business.   I took the test and let me hasten to add not because it is meant for our tiny business.

The questionnaire leading to the diagnostic starts by asking the size of the company  and the numbers are large.   The smallest companies are sales of $500 million or more… way… way above my pay grade.

However… guess what.  Big businesses are ruled by the same laws of nature as we little folk so we can transform… ie. step down…  so the questions do apply to all of us.

Here is an example of three of the 50 questions in the diagnostic and what they mean to us.

Big Corp Question #1: Our earnings growth rate has outstripped our revenue growth rate for five or more years.

Stepped Down Question #1 for We Little Folks: We are penny pinching so we have more and more money in the bank… but we are not reinvesting in ourselves.

Big Corp Question #2: Our core business reinvestment rate (R&D + CAPX + advertising divided by revenue) falls below its historic range.

Stepped Down Question #2 For We Little Folks:  We are not even trying to improve the existing things we already are doing.

Big Corp Question #3:  Our dividend payout ratio exceeds 30 percent.

Stepped Down Question #3 For We Little Folks:  We are spending too much and investing too little.

We all need to evolve and adapt. How is the question.  Take a look at the Stall Point Initiative’s Big Business Red Flag Diagnostic and step the questions down to fit your own business and life.  That transformation could transform your life!


Technology is changing business at a rapidly increasing pace.

This is why our courses on how to earn globally never end and include regular updates that look at what we are doing in business ourselves.

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See 24/7 Wall Street’s list of businesses that will disappear in 2012.

Bloomberg’s Must-See YouTube

Harvard Business Review Reinvent Your Business Before It is Too Late

Yale Press  Stall Points  – Most Companies Stop Growing–Yours Doesn’t Have To

Stall Point Initiative