For more than 60 years millions of us browsed, socialised and bought music in record shops. New formats were introduced in this period but the relationship between the record labels, the stores and the consumer did not fundamentally change in that period.
1996 saw the introduction of the first commercially available MP3 player. I remember being given my first MP3 player in 2000, it was compact and could carry a small number of songs, but it wasn't very robust and soon broke. At the end of 2001 Apple introduced its first iPod, swiftly followed up with a version that could work on Windows in 2002. By 2006 more MP3 players were sold in mobile phones than standalone MP3 players.
The last-man-standing of the high street record shop chains, HMV, reported a slump in sales for yet another year in a row. They cite competition from supermarkets and online retailers plus the shift away from CDs to downloads as key reasons. They are now desperately trying to shift their business towards the sale of technology such as MP3 players and tablets, but they have left it too late. They should have started shifting their focus 10 years ago.
Amazon, one of reasons for their downfall, built their business off the back of selling books and DVDs. Recognising that DVD and paper-based book sales are in decline they started offering products in other categories, but that was not enough, they also needed to make some key strategic decisions: the development of the Kindle and the acquisition of LoveFilm being examples. As a retailer, why fight the shift to digital downloads when you can spearhead it? Ironically, the development of the Kindle has sped up the shift towards digital books, but it is this kind of strategic and innovative thinking that is going to ensure that Amazon will thrive.
What is catching businesses out, and retailers in particular, is the exponential effect. There comes a tipping point when suddenly a trend or technological development takes hold and change happens faster than anyone can imagine or keep up with. That little piece of plastic I was given in 2000 that held a few songs and broke on me after a few weeks was just a tiny drop in the ocean but that little drop created waves that became a Tsunami for the music industry. For nearly 60 years the high street record shop thrived, it took just 10 years for them to all but disappear and the speed of their demise accelerated at such a pace with the introduction of the iPod that, by then, it was too late for them to react. Just reflect for a moment that the iPod is not even a teenager yet but it completely transformed the music industry.
As a business executive it is easy to stay in your comfort zone and stick with what you know plus there is always risk in innovation. Sticking your neck out when you have a mortgage, a family to feed and a career to protect can be scary, so businesses need to create a culture where innovation and risk is more acceptable if they don’t want to get caught out by the X-ponential-Factor.
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Liz has been in digital marketing since its inception. She is Chief Marketing Officer of Quercus and a director of Savvy Social and entertaining:tv, businesses that focus on social media, video and shopper marketing.