Blinders are placed on a racehorse to keep it focused on what is in front and not get distracted by the crowds during the race. In business, while it is good to be focused, it is perilous for a company to rest on its laurels and under-estimate the impact effected by the changes in the marketplace, particularly the pervasive internet technologies.
The Yellow Media Group, a Montreal firm in the directory business, is a victim of its own success. The company produces the bulky Yellow Pages which used to sit by the telephone in every Canadian household. Unfortunately, the near-monopoly market Yellow Media has in the print medium did not carry over to the online market. The company has divested pieces of its business to pay down debt. It has halted the dividend payments. Its share price hovers around $0.20, a 98% dive from its high of $17. Yellow Media’s demise is attributable to:
- A myopic view of business—a healthy stable stream of revenue in the near-monopoly print directory market enticed the company to build national dominance in that space. Yellow Media paid a hefty price, over $2 billion, to secure its national reach in 2005. At that time, e-commerce and the internet were widely accepted in conducting business. The debt incurred to gain dominance in a declining industry was a poor decision.
- Underestimated power of the internet and its competition—Yellow Media continued to convey confidence in the print directory business despite the declining print advertising spend over the years. The internet is a game changer, which not only changed how business is done, but spurred innovative ways for companies to market their products and services. The intense competition in online advertising, not to mention powerful players such as Google, has Yellow Media scrambling for a piece of the market.
- Slow transformation—Yellow Media started to offer online classified advertising in 2006. It also offers search engine optimization, application for mobile devices, and website development. The transformation was slow. Revenue from digital services accounts for a mere 25% of the total revenue in 2011. The growth in digital revenue was not high enough to offset the steady decline in print revenue.
To avoid the demise of Yellow Media,
- Be in touch with your customers—it is not sufficient to know who your customers are; you need to know why they do business with you. Engage in frequent dialogues to learn about their needs, preferences, dislikes, consumption of complementary products and services, how they purchase, etc. For example, Yoox is an online store which offers end-of-season clothing and accessories from the world’s most prestigious designers. Its selection is hard to match. The pricing is a bargain for designer clothing. The return policy is hassle-free. If you were Holt Renfrew, how do you retain your existing customers and remain competitive?
- Be discreet with trends—the digital eco-system has created new markets that one could not envision. Some have direct or indirect impact to your business. Pay attention to the trends which pose high risk to your customer base and be wary of those lurking around that would affect your customers, suppliers and business partners. If you were a supplier to Yellow Media, how would your business be affected? If you were in the courier business, what competitive advantages can you create, in collaboration with online businesses, to leverage and drive e-commerce growth?
- Be objective—challenge the conventional wisdom in your business. Do not rest on your laurels as customers are fickle. The constant bombardment from advertisements and alerts from social media alters purchasing decisions quickly. It is more challenging to sustain success today without reinventing your business. Group think gives you the warm and fuzzy feeling but it might steer you down the wrong path. Consider the effects the iPad has in the consumer markets, in health care, aviation, and education; could your business ignore these changes?
We have witnessed how the internet technologies rendered successful companies irrelevant. Some have closed their doors permanently. Others continue to struggle to acquire a piece of the intensely competitive market. Blockbuster and HMV Canada are two examples. Therefore, remove the blinders that pigeon-hole your business; take an impartial and objective view of the competitive landscape and craft your winning strategy.