Counselor Magazine August 2012 : Page 84Innovation X Canton: Everyone thinks that their suc-cess is going to be forever. Maybe last year sales were flat but they did OK, and the year before that sales were down and this year they’re up a little bit. This industry is not growing, but it’s fairly stable. X Counselor : Which doesn’t sound too bad. X Canton: That’s the kind of success that was happening to car companies in the ’80s, when I said, “Oil is going to get more expen-sive, and you should think about making smaller cars.” They said to me, “What do you know? Everything’s selling great right now. Americans love big cars.” Success is the cur-rent barrier to change. You think it’s going to go on forever, but somebody’s going to come along and disrupt this industry. I will forecast that now. They’re going to give away products for cost to get other products sold. And then a lot of people who have been selling mugs and this and that, whose bread and butter is based on margin, are going to be disrupted. And that will happen because it’s happened in every single industry. I will say this now: 25% to 30% of the companies in this market are going to go away over the next three to five years. They won’t see the future coming. X Counselor : So what does that mean for an industry that’s always trying to attract new talent – either in seasonal or cyclical jobs or sales positions? X Canton: At the end of the day, an industry has to be innovative enough to attract Gen Y, a demographic that wants to change the world for the better and make a difference in life and is not so concerned about job secu-rity. My godson is graduating from Columbia this year and moving to China because there are more opportunities to make money in China than to stay in the U.S. That’s a kid from an Ivy League school who says, “I think there are more interesting opportunities in other nations.” My other friend’s son did the same thing. He pulled out of a degree in political science – he’s a very smart kid – and he moved to Vietnam. I think that businesses that are looking for talent, for the most part, are out of sync with the talent pool, and that’s going to be a problem. The other reason to embrace innovation is to be able to adapt around the talent, not the other way around. X Counselor : But is that really a concern for so many of the distributors in this indus-try who are more locally-focused when looking for talent? What about companies that only have one or two employees? Or work out of their home? X Canton: Take a look at companies that have business models like Yammer. It was started three years ago by a handful of guys, and now it’s generating close to $100 million with five million customers. It’s called a free-mium. Here’s a business that gives a premium service for free – an Internet social network-ing service for companies. Only two million of the five million pay for it, and they’re OK with that because they figure another three million will pay at some point. X Counselor : Are you suggesting that dis-tributors start giving away products for free? X Canton: Look, the future is smaller and smaller margins, with fewer customers, because they won’t innovate fast enough or consolidate fast enough. Out of five million customers, Yammer has two million that pay per seat, per user, and that subsidizes all the rest. And it has venture capital firms that value companies based on the size of their audience. What I’m saying is this represents the new business model. If you were in the ice business before refrigera-tion, you were doing pretty well. All of a sudden refrigeration shows up, and what do you need ice for anymore? X Counselor : Is that the only future for the ad specialty marketplace? A lot of distribu-tors pride themselves on building personal, one-on-one relationships with clients, something they say can’t be beat by low margins and Internet-based companies. X Canton: The premium business may con-tinue to be worth billions of dollars selling all kinds of products like calendars, but there may be 10 players in it. In fact, that’s the busi-ness I’ll go into. I’ll do a roll-up of all small companies and my partner will be a group of factories in China. Or maybe I own those fac-tories now and I want to disrupt everybody in this space. I’ll use aggressive social media, do innovative stuff like give away shirts that have buttons on them that can talk. I’ll buy a bunch of small companies, roll them up into a big one and justify them, because it’ll cost me little to keep the factories going in China. By the way, it’s going to be a completely Internet-based, network-based model. There will be no real estate. And I’m going to also not care about undercutting everybody because at the end of the day, I’m going to have higher premium products. AUGUST 2012 | COUNSELOR “Success is the current barrier to change. You think it’s going to go on for-ever, but somebody’s going to come along and disrupt this industry.” Dr. James Canton, Institute For Global Futures X Counselor : So you think it’s really all about innovation as opposed to steady sales growth? X Canton: I’m talking about creating a more dynamic marketplace for tripling your sales. I’m not saying, let’s give up those “sexy” mugs, those T-shirts and those USB drives. I’m not saying give up your bread and butter. I’m saying, if you want to grow your sales into new categories, look at examples like Playbutton and pay attention to other trends so the industry can have some breakout products. It’s the future of what this industry could be about. X Counselor : What do you say to the dis-tributor whose sales are increasing every year, and who is convinced he’s beating the pricing wars in a commoditized industry? 84 Publication List Using a screen reader? Click Here |
