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Train Tracks

Posted by David Humphrey on 12 July 2016 | Comments

Remember that movie where a group of boys are walking along the train tracks on their way to an adventure? One of the boys stops and puts his ear to the tracks to listen for an oncoming train. But, in typical movie drama, the boys realize too late that not only is the train coming, it is just around the corner and bearing down hard, often while the boys are on a bridge or someplace difficult for them get to safety. In business, there is always a train coming, often taking the form of a younger, faster, smarter person with a new approach (e.g. Facebook) or an app that disrupts the status quo (e.g. Uber). The train may be a larger well-funded national company that chooses to enter a new market (e.g. XFINITY Home Security). If owners are not diligent, that train will overrun their business and industry before they can react.

In 2000, Blockbuster Video was the dominant movie rental business in the country. They had preferential relationships with movie houses and set the trends for new release guarantees, reservations and many other innovations. Reed Hastings had a different approach. Customers pay a flat monthly fee for as many movies as the family can watch.  When the first movie is returned, a new movie is mailed to the family automatically from their “watch list”. Under this plan, there were never any late fees—ever. Netflix put the dominant player in the movie rental industry out of business in less than 10 years. When Netflix was only two years old, they offered to sell their concept to Blockbuster and were soundly rejected.

On a local level, the regional home security monitoring companies now need to compete with the national power of Comcast, local radio stations need to compete with SiriusXM radio and the local hardware store with Lowes. Machine shops that once counted on sales from the local Fortune 500 company now complete with operations in Mexico.In our introduction story about the distributor whose value dropped by $5 million, our analysis suggested that the cost to modernize the facility would have been only about $500,000. However, by the time we became involved, it was too late as they had already lost several key customers.

As a business owner, you need to have your ear to the tracks to make sure your business is viable today, tomorrow and for the foreseeable future. Businesses need to consistently reinvent themselves and update their processes and procedures to meet future demands. Without innovation and vigilance owners may find themselves pausing to put their ear to the tracks only to learn it is too late.


If you are interested in learning other ways to increase the value of your business, The Art Of Business Value Enhancement is a Must-Read!  Click here for more information.