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Cannibalisation

No – don’t worry… we’re not talking about the traditional meaning of the term. Many companies these days are full of great ideas. The all to often problem is that when these ideas are raised internally the senior managers look disapprovingly upon the idea because “that has the potential to replace our existing venture stream!!”. I can remember once I was straight out of university and I was working for a large multi-national company, helping them to design a new product. I conceived an idea that had the potential to radically disrupt the industry and my brief was to test the market. But then I heard those words “But we don’t want to kill our existing revenue…”

 

Recently I was having a laugh over at Tom Fishburne’s blog and I came across this little article he wrote. I love the way he can represent business problems through genuinely funny comics but still make a great point.



“If you don’t cannibalize yourself, someone else will,” Steve Jobs famously said.

Cannibalisation risk is a major factor in evaluating innovation. No product is 100% incremental so we have to decide whether new products will more than offset the sales loss of what’s already on the shelf. What’s often left out of the equation though is the risk of our current products becoming obsolete no matter what we do.

Kodak invented the first digital camera in 1975, over a decade before the first high-resolution digital camera was on the market. At the time, the Kodak film business was highly popular and profitable. This was two years after Paul Simon sang “Mamma don’t take my Kodachrome away”. Why would Kodak ever want to jeopardize that cash cow?

In the thirty plus years after inventing the first digital camera, Kodak resisted the shift from analog to digital at every turn. That strategy culminated in Kodak’s Chapter 11 filing earlier this year.

Apple has always preached creative destruction. Imagine the cannibalisation analysis to launch the first iPhone when you have a phenomenally successful iPod already in the market. But that decision kept Apple ahead of the game.

Ultimately we can’t treat any of our products as sacred because our competitors surely won’t. If we want our products to succeed, sometimes we have to risk sacrificing them.

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