Friday, February 16, 2007

The Age Of Marketing Insurgents

Identity Crisis -Why Incumbents Lose Their Advantage

By David Miranda

The evidence is pervasive. Major incumbents, representing almost every business segment, have been losing their long-held competitive advantage in the marketplace. The perpetrators of this erosion have been insurgents-small, but keenly focused and aggressive competitors who have identified the bureaucratic Achilles Heels of the big guys - arrogance, ignorance, resistance to change, indifference, and resting on one's laurels. Take your pick of one of more.

Examples abound. Some old, some new, some soon to make their case.

Take the newspaper and magazine industries. Once the unchallenged incumbents of the fourth estate, both in circulation and advertising. Today, declining circulation with the resulting effect on revenue. The insurgents? Craig's List, eBay, Google, Yahoo, news sites, blogs, to name a few. The head of the New York Times said recently, he does not expect the Times to be printed within five years going all digital. Time Inc., the world's largest magazine publisher has recently undergone its second major round of employee cuts. Time magazine, the flagship brand, has recently reduced it advertising rate card circulation from 4 million to 3.25 million and announced more resources dedicated to its online efforts.

Take the real estate and travel industries. These once heavily intermediated industries have been disintermediated. On the travel side, agents are on the endangered species list driven out by both internet travel agents (Expedia, Travelocity, Orbitz, etc) as well as the web sites of the travel providers themselves. Real estate agents are being circumvented by the likes of, and with the ability to both buy and sell their homes on the Internet.

The music industry once tightly controlled and marketed by the large record labels have seen, what started with Napster, evolve into various and sundry distribution channels they never imagined a short decade ago. The internet has provided a channel for new talent to find an audience and distribute content. iTunes has become the most powerful music distribution channel in the world. As we witnessed the end of the LP, the 8-track, and the cassette. We are now witnessing the demise of the CD. A similar situation can be found in the movie industry.

These are just some examples of insurgents taking it to incumbents.

But what are incumbents to do? The answer lies in the brands they developed and nurtured - brands that they have taken for granted and underutilized in their battles with the insurgents.

The incumbent brands need to understand their underlying attributes, their real raison d'etre. The New York Times, for example, is not a newspaper. It is a news organization with a rich and storied tradition of award-winning journalism and commentary. It is a valued curator of the news. The newspaper has just been a means to distribute the content, just like film was a means to distribute photos. As long as newspapers see themselves as newspapers, insurgents will win.

The music labels are music discoverers, mentors, and distributors of talent to music audiences. They are not producers and distributors of CD's. Like newspapers, the CD is just a means to an end. It is the end that matters. Until they learn this, the insurgents will win.

Incumbent brands must understand and learn from the past. The railroads thought they were in the trains and tracks business. They were in the mass transportation business and if they had learned this sooner they might have recognized the opportunity and threat of the airlines. If the old movie moguls has realized they were in the entertainment business, not the movie business, they would have recognized the opportunity and threat of television.

Incumbent brands, instead of chasing insurgents, first need to look inwardly.

What business are you really in? Chances are an insurgent is lurking to take it?