Assets or Opportunity: Which Should Drive Your Growth Strategy?
Ever wonder why some companies were successfully launched -- and why others failed? Why one idea gets traction and makes billions -- and another struggles and eventually dies? I do.
I've spent the past 20 years working at the intersection of old and new media. In that time, I've watched entrepreneurs launch a lot of great digital companies. Most of them were not offshoots of legacy businesses. I've also watched incumbent companies launch a number of disastrous ventures based on their existing assets and see them miss the opportunity to create or own many, many successful companies.
Why did Larry and Sergey create Google and then launch AdWords? Why didn't a local media company start Groupon? Why did Reed Hastings found NetFlix? Why didn't Sports Illustrated launch or buy ESPN? Why did Steve Case build AOL? Why did the newspaper industry form the New Century Network?
The "new media" landscape has certainly been a dynamic and challenging one over the past two decades. Creating new businesses in this marketplace has been a mixed bag. While it's hard to find a single consistent answer to the question of why some new businesses worked and why others didn't, I do believe that there is a consistent theme that separates the successful from the unsuccessful: were they focused first and foremost on chasing an opportunity or leveraging assets?
In my experience, those focused on chasing a market opportunity were much more successful than those that chose to leverage existing assets. Here are two big reasons why:
Old assets may have little value in new markets. In markets undergoing technology-driven disruption - like the media and advertising world over the past 15 years - infrastructure and large fixed-cost structures quickly shift from being great assets to being terrible liabilities. Being too in love with printing presses, large, centralized newsrooms and classified ad revenue kept newspapers from helping their readers find the news and information they wanted easily and cheaply, preventing them from providing their advertisers with cheap, efficient digital marketing channels that work.
Playing offense wins in dynamic markets. I've been in literally hundreds of meetings with legacy media and advertising companies talking about their digital futures where the discussion was dominated by questions like: "What should we do?" "How will we compete with them?" "How long will this last?" That's how folks talk when they are protecting assets. That's not how folks talk when they are trying to seize the market opportunity for next-generation local promotion using Web services and a direct sales force to combine the best of flash mobs, e-coupons and social marketing.
What do you think? Chasing opportunity or assets, how do you create growth? (You can't say both.)