Innovate or Die
In this edition of BIA Advisory Service’s Vantage Points, we share insights from Dan Hight, Business Development and Partnership Executive and Industry Advisor for BIA.
The Vantage Point series taps the perspectives of various lookout points from around the local media and tech sectors. The views expressed do not necessarily reflect that of BIA Advisory Services. Please contact Rick Ducey, Managing Director, BIA Advisory Services, if you have insights to share.
Innovate or Die
Dan Hight, Business Development and Partnership Executive and Industry Advisor
With this week’s bankruptcy announcement from Sears comes another stark example of iconic companies that fail to innovate and invest in their business. Has retail changed? Of course it has. Consumers’ shifting shopping habits have caused tremendous change in how retailers advertise. The downfall of Sears is more than not seeing the e-commerce trend… after all, Sears started off as a catalog business… the “Amazon” of the day. But Sears did not understand what their core value was nor did they invest in their stores. Sears had tremendous value as evidenced by some of their other brands: Lands’s End spun off in 2014 has a market cap of $484M; Craftsman Tools purchased by Stanley in 2017 for $900M; even Kenmore once valued at $2B might still be purchased for $400M. But Sears as a whole does not have value anymore, with Market Cap of just $59M.
This is not just a story for Sears. Toys ‘R Us filed for bankruptcy in September 2017 and closed all stores earlier this year. The Washington Post was purchased by Jeff Bezos for $250M, not just to keep the paper afloat, but to change the business model in the Internet age. If companies don’t innovate, they can’t survive. Former Cisco CEO, John Chambers, says that companies must reinvent themselves every three to four years.
Gannett purchased ReachLocal for $156M for its customer base and digital marketing product solutions. iHeartMedia, which is in bankruptcy to restructure long term debt, is leveraging the growing popularity of podcasts, particularly with the millennials, with $55M acquisition of Stuff Media. AT&T’s new advertising business, Xandr, acquired AppNexus between $1.6B – $2B to help revolutionize the way TV is purchased.
The point is not to call out winners or losers, but to recognize that resting on your previous successes is not going to cut it any longer, and probably never did. Companies today need to constantly evolve to stay viable in today’s digital economy. With cloud-based infrastructure, machine learning and artificial intelligence looming, the rate of change is only going to get faster. Companies have to challenge themselves constantly.
Strategic partnerships are a great way to make this happen. Not every company can afford to buy their own ad platform (AppNexus) like AT&T did or a crowdsourced navigation app (Waze), like Google did or data and analytics companies as Walmart has done But strategic partnerships can help a company’s core business transform and stay relevant.
Here are few great examples: Casper mattresses being sold at West Elm stores for access to brick for Casper and product extension for West Elm and mortar; Nike leveraging Apple for fitness tracking and Apple extension to fitness apparel; Uber partnership with Spotify to leverage rider experience for Uber and added distribution for Spotify. Don’t innovate through partnerships or investment, and you might suffer similar fate of other iconic brands.
Dan Hight is the Founder of DH Advisors where he helps companies leverage technology solutions to drive sustainable revenue growth. His team brings a mix of traditional media, out-of-home, programmatic, mobile and digital media experience to help companies drive new revenue. If you are looking for help in building new revenue sources and partnerships, please contact Dan for more information.