Aí embaixo tem alguns trechos de um dos posts mais fodas que eu já li, uma verdadeira aula magna sobre negócios. Na verdade é uma baita análise sobre a RIM, responsável pelo blackberry e que se encontra em uma bela sinuca de bico, apesar de faturar astronômicos 15 bilhões por ano. Mas a melhor parte é quando o cara fala sobre seu antigo trabalho na Apple para explicar a situação da RIM.
When I worked at Apple, I spent a lot of time studying failed computer platforms. I thought that if we understood the failures, we might be able to prevent the same thing from happening to us.
I looked at everything from videogame companies to the early PC pioneers (companies like Commodore and Atari), and I found an interesting pattern in their financial results. The early symptoms of decline in a computing platform were very subtle, and easy for a business executive to rationalize away. By the time the symptoms became obvious, it was usually too late to do anything about them.
The symptoms to watch closely are small declines in two metrics: the rate of growth of sales, and gross profit per unit sold (gross margins). Here’s why:
Every computing platform has a natural pool of customers. Some people need or want the platform, and some people don’t. Your product spreads through its pool of customers via the traditional “diffusion” process — early enthusiasts first, late adopters at the end.
It’s relatively easy to get good revenue from the early adopters. They seek out innovations like yours, and are willing to pay top dollar for it. As the market for a computer system matures, the early adopters get used up, and the company starts selling to middle adopters who are more price-sensitive. In response to this, the company cuts prices, which results in a big jump in sales. Total revenue goes up, and usually overall profits as well. Everybody in the company feels good.
Time passes, and that middle portion of the market gets consumed. Eventually demand growth starts to drop, and you make another price cut. Sales go up again, sometimes a lot. With revenue rising, you and your investors talk proudly about the benefits of reaching the “mainstream” market.
What you don’t realize at this point is that you’re not “reaching the mainstream,” you’re actually consuming the late adopters. Unfortunately, it’s very difficult to tell when you’re selling to the late adopters. They don’t wear signs. Companies tend to assume that because the adoption curve is drawn as a smooth-sided bell, your demand will tail off at the end as gradually as it built up in the beginning. But that isn’t how it works. At the start, you are slowly building up momentum from a base of nothing. That takes years. But by the time you saturate the market you have built up huge sales momentum. You have a strong brand, you have advertising, you have a big distribution channel. You’ll gulp through the late adopters really rapidly. The result is that sales continue to grow until they drop suddenly, like a sprinter running off the edge of a cliff.
Until you get close to the end, your revenue keeps rising, enabling you to tell yourself that the business is still in good shape. But eventually you reach the dregs of the market, and sales will flatten out, or maybe even start to drop. You cut prices again, but this time they don’t increase demand because there are no latent customers left. All the cuts do is reduce further the revenue you get from selling upgrades to your installed base. The combination of price cuts and declining sales produces a surprisingly rapid drop in revenue and profits. If you want to make a profit (which your investors demand), your only choice is to make massive cuts in expenses. Those cuts usually end up eliminating the risky new product ideas that are your only hope of re-igniting demand.
At Apple I called this the platform “death spiral” because once you get into it, the expense cuts and sales declines reinforce each other. It’s almost impossible to reverse the process, unless you’re Steve Jobs and you get very lucky.
The best way to survive is to stay away from the cliff edge in the first place. But that means you need to be hyper-attentive to small changes in sales growth and gross margins.