When it comes to business strategy, it is essential to learn from past examples and great strategists. For example, we all know that business cannibalization is a hard task that entails obstacles of many types. Not only it means giving up on known success in exchange of unknown future, but it also creates competition within a company, as it entails winners and losers. And yet, successful masters embraced it and brought it to the next level, accelerating the process.
Steve Jobs once said: “If you don’t cannibalize yourself, someone else will”.
This simple and powerful sentence well explains his approach to a subject matter that he overemphasized by thinking, developing and selling Apple’s new products as substitutes of the old ones, without being afraid of the risks that this entailed.
For example, in 2005, even though sales of the iPod were satisfactory and steady, Steve Jobs started fearing that such a product could soon be cannibalized. In fact, smartphones at the time were presenting more and more features. If the iPod was to be replaced by a phone, Steve Jobs wanted to guide the company in charge of creating and commercializing such a device.
This became his priority and, only two years and a half later, he presented the “the best iPod ever made”. The iPhone was the combination of three different things:
- A widescreen iPod with touch controls
- A revolutionary mobile phone
- A breakthrough communication device
and it was priced accordingly, as it was sold for the sum of the prices of the bestselling iPod and of an average smartphone. It was, of course, a revolutionary product. One of those unique products that change the entire industry they belong to.
As we know, it was an innovation miracle. The revenues boomed and, although the sales of the iPod were shrinking, the company was surfing the wave of success.
In 2010, with the launch of the first iPad, the story repeated itself. When asked what effect it had over Macintosh sales, Tim Cook simply replied: “Some customers chose to purchase an iPad instead of a Mac. Even more decided to buy an iPad over a Windows PC.”
As exemplified, cannibalizing your own business is never easy but can deliver unexpected and incredible results, therefore, it is undoubtedly worth the risk.
References:
Yoffie, David B., and Cusumano, Michael A. Strategy Rules: Five Timeless Lessons from Bill Gates, Andy Grove, and Steve Jobs. New York: HarperBusiness, 2015.
Thank you, Maria for sharing your thoughts about market cannibalization. According to Investopedia “Market cannibalization is the negative impact a company’s new product has on the sales performance of its related products.” I believe that capitalization of your own products by disrupting whole market and offering innovative business model or products is the only way for current incumbents to survive. I agree to Steve Jobs, all market driver companies should constantly work on game-changing products, even though it may disrupt its own market. They will lose market share in dramatic pace if someone else cannibalizes market and takes advantage of first mover advantage.
Hi Maria,
You’re making a very valid point. In general, companies are very afraid to cannibalise their own business. However, in my opinion, it is not always as clear cut. Cannibalisation can be a good thing, but a company should always thoroughly consider all alternatives, because cannibalising simply because “cannibalising is good” is too simple.
For example, when laundry detergent brands introduced laundry pods, the whole market decreased, because people were now more efficient with the product. What’s more, profit margins for the pods were lower as well, and the innovation hasn’t been revolutionary enough to fully replace normal detergent.
Thus, it is wise to always carefully consider each situation individually, whether it is necessary to cannibalise.
https://digitalstrategy.rsm.nl//2018/10/05/cannibalize-your-own-business/
Hey, thanks for your interesting post.
In essence yes, the most promising businesses out there continuously self-cannabalize to stay ahead of their competition and thus retain their loyal followers. Do you think the time has come for large data-oriented companies that also control the largest shares of the smartphone industry (e.g. Apple, Google, Microsoft, Samsung, etc.) need to self-cannabalize the smartphone’s (just as Apple did with the iPod) for the next big thing? I’ve seen other articles claiming that it’s time for Apple to again move on with the products that it offers.
Sure, the way our smartphone’s work incrementally change and (potentially) become better, and faster. However, essentially the smartphone has not truly changed since its emergence. I found an article that claims that a products life cycle is resembled by the following framework
“It starts with the innovation of a new product that is brought to market,
The first early movers try out the product,
Ideally this leads to the creation of a hype phase,
Followed by a long road to mass adoption,
That hits a natural (market or technical) ceiling,
And inevitably the decline of a product-usage – interest.”
and in my opinion each of these steps has pretty much occurred (have potentially reached the last?). Apple’s anticipated adoption and interest growth in the use of its iPhone X have not been reached at all (Livain, 2018). At the same time, cheaper alternatives are actually proving to be better (in terms of hardware) than what Apple has to offer.
Do you think we will see a massive decline in phone sales? And do you believe that Apple will be a frontrunner in the product that will deem the smartphone useless?
References
1.https://www.livain.com/2018/01/30/smartphone-era-coming-to-an-end/
Hey Maria! I definitely agree on the fact that cannibalizing your own business is something that you have to be wiling to do as a company in a context of exponential technological growth and innovation. However, I would like to point out that a large and successful firm is able to cannibalize its own business only if it has the right internal mindset. To me, indeed, here’s when, more than ever, company culture comes into the picture. Apple is a leading innovator and the internal culture is very unique and different compared to many companies in the same sector, and that’s one of the reasons why it is surviving so well in the age of disruption. Yet many companies’ culture is characterized from inertia as well as cognitive biases, such as anchoring bias, status quo, and conservativism. As you can guess, these biases make it extremely hard for a company which had invested resources to design and market a certain product, to cannibalize the reason of its own success. Thus, to conclude, yes, cannibalizing your own business might be necessary, but doing it in practice requires, first and foremost, a huge work to change the culture and mentality of your company.