Saturday, December 08, 2012

The Zero Option

In business, as in life, we often keep doing things because we've been doing them for a long time. It's habit and past practice converted into a self-fulfilling rationale for why things shouldn't change. "We've always done that." "We can't stop doing that." The result is that we keep doing things that we should have stopped doing years ago. This mindset is probably responsible for the failure of more businesses than anything else, but we can't get rid of the mindset, so we keep repeating the mistake.

I suggest a new approach called "The Zero Option." Take something that you're doing--even if it's still working, even if it's still profitable--and stop doing it. Do something else. Here's a few examples from media companies:
  • How often have you seen an ad on television for a movie that's bad--obviously bad, just from the commercial--but it's still booked into theaters for national distribution? I'm not talking about bad movies that will still make a lot of money, like the "Transformer" series, or a blockbuster bomb like "John Carter" where there's so much money at stake that the studio can't afford to walk away from it. I'm talking about movies in the $50 million dollar and below budget range that tested poorly and might have gotten mediocre or bad reviews from early showings at film festivals. These are often the movies that have their titles plastered at the top of the screen throughout their television commercials, as if seeing the title for a full 30 seconds will make a bad movie more desirable.

    Instead of spending a few tens of millions of additional dollars to promote a movie that's an odds-on turkey, why not kill it? Write it off. Sell it (even at a loss) to another distributor. Get back into the business of dumping stinkers into the direct-to-video market. Don't throw good money after bad.
  • Local television news is a dying business. It's still profitable for most stations, but the audience is dying off, as younger viewers switch to "The Daily Show", watch something on their DVRs at 11 p.m. or get their news from the Internet. U.S. television stations used to be required to show news programs by the Federal Communication Commission, in order to fulfill their obligation to operate "in the public interest." Today, fulfilling the public interest requirement has become little more than a joke; many stations do it with a few hours of children's cartoons on Saturday morning, between the early-morning infomercials and the early-afternoon sporting events.

    Rather than run news programs that have turned into a nightly cavalcade of murders, fires and crying mothers, where most of the audience is only interested in the weather report or sports, why not try something else? At the 11 p.m. hour, instead of producing a news report, how about replacing it with a local nightly talk show, perhaps hosted by a local radio talk show host with a strong following? Bring in a studio audience and talk about some of the local events of the day. Let viewers call in. You can still have weather and sports segments (or the entire show could be focused on sports.) Instead of being an also-ran for the "between 60 and dead" audience for local news, you could build a younger, more valuable audience for a locally-produced show.
  • Radio stations in the U.S. have been adding commercials to their broadcasts for years. It sometimes sounds like there's more commercials than content. That's led to the growth of satellite radio and streaming services like Pandora and Spotify, which have fewer ads or none at all. Broadcasters are wringing their hands about the growth of streaming media in particular; Clear Channel, which owns more radio stations than any other company in the U.S., has launched its own streaming service called iHeartRadio. But, why are consumers shifting away from broadcast radio? The answer is too many commercials. Yet, there's a radio in just about every car sold in the U.S., and it doesn't cost anything to turn it on or to keep using it.

    Instead of trying to push as many ads into each hour as you can, why not cut back on the number of commercials played each hour, and promote that as a differentiating factor? In the short term, your ad revenues will drop, but if your audience expands, you can charge more.
The Zero Option means making a deliberate decision to change something that you're doing, even if it appears to be working. It doesn't mean making a change because you're forced to by new technologies, competitors or governments--those aren't proactive, voluntary changes. It's about actively driving the rate of change in your industry instead of letting others drive it for you. 
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