IBM’s Saul Berman: Where’s the Value?

Remember when Napster and the digitization of music were going to destroy the music industry? A little over a decade later there’s still a recording industry—and an increasing percent of its revenues are coming from digital rather than physical products. That would be a happy ending if it weren’t for traditional music companies losing about 50 percent of their value during that transition, points out Saul Berman, global leader for the strategy and change consulting practice within IBM Global Business Services and author of Not For Free: Revenue Strategies for a New World.

For Berman, whose business revolves around counseling client companies on strategic issues, the music industry is a useful microcosm of the broader business world, where companies need to embrace new business models in an era of continual change. “You may be able to continue to make the majority of your money the way you’ve been making money for the next three to five years,” he warns CEOs. “But you’ve got to see disruptions coming and get on the track early, or you’re likely to lose value to the group that creates the new platform or standard.”

How can today’s business leaders bulletproof their businesses against disruption? Berman offers several suggestions:

• Hunt for Hidden Treasure. Look through the archives of your assets for unrealized value. “Is there information you’re collecting that can be sold in different ways?” asks Berman, who points out that most businesses amass extraordinary amounts of data. “In the media space, do we have photography or video that we can monetize by selling them as individual pieces?”
• Rise—Don’t Drown—With the Tide. Whether it’s music singles or à la carte cable channels, the customer will find a way to get what he or she wants. “So it’s not about trying to get people to stop or to do something your way,” says Berman. “It’s about finding a way to help them do what they want to do and make money.”
• Customize the Value. Some customers will pay more to never have to see an ad, others will be willing to watch more ads to save money. Find a way to tailor the products you offer to those different customer segments, suggests Berman. “To make these things work for you, you’ll have to ‘componentize’ your business or make the product or service and the cost as variable as possible.”
• Watch Your Kids. “Observe your kids, particularly if you have teenagers,” says Berman, who notes that the younger generation already views email as passé. “They’ll tell you, ‘Email is for my parents and the government.’ If you want to see the behavior patterns of the future, look at what different age groups are doing and think about the implications for your business.”