I) Thinking That Your Organisation And Its Products/Services Are Bullet-Proof

Need to understand the elements of capitalism. Capitalism is based on enterprises, market competition and uncertainty. It is inherently volatile with cycles of booms and busts; it is not about equilibrium. As Joseph Schumpeter stated

"... economic progress, in capitalistic society, means turmoil...... the capitalist process progressively raises the standard of life of the masses. It does so through a sequence of vicissitudes...... capitalism not only never is, but never can be, stationary..."

as quoted by Alex J Pollock, 2010

Capitalism is not about creating stability. It is about intrinsically uncertain, as we do not know what the future holds; we don't know the possibilities of future outcomes. Capitalism involves competition as a discovery process and market economies thrive on an on-going supply of unreasonable optimism. It has been estimated that there will be a crisis every 10 years. The booms and busts reflect the fundamental uncertainty and the limitations of human minds in dealing with it. Despite the ups and downs, the American standard of living has risen sevenfold during the 20th century.

"... the recurring financial cycle......around a rising trend of greater and greater overall economic well-being, the bubbles and crises notwithstanding. This can only happen when capitalism releases the energy of enterprise with its unreasonable optimism, entrepreneurialship, the creation of new knowledge, and investment in experiments, many of which will fail..."

Alex J Pollock, 2010

Furthermore

"...companies aren't change proof, and no company will last forever......no business lasts for ever..."

Richard Branson, 2008

For example, the music industry is always changing. By 2008 the CD as a retail item was heading into the history books. It peaked in 1999 when the worldwide market for consumer spending on music was $US 17 b per year. By 2005 the figure had dropped to around $US 10 b, with digital downloading on the rise. By 2012, the revenues are projected to be around $US 9 b and will be dominated by revenues derived from downloading music via the Internet. When Virgin Records started in the 1960s it funded

"...recording sessions, manufactured the product, distributed to the shops and then marketed the band and the music......gave loans and advances for touring, for making promotional videos, for equipment, for props and lighting.......advised and looked after the careers of musicians and handled the accounts and sales. Did all this work make us future-proof" Of course not. The value of these services has disappeared, thanks mainly to digital technology, the Internet and the arrival of YouTube and social networking..."

Richard Branson, 2008

Furthermore, there is no need for the expensive recording studios as top-quality albums can be recorded on a decent laptop and distributed via the Internet. Thus the cost of manufacturing and distributing is minimal. The business model has changed from selling LPs and CDs in large numbers, ie economies of scale, to recover the manufacturing, printing, shipping and retail costs plus royalties. The new model is based on digital "cost-free" via the Internet where the economies of scale are not important. Promotion can now be done via social networking on MySpace, Facebook, etc.

In 2007, an English band released their album "In Rainbows" as a pay-what-you-like digital download. Many experienced operators in the music industry thought that they were mad. It was successful with

"...40 percent of fans paid an average of 3 UK pounds each for the album, making the band nearly 1.5 million UK pounds......they had licensed the music and it went on sale as a CD too..."

Richard Branson, 2008

 

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