Disruptive Tech, Tough Decisions

Innovation and humanity  are inextricably linked. We humans are always looking for ways to do things better, faster, simpler. Our passion for reinvention prevents many industries – including signage and graphics – from reaching a state of stagnation.  

More than 20 years ago, Harvard business professor Clayton Christensen wrote a book called The Innovator’s Dilemma – When New Technologies Cause Great Firms to Fail. As you might have guessed, its primary focus is how highly successful companies end up failing when they don’t embrace changes that occur with disruptive technologies. And vice versa, how companies that have the foresight to identify, embrace, and develop their business with these disruptive technologies in mind become successful. 

The examples Christensen cites include the downward spiral of companies like Sears and Woolworth and their loss of business to discount stores like Kmart and Target. He also discusses the dramatic changes in IBM’s dominance in mainframe computers, their subsequent loss of significant market share in the minicomputer business, and their ability to gain back market share in the personal computer sector by a shift in philosophy and strategy. Even though the book is more than two decades old, the material is informative and the subject matter is still quite relevant.

Several years ago, my business partners had the opportunity to attend a lecture Christensen gave on this subject. Although I was unable to attend, the ideas he shared quickly became a topic of significant importance to us; we discussed the ideas put forth in his book and what they might mean to the future of our business. We concluded the disruptive technology in the signage and graphics market would likely be oriented around making our customers’ buying experience easier – likely based on some sort of an e-commerce platform. 

At the time, there was very little e-commerce activity in our industry. However, it seemed likely this would change. I wish I could tell you we had the foresight back then to be forward thinking and embrace the disruptive technologies that would eventually begin to enter our market, but we did not.

We discussed the idea, but focused completely on growing and operating our core business.

Making the Move to Online

Fast forward to 2011. Perhaps similar to your operation, many changes had occurred within our shop, Ferrari Color – some due to internal factors within our control, others due to external factors outside of our control. While sparing you the details, suffice it to say we were able to continue growing our business at a steady, though not spectacular, rate with some years of profitability and some years of financial struggle. Because Ferrari Color has focused significantly on retail graphics, the most recent years have been much more difficult to sustain any kind of growth or profitability. 

Because of this struggle, we again revisited the topic of disruptive technologies and realized selling signage and graphics online was, in fact, a technology platform we needed to embrace. Due to the forward thinking of one of my business partners, 20 years ago we had seized the opportunity to purchase the domain name Signs.com. On the strength of that name, we hired the right people, spent the necessary capital to develop the website, and in 2012, launched into the world of selling signs online. We’re now in our eighth full year of e-commerce and have experienced good success in this part of our business. 

But here is where the story gets interesting. For the past few years, we’ve struggled in our attempts to manage two very different businesses. The traditional Ferrari Color side has more than 30 years of history and an impressive list of legacy retail clients. The online Signs.com segment has very high growth rates and thousands of customers per month spending small dollar amounts on banners, lawn signs, aluminum signage, and other sorts of graphics. (Interestingly, many of these buyers may not return to the website to purchase another sign for months, or years, or perhaps ever.)

After many difficult discussions and a very emotional decision, in late 2018 we decided to exit our legacy business completely and sell off Ferrari Color. We structured a deal with a company scheduled for early 2019. Unfortunately, due to a variety of factors, the sale fell apart in early spring and we found ourselves facing an even more difficult decision. A few months earlier, we had been prepared to exit our traditional trade and move forward in a new way. But now we had no buyer. Do we just go back to the way things had been before and try our best to figure it out, or do we try something much more dramatic?

Do or Die

Based on the foundational concepts of disruptive technologies we felt had significantly affected our traditional company, we came to the extremely hard and emotionally painful choice of exiting our core business we had managed for more than 30 years and focusing only on Signs.com. As a result of this decision, we parted ways with our sales team, project managers, customer service division, installation department, estimators, and a few other positions that had supported the traditional business. We were able to offer generous severance packages and fortunately, within three weeks, all of our former Ferrari Color employees were able to secure new positions with new companies.  

I apologize for the lengthy narrative describing the course of events during the past six months. However, the details are necessary to help explain how challenging the decision was for us – and can be for you – when confronting the significant changes occurring within our industry. 
Whether you can admit it or not, you’re facing similar dilemmas regarding the future of your business.

Disruptive technologies are certainly not limited to the example of online signage I’ve described. It could be the changes in the focus of traditional (static) signage to digital signage. Perhaps it’s within the manufacturing processes and the rapidly changing environment there. It might be the transformations happening in the area of delivery and logistics. 

My point is if you aren’t identifying and communicating changes in the world of technology and how it will affect your business in the coming years, you may just be operating with your head in the proverbial sand.

The Customer Isn’t Always Right

One of the most important points from The Innovator’s Dilemma is that it can be very damaging to your business to rely too much on what your customers want. While that may sound very strange, the point the author makes is that your largest and most important clients may not be innovative in their thinking at all. They could, in fact, be very happy with the products and/or services you currently offer them, and as a result, aren’t really looking for any additional implementation of technologies or systems that could create efficiencies and cost savings to them. 

In our case, for example, none of our top 50 – or even 100 – customers were asking Ferrari Color to provide them with online business management. If you choose to ignore emerging or disruptive technologies, I can assure you some of your competitors are not. While you may be secure in retaining your current business because of your quality, pricing, and service, imagine what might happen when a competitor offers the same quality, pricing, and service, combined with technologies to make your customer’s life much easier. You will likely lose them as a client.

An example of the shifting landscape of the signage customer base is the change we’ve noticed in recent years in buying habits. As the “old school” buyers move out of some of your clients’ organizations, they’re being replaced by a new generation of buyers who embrace, rather than avoid, technology. 

New buyers don’t really want to talk to your sales reps anymore. “Don’t come to visit me – just send me an email or a text” is the popular response with this generation. (It actually feels like the way my children now communicate with me. Seems like they only call me on my phone when they need money. But I digress.) You can be annoyed by these changes, or you can embrace them. Even though your customers may not be specifically requesting you to adjust your interactions with them in a more innovative way, they’re already implementing and utilizing disruptive technologies on a regular basis. Eventually, and probably sooner rather than later, your clients will be adapting new technologies into their policies and procedures with or without you.

To be fair, the Ferrari Color/Signs.com story is a rather dramatic example of a complete shift in an approach to adopting and implementing a technology platform. I’m certainly not recommending that everyone in our industry completely exit the traditional graphics business and move entirely to an e-commerce solution. 

The point I want to drive home is you have some choices to make as you move into the future of your business. You can ignore the disruptive technology changes occurring in the world of signage and graphics, or you can identify those relevant to your business and embrace them. These decisions will lay the foundation for the success of your business as you continue to navigate the existing and future changes in technology – which are certain to continue to disrupt the industry.

Marty McGhie is CEO/partner of Signs.com, an online provider of custom signage based in Salt Lake City. You can find him on Twitter @Marty_McGhie.