Do not base your business model on change in human behavior

As search technology for images has improved and prices for digital devices (including cameras that are now incorporated in mobile phones, PDA, etc.) for taking pictures, I am seeing opportunities for growth in the imaging industry coming from several dimensions. But all this time, reports from market research companies (as shown in the chart below) were pointing to a leveling off of sales of digital cameras and a boom in camera phones. While it did seem like a logical evolution, it was running contrary to other trends that have not led to a convergence in devices. For instance, while we are starting to watch a lot more video on our computers, we are still buying larger and better television sets.

Chart showing the flat sales of digital cameras and booming growth in camera phones.

This is exactly what is happening in the the camera phone/digital camera business. In fact, IDC now calls it a myth that “[T]hat camera phones will replace digital cameras.” According to their Mobile Imaging Survey, “[T]he camera phone is more of a gateway product in the U.S., and creates, rather than destroys digital camera users.”

What does it mean for you?

    Don’t believe everything that analysts and experts (including yours truly) say, and particularly, when they forecast. These guys are no better at forecasting than a psychic or a monkey is.
    Human behavior is impossible to predict. So do not base your business model on a certain expected change. Incorporate unexpected scenarios in your business planning so that if things do not turn out the way they were predicted, you can still survive. The dot-com taught us that lesson really well.
    Do your own research. Use multiple sources of data and add your own research to it. And once you are done, don’t just sit back and hope that things will turn out the way they were predicted. Stay on top of trends and keep refining your forecasts based on continuous research.

Recommended article: Business forecasting is not a perfect science

Merck backs off from aggressive legal strategy

If Merck had done what it did yesterday the day it announced a recall of Vioxx, it would not have become a classic example of shareholder value destruction. It is completely understandable that any business, particularly drugmakers, will end up having products that do not perform the way they are intended to and will hurt people. That by itself is not a problem. The problem is when a company engages in a well-orchestrated campaign to hide those problems and makes the customers feel stupid – something Merck has done since September 30, 2004. No wonder it has thousands of lawsuits with an estimated Vioxx related liabilities of $65 billion. In addition to that, it is being investigated by SEC, DOJ, Congress, and several attorneys-general. (Related article: Merck on the wrong track with its Vioxx legal strategy)

What does it mean for you?

    Have a product recall strategy in place that shows respect for your customers. It simply does not make sense that you start to mistreat customers just because you are afraid of trial lawyers.
    It is simply horrible business and legal strategy to fight thousands of lawsuits for years. Distractions should be avoided at all cost.
    Lawyers are smart people, and as a professional myself, I have a lot of respect for what they do. Also in a society likes ours, they are critical to a business. Having said that, watch out for a lawyer (or a management consultant) that is trying to “create work.” By vowing to fight each lawsuit individually, the lawyers are simply trying to project over 100% billability for next ten years. Throw such lawyers out of your strategy meetings.

Related article: Lessons from Vioxx, Celebrex, Bextra controversy