Don't Just Play Around -- Your Industry Is Full of Excellent Opportunities Everyone Has Overlooked
Companies want to grow faster and always imagine that areas they haven't explored are full of better opportunities than where they are. The truth is usually the opposite. This article explores the missing opportunities at toymaker Hasbro.
During many years of visiting companies, I have been amazed at how many times that companies which diversified into new industries and businesses later retrenched because their base "slow growth" business turned out to be the fastest growing area in the company after all.
A good lesson is to assume that you are missing the best opportunities to further exploit what you are doing today, much like the children running a lemonade stand are on a hot summer day.
Hasbro, the toy maker, was finding itself driven to distraction by the Internet. With a long history in the toy and game business, the lure of interactive offerings seemed irresistible.
Temporarily soaring stock market valuations for dot-com made it seem all the more logical. The company also did well in attracting top talent, including Ms. Meg Whitman who later left to head e-Bay.
After fast growth and steady, but low, profit margins in 1997 and 1998 from interactive operations, the company lost a ton in these areas in 1999 and 2000. Seeing continuing problems, Hasbro sold its stake.
At the same time, the company pulled in its horns in other ways. Manufacturing had been scattered as a result of many acquisitions, and was then consolidated into three factories worldwide. Overheads were reduced and simplified by eliminating an unsuccessful matrix-style organization that consultants had recommended.
With the decks cleared of old problems, how could the company's business model be improved?
As a first step, the company began to look at its old businesses in new ways. Looking around, the company noticed that some of its long-time franchises had a lot of untapped potential. With some well-done development and marketing, much growth could come from existing, well-known brands.
For example, many people played with Tinker Toys and Lincoln Logs as children. In recent years, both brands have been increased to vast multiples of their original size with new products and more marketing.
Similar innovations with new types of the popular, classic game, Monopoly, also added substantial growth. The average household went from owning one version of Monopoly to having several in the process, as Hasbro increased the game's relevance and fun for the players.
Hasbro's earlier eagerness to add franchises had focused the company on adding fish ponds through licensing and acquisitions, but management didn't always take the time to fully fish those ponds once they were acquired. The company had been operating like it was fishing with these brands using only one type of lure, one that was unattractive to many potential customers.
Next, the company noticed that it did have some cutting-edge, artificial intelligence that was making profitable progress. The company had been a pioneer with Furby, and recently added Poo-Chi, an interactive electronic puppy using artificial intelligence.
Academic researchers have recently been making remarkable discoveries about how much interactive toys that learn can accelerate human learning. By nurturing this technology and learning how to apply it more helpfully for youngsters, Hasbro has the potential to establish vast new dimensions of and applications for toys.
But to do this, Hasbro cannot hope to accomplish everything that is desirable alone. The company must get help from all kinds of academics and technology companies through partnerships.
Also, the company began to reexamine its on-line experiences and realized that there will increasingly be ways of electronically distributing play experiences in the future. This meant that the company's goal should be to find ways to quickly adapt its offerings to be available in a broad array of forms which incurring little economic risk.
Alan G. Hassenfeld, former CEO and grandson of the company's founder, offered this humble, but profound, advice from his wife as a guide to the company's future, "God gave me ears, not to talk with, but to listen." A key lesson of that listening in his view is that you "have to take measured risks."
Beginning with speculations to stimulate your thinking, what else could Hasbro do? See what you think of before reading any of the examples below.
First, since its brands have some strong awareness among youngsters, the company could partner with educators to create learning modules that employ well-known brands. People learn best when they are playing.
Put what needs to be learned into a play environment that people already enjoy, and rapid progress follows. Dungeons and Dragons could possibly be adapted for creative writing. Monopoly-based problems could be part of the math curriculum. Interactive toys like Furby could be adjusted to help children master specific lessons in preschools and at home.
Since educators often create such materials on a contingent royalty basis, the investment could be small. By teaming with an educational publisher, Hasbro could rapidly expand the distribution of these offerings. Many parents and grandparents would buy them, and the programs that were good enough might well find their way into schools.
Second, the company could sponsor international competitions for children to design new versions of the Hasbro games and toys that they like. For the most promising ideas, the competition could provide access to the company's technical talent available to turn the concepts into reality. This could be done somewhat along the lines described in Charlie and the Chocolate Factory as a way to encourage more interest in toy-making and play experiences among those who enjoy them most.
Third, the potential of these toys to spur a child's development opens up the door to new possible customers, including school systems and government authorities, for whom new types of toys could be cost-effective solutions to learning issues.
Hasbro could provide limited free access to its technical staff for academic researchers interested in these classes of problems. Supporting innovative schools that wish to use new technologies and materials with free samples could provide the experimental sites to show what could be done, and validate the applications.
For example, one of the biggest educational limitations now is that about 40 percent of all students have trouble learning to read using the standard methods. Perhaps a version of Furby could be programmed to help a child identify her or his most effective learning style for reading and then to help the child begin to master the basics in that way. Teachers could then pick up on the Furby-based clues to tailor-make educational activities for each struggling youngster.
Fourth, the kinds of basic lessons that the Grameen bank wants to share with rural communities could be encapsulated into Furby-type toys that are provided to poor youngsters by organizations that support economic development. It is probably cheaper and more effective to provide such learning aids than to put local staff into such communities on a full-time basis.
The same toys could be helpful in literacy programs as well where teachers are in short supply. Toys will never substitute for teachers, but they could be helpful in facilitating learning where teachers are unavailable or seldom available.
Where are you missing opportunities in your own products and market that are better than what you see over the fence?
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ABOUT THE AUTHOR
Donald Mitchell is chairman and co-founder of Mitchell and Company, a strategy and financial consulting firm in Weston, MA. He is coauthor of seven books including Adventures of an Optimist, The 2,000 Percent Solution, and The Ultimate Competitive Advantage. You can find free tips for accomplishing 20 times more by registering at: www.2000percentsolution.com