I see this all the time.  People have good ideas maybe even great ones and do nothing.  They do nothing because they have built a life around having things – cars, houses, vacations, games, toys, etc. and need – no must have a steady income to support their addiction to things.  This need for a steady income adds to the reasons why many people do not go after their dreams.  I know a great engineer who is busy creating great products for his company when he could go off and create them for himself.  I know a product manager who had five “fund-able” ideas and yet took a job working for someone else working on a product that did not excite him.  A know many people like this as they continue on in their jobs because they create their cages and shackle themselves to their own desks.

I have done this as well – so if you feel this way do not despair you can break the bonds.  get rid of the junk – reduce your dependence and set a goal to buy your freedom from the tyranny of the paycheck.  Once you are free you can try all the things you dream about.  You can go “All In”.

When you do go for it their will be investors waiting.  If you want them (different story).

Just so we are on the same page – Cannibalization in this case does not mean eating people it has to do with the introduction of a product or service that eats in to a company’s primary revenue stream. 

Many companies have faced this issue in the past – some famously have clung to their antiquated business model or product and rode it into the ground. A few examples: The Recording Industry for not embracing digital downloading; The Movie Industry in resisting but ultimately embracing the VCR; and even in my own career as EarthLink did not want to offer an Email only subscription for fear it would increase the cancellation of people paying $21.95 per month for dial up when they currently had high speed access and were keeping their dial up account only to maintain their email address.  Hey people figure this stuff out!

So what is the problem here?  Why should you embrace new products that could ultimately cost you sales in your primary business?  Single answer is that if a new product comes along or business model that greatly lowers the value proposition of your current product or if the new “thing” adds more value to a certain segment of your current customers, then someone will offer the service to your customer and your customer (at least a portion) will buy it from them and leave you.  Bottom line is that a portion of your clients are gone as soon as the new option becomes available.  The big questions are how many and how soon?

As a leader of a start-up you it is rare indeed that your new business will face the challenge of cannibalization – but if you are selling into a market where your product risks cannibalizing your potential client’s primary revenue stream you need to consider these issues and combat them.

Here are my three steps to confronting/battling those who bring up cannibalization as a reason NOT to adopt your new product, service, or business model:

1. Show that the change will happen and what effect it will ultimately have on the business if adopted by competitors (The Doom Case).  Make no mistake it is not a question of “if” but “when”.
2. Create the financial models to show the impact of new product adoption allowing for cannibalization to occur.
3. Demonstrate or provide a plan on how the business can be changed where by the new product if adopted could boost the business without destroying the entire revenue stream (This is the action plan behind the business case in step two).
4. Give anecdotal examples of how cannibalization issues have affected similar businesses.

A word of warning – this is BIG risk stuff – Do your homework!  In my experience the change usually does not happen as quickly as you think (so you have more time to milk the old model or products) and there is not perfect information (so your customers will not immediately change to the new model or product). 

Also, pray that you are not working for the Encyclopedia Britannica as Microsoft rolls out Encarta where a $1,300 set of books are replaced with a $50 and then free online version offering greater quality.  That spells GAME OVER!

It is EASY, CLEAR priorities, QSC in Wendy’s case, that help you and your team deliver a consistent client experience and for your team to focus on doing the things that create the greatest value for the client.  So for our IT team QSC equals:

1. Keep the servers running.
2. Take care of Client technical issues.
3. Develop next version of web interface.

for Marketing QSC =

1. Promote the client’s programs
2. Promote the company

Simple priorities help everyone on the team to act in a coordinated way to deliver great results.

If you are buying a company – people call it “Deal Fever”.  The emotions run high and “Deal Fever” grips you and all of a sudden you start assuming away issues that make the deal “OK” or the deal terms “passable”.  Whenever you say, “We have to buy this…” you will end up paying too much.  You will miss something or you simply will not do the things the more disciplined you would do.  Commit to no “Deal Fever”.  If you start getting emotional stop the deal or bring in your trusty attorney.  Usually they will help you think rationally.

If you are selling a company – no buyer can ever “Insult” you.  If they make a low bid simply don’t counter.  Tell them that you are not willing to sell your company for that low of a price but you would be willing to entertain a better offer.  I have seen many sellers get caught up in their own hype and miss out on great opportunities.  One potential seller was offered a sum of money for his company (my boss got emotional in this case and had to have the company – I was the messenger so don’t blame me) that would allowed his great grand children to never have to work.  The seller was 22 years old but he believed the hype – never sold – never went public and his next raise round was a down round.  The company flamed out and it ended up being a $400 million mistake.  Remember – no emotion!  Think about what you want out of your company and what is needed by you and your investors to gain a good return.  Focus on that number – do your best to maximize the number but don’t lose sight of the goal.

Emotion makes people do things for the wrong reasons.  The best example of this is in litigation or divorce proceedings.  Usually the only one that gets rich or is satisfied in the end is the attorneys.  We all have heard at least one divorce horror story.

Bar emotions from your negotiation or have a professional help you.