The quote in the title of this post was originally attributed to Henry Ford. In his day, Mr. Ford was known for his innovation in production and manufacturing. Ford was not a success because he necessarily had the best quality product. But, Ford held a strategic advantage. Therefore, he had the ability to limit aesthetics because his prices flat-out beat the competition. Contrastingly, when there is no strategic advantage, wide arrays of products–with competitive prices–put power back in the hands of the consumer. Digital signage vendors are no exception to this rule. With so many more options for software and hardware to choose from, the days of “you can have any signage media player you want as long as it’s ours” are over.
Separating Hardware and Software Sales
At times I feel digital signage software companies are unable to grasp the business principle of specialization. I have said it before and I’ll say it again, “a specialist always beats a generalist.” This is a fundamental principle not practiced enough, especially in our industry. And those who provide screens, mounts, players, software, content, and the frosting are spreading themselves too thin. They’re not focusing on a single core competency.
Perhaps this widespread issue can be blamed on systems integrators used to working out all the project nuances. If you are an integrator, you know of what I speak. The problem I see is that too many companies have the mindset of let’s make money from every possible angle. And, with the way the general market is looking it may be tempting to “milk” the leads for all they’re worth, but it can be simultaneously detrimental to lasting success.
I’ve been reading a great book lately entitled “Value-Added Selling.” The book goes over some very interesting points about how markup in specialization is much more profitable for the masses than markup in generalization. Specialization allows you to focus on keeping costs low for your niche, thus making a greater profit while selling at a competitive price point. The takeaway is this: specialize, specialize, specialize. While it is counter-intuitive to think this way, sustainable longevity requires it.
Biz Models, Not “Model T’s”
Of course we could always play the devil’s advocate here and argue that Apple is a good company to mirror. Since Apple provides both the hardware and software for their customers, digital signage software providers can mimic. That’s a decent argument, except when software eventually transitions to the cloud. Has anyone heard of digital signage moving to the cloud? I sure hope so, because that is where we are going.
While the “Model T” approach worked at the outset of the automobile manufacturing era, it would be foolish to adopt such a business model today, unless your prices were able to match those of the early automobiles. Digital signs are no exception. If you’re reimaging a small PC, clients are going to know that 80% of the $1,500 MSRP is markup. They will quickly be on the horn, looking for products elsewhere. They know they could get a hosted solution for four years and a economic media player from a specialized vendor for less than your MSRP. It’s true that “whole products” are reserved for the mainstream, a market segment I’ve spoken a lot about lately. However, “whole products” doesn’t mean you provide the display, the mount, the player, the software, and the content creation. It simply means, you make procuring those necessary pieces easy and cost effective.
Rules of Thumb to Follow:
- If you are a software development company, develop and sell software.
- If you provide media players and other peripherals, keep it up. Leave software to the software providers.
- If you are an integrator, integrate (these saps are the ones who’re bringing it all together).
- If you focus on displays–do displays.
Don’t think that you can moonlight as a software provider and an integrator in perpetuity. It just won’t work.