How exposed is your business model?
I came across this fascinating chart, during a discussion in the space of FinTech the other day.
It is, as you can see, an overview of US Recorded Music Revenues by format, adjusted for inflation. When I look at it, I extract two points I find interesting:
Digital replication has few restraints, and this means there is also a fundamental devaluation per unit of the digitized asset. Which means you transition from relying on high margins for creation, to needing to focus on high volume, unlike, for example, cinema or concert experiences that lock consumption to a time and place and can therefore still maintain an experiential value.
Having an inflation adjusted view also allows us to infer the evolution in the "share of wallet" (if not share of time, but it is fair to assume a decline there, too) of one type of content consumed, and allows us to infer that consumption is then spread to new content classes – streaming video, podcasts ... even memes and reaction videos, for example.
i.e. part of this massive change in value is based on the economics of digitization – but part of it is also based upon evolving behaviors, needs and capabilities.
Why is this worth five minutes of your time today? Because of what it could mean for your business and sector.
Even in a sector like Finance, for example; you can and will see the emergence of new "asset classes," and see the accompanying shift in the share of wallet. With assets (your money) moving from traditional banking product to a broader portfolio of products you wouldn't recognize as "financial sector" today.
What about you? When your category evolves, what will its current offers collapse into? And what are the new asset classes that will replace them? You'll find the answers by understanding the behaviors behind their consumption, and understanding how those behaviors will evolve.
To learn more about how you could establish the changes you are most vulnerable to, also check out my Cognitive Transformation Model and First Principles essay on why you need to run at two speeds – tackling the problems of today while preparing for the seismic shifts of tomorrow.