USC Graduate Series Week 2 speaker: Naikaj P. Bhobe ! !Topic: Market Discontinuities!Date: 28 January 2014

�1MARKET DISCONTINUITIES- NAIKAJ P. BHOBE

!Pay Attention to Market Discontinuities. !

Billy was the owner of a big record company in New York. He had a roaring business, backed by excellent artists who had a great fan following. His records, cassettes and vinyl represented some of the best artists in the country. He found that constantly improving the performance of the company and the relationships with artists were improving his revenues and in turn his profits  However, something changed around 2000s. His revenues no longer grew despite dramatically improving the quality of cassettes and their durability. He researched on newer technology in cd/cassette making as well as innovative marketing techniques but his business continued to flounder. Somewhere in his market, a new disruption had come and people no longer needed cds to listen to music, the internet had taken over. ITunes, YouTube and many other mediums had left his business with fewer costumers. For no fault of his, the business has to either die or adapt. This is exactly what happened to the record companies who dominated the market for a century when iTunes/internet and the smart phone revolution wiped out their revenues to half. The technology proved that people bought good music and not records/vinyl and cassettes. !Market Discontinuity is one of the most important concepts that is often ignored by investors and companies. The term was coined by Peter Drucker, the father of modern management. It now applies everywhere - technology, innovation, management and investing. Though it often takes certain time to let these discontinuities make a lethal difference to the business, in the long run, they can affect the business bad unless the company adapts to the changes. !Discontinuities challenge businesses to drastically evolve.  In 1995, Yahoo and the new Internet companies challenged Microsoft with a discontinuity. But, Microsoft didn't take the challenge seriously & early enough. While they squashed Netscape, they didn't realize the discontinuity is far bigger than just a browser. Now, Google has a bigger market cap than Microsoft.  To respond, we need to recognize the discontinuity early enough.

�2MARKET DISCONTINUITIES- NAIKAJ P. BHOBE