Where Will Your Business Be When the Music Stops?

I've always loved the game "musical chairs." You know, that game where a group of kids is circling a cluster of chairs, and everyone has to find a seat when the music abruptly stops. There is always one less chair than the number of players. The one person left standing is eliminated.

In many ways, musical chairs is the perfect metaphor for building a new business, or one's career. It's a competitive race in which you quickly learn there is not always room at the table for everyone. Having our kids get a little slice of real life experience early on and learn that occasionally you might have to push or shove your way to a seat in order to succeed isn't a bad lesson. As I like to say: it's lonely at the top, but at least it's not crowded.

I also find that the game teaches a lesson quite opposite from the one espoused by many schools, teachers and parents these days who promote the "everyone's a winner and gets a trophy" view of the world. I think they're killing our country's competitiveness and mortgaging our kids' future with a bunch of fake, feel-good psychology. It's the same problem in the classroom as it is on the playing field. It's so much easier to administer and grade a useless multiple choice test and to inflate every kids' grades for their college applications than it is to create challenging course work that excites, engages, and challenges them.

Most teachers today are doing a crappy job of teaching our kids the critical thinking and problem-solving skills required to succeed in the new digital and global economy. And too many parents are just too busy or otherwise occupied to take an active interest in their kids' educations. It's much simpler to just pat your kid on the head for "trying" than it is to sit and pour over his or her homework to see what they're learning.

For me, musical chairs has also become an everyday reminder that most startups aren't going to succeed in the way they might imagine. Most won't grow up to be stand-alone big businesses. A few of the best ones will find a way to get there, but most young companies will have to fold their product or service into someone's else's success story.

It's not an impossible thing to do, but to do it well requires planning and an early start so that you're not left behind, rolled over, or alone on the sidelines when the sands stop shifting. There's always talk about how technology is a "winner take all" business and it's not wrong, it's just a tad overstated. You don't have to be the one and only player left standing to build a healthy business that creates significant value for you, your team and your investors. In fact, I think that in most tech-driven markets we're much more likely to have strong oligopolies, rather than monopolies. This is slightly better news for growing startups because it increases the pool of prospective buyers. But it's still going to be a tough road.

Here are three categories that are losing the game of musical chairs right now:

1. Apps are drowning.

Downloads of new apps are dropping every month and the trend is accelerating. The glut is growing, and for a new entrant, it's virtually impossible to be found among the 50,000 new offerings pouring into the app stores each month. If you can't be found, you will never be chosen: consumers are digital creatures of habit who barely use the vast majority of the apps already on our phones. If people tossed some of these unused apps, they would save tons of time that's now lost searching for specific icons lurking somewhere in the mess. At best, we're using maybe 5 to 7 apps a month on any kind of consistent basis and, according to comScore, 50% of our activity is concentrated on a single (usually social) app. If you're a standalone app, you'd better start looking for a home.

2. Gateways trump gadgets.

Fitbit is flailing. Retailers are flooded with product sitting on their shelves. How many wrists do they think we have? How many measurements really matter to most of us? And how many dedicated devices does anyone want or need when each and every day the basic functionality--steps, heart rate, BP, etc.--is being built right into all of our other mobile devices? And Fitbit is caught in a classic squeeze from both ends of the price spectrum, which is likely to persist. Apple wants to own the high end and Xiaomi is chipping away from the bottom. But there's a much bigger structural problem facing all the gadget guys.

It's the folks that control the gateways--not the gadgets--who are increasingly becoming the only games in town. No one is better at this game right now than Facebook. Honestly, it's only a matter of time before it becomes clear that all the tracking devices, all the navigation devices, all the data-generating wearables of whatever stripe (just like all the content created by professional media publishers) will need to knuckle under and feed their results through Facebook's front door to the consumer, because that's where the consumer lives and that's where the data needs to be. Facebook's phone was a bust, but guess what? They figured out a better and far more profitable way to serve their users, while shifting all the risk, pain and costs of production onto the backs of the gadget guys. If you're a dedicated device, not made by Apple, and you're not already in bed with Facebook, you're toast.

3. Perfection is the enemy of good.

GoPro is gasping for air. Competition is up, diversification into drones is going nowhere fast, Christmas looks lousy, and the forecast for the year is down. And they're having a hard time manufacturing the next new thing. The truth is that most of us are mere mortals and we don't need the newest and greatest anything--we just need something in our price range to get the job done. And the competition is pushing the prices down and the basic quality up. In almost every tech sector, the players keep raising the bar and upping the average so that, in most cases, good enough today is plenty for the vast majority of customers. GoPro has burned through the pros, the enthusiasts, and the super-picky and price-insensitive people and now they're staring into the consumer chasm and facing a world of competitors (including all the phone manufacturers whose offerings keep getting better, cheaper and more waterproof). If you're the price and quality leader in your space, you need to start working on Plan B.

Regardless of where you stand right now, it always the right time to take a hard look at just what you have and what you've built. Sit down with your team and your advisors to discuss what the best alternatives are to capture and extract whatever value you've created in the business before it goes away. Remember, no one who's interested in moving forward spends too much time gazing in the rearview mirror.