A & B Businesses And The Media


July 19, 2009

One of my very best business
school professors, Bob Pricer, distinguished business types in a simple way:
Businesses that mass produce a product or service, versus businesses that
customize a product or service – which he called “A” Businesses and “B” Businesses.
Once you learned to seperate businesses the Pricer Way, it became clear how you would need to operate your business, sell your product and how to grow your business.

A Businesses B Businesses
Fast Food Gourmet Restaurant
Ford Automobiles Aston Martin Automobiles
Website-in-a-box Website Design Firm
H&R Block Tax Service Grant & Thornton Accounting

A Businesses succeed by providing
low-cost, large volume “one-size-fits-all” solutions to their customers. B
Businesses provide highly customized solutions to customers with a specific
need. Ford will build 250,000 Focuses this year, while for the nine years Aston Martin
built DB7’s they only made 777. The most expensive Focus costs $18,265. The DB7 listed
for about $140,000.


There are A Businesses that have
customizable features – but they are extremely limited. For example Dell
Computers added value to their product line in the 1990’s by offering “custom
computers”. Dell did this by using point of sale data to determine how many of
each possible customization consumers would want and built those in
anticipation of projected demand – but Dell only offered a limited number of
“custom” computers. A true B Business computer seller would build a personal
computer from the ground up and maybe install specific software requested by
the buyer – or even paint pinstripes on the case.

Mixing A Business models with B
Business models is a recipe for disaster. For instance, in the early 1990’s
McDonalds attempted to compete with Burger King’s “Have it your way” campaign
by offering customized Big Macs. To understand the impending disaster, we
should ask the question, “What’s a Big Mac?” The answer: “Two all beef patties,
special sauce, lettuce, cheese, pickles, onions, on a sesame seed bun.” You can
sing the ad, right?

When McDonalds decided to
customize the Big Mac, they not only fought against their own advertising, but
they had to completely retool thousands of kitchens – their production lines –
so that customized Big Macs could be made. Many franchisees opted out of the
new custom Big Mac, confusing customers, and in most of the stores where custom
Big Macs were offered, the retooled kitchens and new staff training was
inadequate. The new product failed, McDonalds went back to the
one-size-fits-all Big Mac, and lost tens of millions of dollars on the
promotion.

Moving from B to A can be just as
treacherous. The most common example is of restaurant concepts that attempt to
grow through franchising. While one or a handful of similar restaurants can be
successfully managed by one demanding manager or chef to provide high-quality
service, when restaurant concepts expand over large distances, they require
specific operating protocols for everything – from how silverware is arranged on
a table to exact proportions of ingredients in a dish for when the manager is
away. What happens if the great dinner rolls aren’t presented warm at every
franchise? Variations open up possibilities for customer dissatisfaction and
thus fewer repeat customers.

Applying A & B To Media
Businesses

The disruption washing across
media businesses can be directly tied to how media companies are distinguished as either A or B Businesses. For hundreds of years media had been an A
Business. Printing presses were expensive, as were broadcast towers and audio
and video equipment. Consumers were limited to the few organizations that could
scrape together enough capital to buy the mechanisms needed for media
distribution.

The internet’s arrival changed
all that, since media distribution through websites is now virtually free to anyone with a
computer and an internet connection. Because the barrier to entry into the
media business has dropped, it has become cost-effective to create highly
customized media offerings – with blogs being the cheapest and most common offering.

Now, ask yourself: What kind of
business is the Chicago Tribune? A or B? The print version definitely
seems like an A Business. But what about the website? The main site seems A.
Chicago Now seems like a bunch of B sites. Then again, all those Digg buttons, customizable
alerts, somewhat geographically targeted news and the “You might like” box at
the bottom of each article web page seems kinda B.

So which is it?

The consumer pressure for
customization on the Chicago Tribune is highly evident through its pulled-in-multiple-directions website – and then even more evident when you look at its declining print
product circulation numbers.

Daily Chicago Tribune Paid Circulation


2006

579,079

2007

566,827

2008

516,032

From Chicago Tribune press releases.

Mass, daily demand for a
one-size-fits-all news product seems to be declining. There are rare
exceptions, like following Obama’s presidential win, the Tribune boosted its
print run by 30%
– an extra 150,000 papers. But that was for one day.

Ultimately, this is the Tribune’s
– and other mass-consumption media’s – challenge: They have to determine
whether they want to be A or B Businesses, and if it is an A Business, what is
their exact audience? It is no longer adequate to be the Chicago paper of
record, since consumers now have the ability to choose more specified, customized
options – Everyblock.com for instance.

But the painful part of that
challenge is that except when there are big events, like elections, big sports
events or disasters, media customers lapse into their small, customized groups.
In order for the Tribune to be successful, it may need to shrink down its main
type-A Business and shift efforts to a number of smaller A Businesses.