Business Model Lessons from Ken Burns Prohibition

Business Model Lessons from Ken Burns Prohibition

As I found myself engrossed in Ken Burns’ well told Prohibition story, I noticed an underlying business model theme.  Back in the 1800’s beer companies effectively controlled the retail distribution of beer.  The brewery business model of the time was to offer free everything: signage, tables, chairs, even rent in some cases, in exchange for exclusive distribution.  The saloon would only sell one brand of beer and the brewery would have a fully-controlled retail channel.

The business model worked so well that some Americans viewed saloons as society’s primary issue.  From there, the Dry Movement was started which eventually lead to prohibition.  Of course, with prohibition, most breweries went out of business.  Getting your product outlawed is typically not good for your business model.

So how does this affect today’s business owner?  The obvious answer is that too much control over the channel or a monopoly can backfire.  Just ask Microsoft if too much control over the market can be a bad thing.  The corollary for most small business owners is: too much of a good thing can destroy your business.

For most SMBs, this good thing might be a proven sales technique, relying on a proven lead generation process like the Yellow Pages, putting too much trust in a long-term employee, or any other methodology that has worked extremely well up until now.   We get spoiled by success.  Just like the breweries, our success can be the cause of massive failure.

Many large companies have fallen victim to this- Kodak, IBM, Best Buy, and Blockbuster.  All of these companies had market dominance only to see it be disrupted or erode.  To date, only IBM has successfully evolved from a dying market to a new growth market.

What is the solution?  As difficult as it is to be impartial, take an objective look at your successful operations, systems, people, and processes.  Which of these processes may be due for disruption or change?  Playing devil’s advocate, which proven process is the most likely to become a problem?


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