Impact of failing to cannibalise

In 1999 I began a worldwide project for Shell in my role as global channel manager to educate our commercial businesses about the impending influence of the internet. I rolled the training program out to 45 countries. The program taught them about the opportunities available by using the internet and the implications for developing global infrastructure to take those opportunities. It also taught them about organisations that were already behind the adoption curve of technology as examples of what Shell did not want to become. The message was, “If you are not cannibalising your business, someone else will.”

My prime example at the time was Kodak. Frightened to cannibalise their business with digital cameras, they were already obviously going to be slow to react to the ability of the internet to split the movement of data from physical goods. It was obvious in 1999 that information about images could be sent over the internet and reconstructed by a printer any distance away. The only thing at the time that prevented Kodak’s printing business from collapsing was national and international access to higher bandwidth. That too was only a matter of time.

At about the same time I was in Australia visiting from overseas and my running shoes wore out on me. I needed to buy another pair. I was in Melbourne and did not know much about shopping there. In addition, I am about the world’s worst shopper. I can be fazed by choices and usually make no decision at all and don’t buy. I went online and even then at the slow download speeds, Rebel Sport had a site that allowed me to diagnose what I should purchase through selecting some variables. I went to the store following the directions on their website and when I got there was able to actually go and pick the shoes I chose and the size I wanted directly from a rack. It made shopping easy for me.

Gerry Harvey had a majority shareholding in Rebel Sport then. It is surprising then to see how Harvey Norman and others such as David Jones and Myer have misjudged the increased use of online shopping and have allowed others to cannibalise their business rather than themselves.

Companies like Mercedes Benz and BMW have on the other hand, been successful at cannibalising their own business. Mercedes had a record year in 2011, GFC and European crisis notwithstanding. They have extended their range of vehicles, positioning them at top of the range in each segment they enter. Now, as the vagaries of the economic cycle and the ongoing concerns over climate change impacts the cost of energy consumption – thus changing people’s ability and desire to buy large or small cars – Mercedes is well positioned to cope with any change in market movements.

The nature of cannibalisation

Kodak’s demise has come to pass rather ingloriously and Mercedes has continued to prosper. But what of your business? What impact will technology, changed consumer patterns or channel attractiveness to end consumers have on your business? If you are in a government department, what changes in technology or in demographics and consumer expectation will make your services obsolete? What changes in funding availability over the economic lifecycle will make your services too expensive for governments to bear, fearing a voter or tabloid news backlash?

Businesses find their market being cannibalised in two ways. The first is as a result of general competition over time with new players entering the market that is attractive to them. The second is channel changes as a result of a channel, technology, or consumer shift which happens relatively quickly.

Channel changes

When I worked for Shell, we were able – over a long period of time- to maintain a very healthy market share of what we called ‘passenger car motor oils’. The major channel for their sales was service stations. We had the largest number of service stations and were in every state in Australia and practically in every town. In the late seventies through to the late eighties, Big W and Kmart stores were opened throughout Australia. They began selling passenger car motor oils, eventually putting them in massive displays and offering large discounts. Our market share declined inexorably as consumers voted with their feet and started buying from these new channels. In addition, in the late eighties and early nineties, specialty auto parts stores also mushroomed across the country providing yet another channel to threaten our business. As a company we held fast, protecting our channel as the market share and profitability continued to decline. In the mid-nineties we changed course and stopped ignoring the customers. We moved into the new fast growing channels as the third preference supplier in many cases. We redressed the falling market share and profitability, although we were too late to regain our dominant position.

Technology changes

Kodak is not alone in their underestimation of the rate and scale of change that technology has brought to their markets and being slow or in denial about the need to cannibalise their existing business. The whole of the printing industry has been turned on its head by the advent of quicker, cheaper printing machines, downloadable design templates which are often free and easy to learn cheaper graphic software. They have been forced to offer smaller runs, provide quicker and cheaper setups and offer cheap online design services which has all cannibalised their business. They have been forced to turn to good old fashioned customer service to further differentiate themselves from the competition which is often internal to an organisation.

The music industry has been fighting a defensive war against technological advances since of the invention of the cassette recorder and player. Each change in technology which increased the ability of home users to copy, possibly illegally, their favourite piece of music has been defended assertively instead of embracing the changes and working out new revenue models. Recording companies have also continued to lose control over distribution channels enabled by the changes in technology such as iTunes.

The advent of ubiquitous superfast broadband access will exacerbate the issues that companies who ostensibly rely on the sale of data as a point of revenue face – potentially losing their business to more technologically savvy competitors.

Consumer sentiment

Consumer sentiment is now influenced rapidly by the ongoing prevalence of reality TV, use of social networks and social communication technology e.g. YouTube and the 24 hour news cycle’s need for even more “conflict” and opinion dressed up as news to improve or retain “readership” and therefore sell advertising dollars.

Twenty years ago, the chance of seeing a salt-of-the-earth grazier sipping on a café latte in my small country home town was inconceivable. However, the change in palates, driven by migration, international business franchises and latterly television cooking shows bombarding our airwaves, has been remarkable. The hospitality industry has had constant changes of consumer sentiment to deal with as their core segment of consumer tastes has rapidly turned into a niche market.

Soap companies have had to cannibalise iconic brands, such as Rexona, with liquid personal cleansing products as consumer tastes changed. By 2003, soap cakes made up less than 50% of the personal cleansing market, although in another twist home-made bars distributed through speciality shops are making a comeback.

Proactive cannibalisation

Markets are cannibalised. We have the choice to cannibalise our own markets or allow existing or new competitors to cannibalise it for us.

There are four methods we can employ to cannibalise our own business.

New channels

Look for where consumers of our products and services frequent. What you are looking for are channels where they do not currently buy our product or service, especially if they do not buy from competitors there either. Secondly what you are looking for is a channel where the transition from what the consumers do buy there to want you sell is not too great to make the channel unbelievable as a provider of the goods and services we sell. For example, selling hand-made body scrubs through a coffee shop is unlikely to succeed even though it is likely that the consumers of hand-made body scrubs are likely to frequent coffee shops. However, using mail order/email associated with holiday destination resorts and hotels and holiday airline frequent flyer lists is likely to be more successful particularly if you have done a deal to supply teaser quantities as part of the room amenities for a small margin.

Research and development (innovation)


Using research and development for new products is not just the playground of larger organisations. Rapid prototyping procedures can replace expensive basics research quite effectively. Have your sales and technical people and often your distributors and key customers brainstorm product characteristics which customers would switch products for. Create prototypes of the products and using a specific test market, attempt sell the product. If you are unsuccessful use the feedback to get further knowledge about what would make people switch. Above all do not be afraid of selling a product which would switch people from an existing product you sell them. Include in the prototyping the price point at which they would switch. .


Often the benefits consumers of our goods and services seek are to do more with the ease of access and use of our product and service rather than the product or service itself. Again we can use the prototyping process involving our sales and technical people and distributors and key customers to determine what they use our product for and how they use it to come up with ways in which we can make it easier and more productive for them to use. This is an effective way to counter other newer products from competitors that are cannibalising our product sales.


The key to cannibalising your own service business is to provide better value either by decrease the perceived cost or increasing the perceived benefit.

Repetition is a route to providing cheaper services. It allows reuse of existing resources and provides a base for templating your approach to selling and providing your services. It is clear that there are differences between clients and the environment in which they find themselves that means that no two services provided are exactly the same. However, there will always be elements of the service or the process to provide the service which are repetitive and can be made into a standard process.

Creating the perception of greater value in the provision of a service may be as simple as making the client aware at all times of what to expect and delivering against that expectation. Creating a project portfolio for everyone involved in the project with a client that tells them exactly what they are to do and when to contact the client creates consistency and as discussed above will also lead to lower costs. Use the prototyping method here too to devise approaches that make you easier to deal with or make a true innovation in your service.

Brand/product extension

Providing additional services or products which are related to our existing products and services even if they are likely to take sales away from existing sales is an effective means of fireproofing our market from future competitors. For example, translating an existing face-to-face training product to an eLearning version or a coach/buddy version may cannibalise our existing trade but may equally as well gain us new customers who will initially take on our eLearning and progress to a face-to-face engagement.


Finding organisations that complement our abilities and that, in partnership, can provide a much fuller suite of products and services is a way of protecting your business which is often low cost. In our own case we partner with animators, video production companies, eLearning companies, project management specialists and electronic document and record management specialists to offer a full suite of services. In return we provide change management, instructional design and human resource management services to them. It is a symbiotic relationship even though in working with our partners even though for example, they learn enough about change management to complete some projects on their own and we learn enough about EDRMS to complete some projects on our own. The collective knowledge we have with our partners continues to grow and we continue to be exposed to more challenging and rewarding projects because of it.

Working collaboratively with partners also increases the potential for innovation, creating barriers to cannibalisation of your business.