112 ShowMetheMoney
how changes that affect industries and companies follow certain
pretty well defined paths. Business change is not unpredictable, only
har dto pre dict. There are myria dtypes of business changes an d
patterns that they follow, but the infinite potential variation can be
organize dpretty simply to enable you to think about those changes
in a profitable way. The chief patterns that matter relate to products
and their degree of brand or commodity characteristics, the sources
an dcosts of supply, the chain of distribution, customers’ habits an d
tastes, an dbusiness an dorganizational design.^6
Take the brand-commodity pattern. Some businesses are able to
transform a commodity product into a branded product, as Clorox
did with bleach and Frank Perdue did with chicken. Those branded
products can be retransformed back into commodity products, going
the way of the Model T and the Hoover vacuum, or at least have
the franchise value of the brand reduced, as occurred with the Xerox
machine an dCampbell’s Soup. Knowle dge of a company’s bran d
position is important, but more important is knowing its commit-
ment an dability to promote, protect, an dexpan dthat position.
Supply patterns either reduce or enlarge the amount of inventory
a company has to maintain. Companies that reduce their inventory
end up decreasing their costs and boosting profits. Dell developed
close relationships with its suppliers that enable dit to pretty much
eliminate carrying inventory of any of the computer components it
uses. IBM an dCompaq have ha dless success in doing that.
Distribution patterns are always important an dgot a huge
amount of attention during the dawn of the Internet. The direct
seller of products has come and gone over the years. The Fuller
brush salesman, the milkman, an dthe Avon la dy use dto give a goo d
profit advantage to their companies, but the shift to suburban living
an dthe proliferation of cars, highways, shopping centers, an dmalls
change dall that. Some of that change dagain as direct sellers re-
emerge dto bring computers, books, an deven groceries direct to the
home.
Customers’ tastes obviously relate to distribution patterns,
though the causality is not always certain. As they say in marketing,
if you make it, people will come (an dif you deliver it, people may
take it). But consumer tastes an dhabits are equally obviously an
enormous driver of profits and a determinant of where the profit
centers are. It is useful to distinguish here, however, between fad
patterns an dlonger-term patterns.
Silly products that capture the temporary imagination of the