Disruptive Technology = Destructive Competitors

Thoughts on survival and success in art and technology by artist and entrepreneur Charles Maring

Are you single handedly destroying your competition, while on a path to self destruction?

Technology is exciting to me. Unlike a lot of people out there, I adore re-inventing myself and inventing the future in my industry. There are times when I give speeches to hundreds of tech savvy aspiring artists, and as a futurist there are other times when I can't fill a room because the industry just isn't ready for change just yet. Keeping our vision 5 years ahead of our competitors serves us very well in the long run, but there are times when it's frustrating because I can see that the entire industry is in a rut, yet even those at the top stop evolving out fear of change.

Photography and video, the subject I know best, are in a constant state of change and evolution. This topic relates just as well to camera manufacturers, album companies, printing companies, and even other technology driven industries. The one thing that big companies have going for them is that they have staff that spends a great deal of time and energy on understanding marketshare. Small, and especially start-ups often just chase their own tail until they realize what works and what doesn't work. But, heck you do have to start somewhere right?

Cost of doing business...

This past week I did what I tend to do every year, or at least every couple of years, and decided I should do a CODB analysis. Costs rise each year, and as a business we have to look at what matters, and what could do better with money spent. Doing a CODB is important for our company because there is no emotional involvement in it. The numbers don't lie. As technology grows so do the options of how we can run a business, so this allows us to get a grip, and take a meaningful approach to what we should consider cutting out, or changing for the better. It helps us make a long term plan for where we want to grow.

This year, as expected, the number was higher than past years. We've seen increases in the cost of just about everything from shipping, to taxes, etc... This is the time when we have to ask ourselves if we should go up slightly on our prices, suffer the consequences of not doing so, or make cuts that we can live without. For instance we cut cable TV out of our personal lives this past year because we now watch TV online via Netflix, Vimeo, etc... While cable is a nice thing to have, we simply don't watch network TV regularly, and believe it or not, with a modern antenna, we still get most of the main networks in full HD anyway... Ok, now onto the point!

What I worked to figure out, was the cost of spending one hour creating a portrait for an average client if they made a minimum purchase of one photograph, or a digital file. This case scenario was based on us staying at the studio, without having to eat any travel expenses, etc... If we pay ourselves, or an employee, and average rate of $25.00 per hour, the bare CODB after simple expenses like electricity, rent, healthcare, time on the telephone to book the session, time in the sales room, retouching, web hosting, etc... (I assume you get the whole picture of adding up all your monthly expenses...) came to around $176.00 just to deliver the single printed photograph, and $163.00 to deliver the file electronically. There is very little difference, as you can see, whether the client ordered print or not. Keep in mind this is the bare minimum meaning we would lose money to take this client on for any less. This amount is for a small town in Connecticut in a business with low overhead. In NYC the number would be dramatically higher, and I can only assume in a rural area it would be a tiny bit lower but not by much.

To give you a little background, our business serves NYC mostly, Connecticut secondarily, New England, and then beyond in that order. However, we started our business in a small town in Connecticut, a place which we still call home, and still have a strong presence.

The Human Phenomenon when it comes to Photography...

Now I don't know about the experience of other small businesses, but photography is a strange beast. A person would never walk into the grocery store, and get to the counter and say to the clerk "the cost of this milk is outrageous, I want to pay less!" Nor would they have this approach in Bergdorfs buying clothing, but photographers get beat up over their simple, honest, CODB every single day. It's just the way it is.

We as artists, must constantly educate consumers that they aren't paying for the $0.50 piece of paper the image is printed on, nor an electronic file being emailed. They are paying for CODB, plus the artists experience, and simple supply and demand. There are only 24 hours in a day, most of which is filled with jobs that aren't done behind the camera such a editing, retouching, accounting, marketing, and everything else that goes into running a business. So, the CODB mentioned above is actually very low, because we only took into account an 8 hour day. It should really be much higher because you don't spend 8 hours behind the camera constantly with back to back portrait sessions all day long. Therefore, as an artist, you will always be justifying your pricing, because the only people who will "get it", are those that run their own service based business. 

When Disruptive Technology and Destructive Competitors Collide

The above is true regardless of where the artist resides and runs their business, and digital cameras have made the problem even worse. The candle is literally burning at both ends, and there is a fuse to a bomb in the center of the candle. The excitement of digital cameras have flooded the marketplace with young, or new, entrepreneurs wanting their piece of marketshare making competition tougher than ever. While digital cameras have intrigued those with the entrepreneurial spirit to take the leap of faith, at the same time it has created an amateur photography market that is dramatically larger than the pre-digital era.

In a global market, marketshare is a different beast than in a small town, or even a large city. When a new studio pops up in a small town with a fresh minded entrepreneur at the helm, chances are the new competitor is motivated to survive. They take on anything they can turn a dollar on, and rightfully so. Again, one must start somewhere. But there is little or no chance they have done a CODB for where they live, which means that unless they get a grip on things fast, or have a day job, they won't be around for long. However, in the meantime they are single handedly destroying the hard efforts of the established business who spent a decade or two educating the community on why photography costs what it does. Now, multiply that by 10 new studios and excited entrepreneurs that the digital camera era has spawned, and you have a recipe for self destruction for not only the un-educated new artists, but quite possibly also for the one who is pulling the industry upward and doing it right all along.

A Personal Story...

If we go back several years we were really the only major studio in our small CT town. After more than a decade of client education in our area, a new photographer moved in opening a studio just down the street from us. I didn't think much about the new studio as I had seen competitors come and go a couple of times already. We have a strong presence in town and a great relationship with the school district. For 15 years or so we photographed the underclass at two high schools, along with 250 or so senior portraits over the summer months. While we didn't have a monopoly on senior portraits, most families that wanted it done right came to our studio. We had built a reputation for quality, and still today, it is the place to be if you want best in class photography. It was a great success for us, but also for the community because we do great work, and we gave back to the schools through a wide range of high quality services complimented by a large financial donation to the schools as well. It was really a win/win for the community. However, this studio owner was fierce in their motivation. They wanted, not just a share of the pie, they wanted the whole pie.

Their prices were well below the simple CODB, and I knew that they wouldn't be able to make it in the photography business for long. Luckily the owner had a full time job subsidizing their photography growth. But, still I just knew they would burn out trying to do both. They made such a fuss with the local town, always clambering about how our prices are outrageous. Finally after getting verbally abused over and over again, the town finally caved and said to us "we hate to do this as your company has been so loyal and good, but we are going out to bid". The bidding day came, and sure enough I was unable to compete with their pricing strategy. What took years to build was suddenly gone in the blink of an eye. The owner built a beautiful studio, bought a new car, and took a big swipe of business from us. Customers would call and complain loudly that their studio was half the cost of ours, putting us in a defensive situation trying to explain our pricing, and the fact that we offered a better quality and service that was proven. Sadly, when you have a school district in a small town, you have some incredible marketing power and influence. Suddenly, what was once considered a fair price, was now considered outrageous in the eyes of some parents and consumers, who weren't already clients. Yet, sadly we knew it was just a matter of time before our cheap competitor self destructed. Again, the numbers don't lie.

This past year, they finally went belly up. But, in the interim we have been informed the studio never paid the thousands of dollars that they agreed to pay the town by getting the bid when they called it quits. This is money we paid happily every year when we had the contract without concern. They also left customers holding the bag by not delivering their printed orders. The town called upon us asking us to pick up where they dropped the ball. While we agreed to do so, the damage is done. The town will never recoup the money owed to the school. Worse, we can never recoup that business, time lost, etc... Now, we will have to start the education process over from scratch, and we really don't know yet if the damage can be undone, or if this segment of business will be lucrative in the future. Time will tell, and we have a long road ahead but we will rebuild. Luckily, we spent the past two years re-inventing ourselves and have opened doors that have far greater potential in the long run, but it hasn't been a stress free transition.

This is happening to studios all over the world right now. Disruptive technology is in the hands of destructive un-educated entrepreneurs that think that they can do it cheaper, of equal quality, and succeed. Simply put, they can't, but they may destroy the industry before they realize it. The prices of photographs at most successful studios have not gone up since the 1990's, yet there are now new costs associated with business such as smart phone bills, higher priced oil, software, storage, and computers. It's a never ending process of staying current and upgrades. Keeping up with technology isn't a cheap thing as we all know. Digress to the film days, and you bought a camera that would last you your entire career.

Luckily we know our CODB, we keep overhead very low, and since we are futurists as mentioned in the first part of this story, we were able to grow in a new direction. Had we been over our heads in debt, not only would the other studio have wiped themselves out, but this over ambitious new photographer would have taken us out with them.

CLIENTS SAVE YOURSELF! ARTISTS, RUN FOR YOUR LIVES...

This is a story I wanted to share because I realize that it's hard for the public to understand the price of photography. At the same time, I hope that new artists entering the market will take the time to consider this, and do the math. Cheap photography is cheap for a reason, which is usually based on not understanding the CODB. Our rates are spot on with what it costs for us to have longevity, and provide best in class photography, and service. Our prices, sadly, have been pretty much the same since the 1990's. The problem we face now is an epidemic of new artists thinking they can do it cheaper and that somehow math is wrong. This mistake creates a public misunderstanding of the value of photography, which ultimately leads to a downward spiral for all who are trying to survive, much less succeed.

Far too many people, especially engaged couples, get pulled in on cheap photography, and "new artists", only for the photographer to be out of business when the big day comes around. The same holds true for portrait or video work. Yes, digital photography and video are exciting, but there are costs that go into running the business of photography that go beyond the camera, the paper an image is printed on, or the digital image that is shared.

If you are new to photography, I get it. You have big dreams, and you want to succeed. I too started very small with a credit card and a dream. We too want you to succeed! Competition is a good thing as long as the playing field is level. However make it point to know your CODB because if you are operating at half the cost of the successful studio in your area then chances are you will not only be out of business in 3 years, but you will forever damage the industry for everyone else around you with similar dreams. 

5 TIPS FOR RUNNING A BUSINESS THAT IS CONSTANTLY CHANGING...

1. KEEP OVERHEAD LOW

I say this in lot's of blog posts, but it is probably this single most important thing you can do to survive when over enthusiastic competitors know just enough to be dangerous. They may wipe out an entire segment of business by undercutting your costs, but if you keep overhead low you can outlast them, and rebuild.

2. KNOW YOUR CODB

Know what it costs you to deliver a single digital file or printed photograph. There are some great CODB calculators out there if you search the web. By knowing your CODB you can better understand why successful studios have been in business for decades, and why they cost what they do.

3. BECOME A FUTURIST

Make research and development a part of your weekly routine. When it makes sense, invest in new ideas or technologies earlier than your competitors. Being first isn't always right financially, but knowledge is power, and it allows you lead confidently. When one door closes, It also opens doors to new opportunities.

4. NEVER SELL AGAINST A COMPETITOR ON BEING CHEAPER

We book a lot of jobs where clients tell us "photographer X said they do the same thing as you only cheaper". Not only does it belittle the value of your work, but if you get the job you lose respect in the long run. Nobody is every happy with a cheaper product that cuts corners. You are really selling against your own survival or growth.

5. IF YOU ARE GOING TO BE THE SQUEAKY WHEEL MAKE SURE YOU CAN BACK IT UP...

As shared in the personal story above. Our, now out of business, competitor was a squeaky wheel that got his way. But, he was unable to back it up with the service and quality that the job he took demanded at the price point he came in at. Know your numbers, be nice, and play the game fairly and honestly. Otherwise you may get your way, but at a cost that puts you out of business, while damaging the livelihood of others around you.