The Kensei Concept

The Refinement:

The Ken-sei formula was further refined when I was lucky enough to have the opportunity to work inside one of the largest manufacturers in our industry. Involved in almost every facet of the industry - and separated by organizational charts - I was able to see that we had our own 'five rings' that interacted with each other - necessarily on a business basis - but also on a product / technology basis - which drove each of the individual rings - collectively - to their natural next phases!

These Five Rings developed into the Ken-sei Alerts that I was published in the early years of K.N.I.S. Each market that they serve are individual and stand on their own on a day to day basis. However - they are inextricably linked in their overall journey in the market place!

This of course is NOT a definitive diagram - just the cleanest way to represent the individual markets - markets in which they have an influence on, and those which impose an influence on them. The real diagram would have too many arrows from market to market to be understandable.

You'll notice from the above illustration - that the markets closest to the top - are all technology based for the creation, reproduction and delivery of 'stuff' - be it audio, video, music, web pages - in today's digital age - it's all bits and bytes - and it is here that the machinery to create and deliver those bits and bytes is developed.

The bottom two rings - Consumer Electronics and Electronic Entertainment - are closest to the consumer. It is here that the the machinery developed in the top three rings is used to actually create entertainment - either in it's reproduction (stereo systems, cameras, computers etc..), its use by musicians to make music - or - records (CD's - almost nobody makes 'records' anymore) for folks to listen to - or games which people play on computers or set-top boxes!

Now with that said - there is in fact one more all encompassing market segment that should be added - but cannot be - as it NEVER EVER comes near the consumer - but is intimately involved in every single market mentioned - and that is the semiconductor / technology market! These enabling companies are the ones that actually allow all of the other markets to accomplish their objectives - but are very rarely credited as such. Sure - there are a couple of semiconductor/ technology companies which the average consumer knows about …Intel, AMD, Texas Instruments, Dolby, to name a few - but the vast majority work behind the scenes.

Sure, you may say - the average consumer is NOT MY customer - but YOUR direct customer may in fact be influenced by that average consumer!

Market Interactions:

One only has to take a good look at history - to see that the markets have ALWAYS been linked! NOT as most would have you believe in a 'trickle down' fashion …i.e. developed for the professional market - and eventually making it's way to the mass market - but as a truly, interactive - sometimes reactionary - methodology!

A few example s…

Beta vrs VHS is a OLD example in how a professional format which tried to be adapted to the consumer market - failed - ONLY because they didn't take into account that the mass market, unlike the professional market - was willing to sacrifice quality for price! I don't believe that you will find anyone that will defend VHS over Beta from a quality standpoint - from the 'filling the consumer wants / needs and desires at the right price stand point' - VHS wins hands down!

Was Sony wrong to bring the Beta format to market? NO!

It was a superior offering to what almost everyone agreed was to be an incredible market!

What they did wrong was underestimate the ultimate consumer - who although wanted the end result - was not willing to pay the premium over the inferior VHS format!

A more up to date example is MP3! Scoffed at by professionals - as being one of the most inferior codecs on the market, sounding bad, having no redeeming value - AND - anyone using it should be sued for distributing audio in that format. Today - the bain of the recording industry, the most prolific digital format in the market place AND supported by almost every professional recording product on the market place - in one form or the other!

WHY? Basically the same reason why Beta failed in the mass market! The mass market consumer had a need / desire - that could be filled by MP3 without having to pay the premium that the 'better' formats demanded! The proliferation of this format in the mass market FORCED - yes - sometimes kicking and screaming - professional products manufacturers and developers to support it in their own products!

Other examples:

I'm not going to go into each and every one of these - but take a look at the controversies surrounding:

Digital vrs Analogue Recording

CD / DVD vrs vinyl reproduction

Discreet surround sound vrs specialization

.

OK - those are technology and/or product examples, how about a business example..

My absolute favorite - Take a look at Starbucks!

WHAT???? They sell fancy coffee - what do they have to do with the electronic entertainment industry?

First - you need to open your mind and look at them from purely a comparative business standpoint. Yes, their business is selling coffee - not electronic entertainment - but THAT is exactly my point - although they DON'T sell similar products that 'we' do - their business shares many of the same problems that our market has - and yet they are being extremely successful! For example:

Price competition: In this area, Starbucks actually has it worse off than we do - not ONLY do they have direct competitors - companies who also sell coffee in storefronts - they have indirect competition - in much the same manner that we do!

Don't YOU have a coffee pot at home - do you pay $3.00 a cup for that coffee? Doesn't your company have a break room - were you can get coffee for free? So then.. riddle me this - how is that every morning there is a line out the door, or twenty deep at the airport? Obviously - they don't compete on having a less expensive product - and - in all honesty - is it really THAT much better?

Product Offering: Yes -their core business is selling a commodity …coffee. A few dozen kinds of blends, in cups and you can even get a scone if you want it. But did you know that they are also one of the largest independent distributor of music in the United States? Or one of the first store fronts to offer Wi-Fi access to their customers? OR - that they are one of the first companies to utilize broadband back ground music systems in which they pick out every single song that plays, at what time, in every single store in the chain? AND OH BY THE WAY - you can purchase those songs right there at the counter while your picking out your scone!

Business Outlook: According to their 2004year end financial s…

Consolidated Net Revenues Exceed $5 Billion for the Year; Fiscal 2004 Marks First Year of Double Digit Comparable Store Sales Increase in More than a Decade; Innovation & Continued Rapid Growth Lead to Strong FY 2004 Performance & Bode Well for Fiscal 2005

Not bad for selling coffee in a cup!

How are they doing it?

Above and beyond all the due diligence, management & business practices, choosing the right locations etc…it boils down to one simple fact..

They know their customer, their wants, needs and desires - and they deliver it.

OK - how about..

Lowe's Lumber! Yeah - I know - nothing to do with the electronic entertainment industry - they sell wood and nails. But did you know they sell home automation systems - right down the aisle from the two by fours?

How does Barnes and Noble compete against Amazon?

I can go on and on - but the point really is that the markets…ALL…markets…have one thing in common…the person or persons at the end of the food chain that ultimately lay out the dollars to purchase our product! It is due to this 'point of convergence' - that demands that developments in similar markets track and move in similar directions!