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A Few Good Chess Moves Can Boost Your Profitability

According to economic reports over the past few years, our industry has been fairly healthy on a global basis. CD sales are up for this period, and DVD in all of its forms is starting to make major revenue contributions to many facilities. Visual postproduction billings have also been healthy and therefore responsible for new levels of profitability in most global markets. The film business has also set new levels of gross billings, leading to larger audio budgets in many cases.

It's smart to remember that our cottage-entrepreneurial industry, particularly in the pricing arena, is like a chess game. It is based on patterns. By examining patterns, you can see how specific pricing policies will lead to specific outcomes. By then looking several moves ahead and determining the implications of your current pricing, you can identify and focus on the most important pieces and positions of your pricing strategy.

An important chess/pricing lesson is understanding the value of recognizing the patterns on the chessboard by studying the games (pricing) of others. Your success depends on moves and countermoves, cause and effect, and a strategic understanding that you must constantly push the pricing window. But the subtle and unique advantage is gained because you are confident enough to understand that if you go too far, you can always retreat and recreate a flow of value. In short, it is very simple to reduce price; it is very difficult to increase it.

What are a few of the winning chess moves you must make to ensure that your business remains successful? Let's explore some of the historically successful strategies employed by large corporations, from which we may successfully and inexpensively learn.

Classically, in big business, the major strategic moves that companies make are the critical choices that capture and control most of the value in their industry's next cycle of value growth (think DVD as an example). This may involve innovative technical choices, creation of new value to the client, or an entirely new offering that gives added utility to their clients. As in chess, there are critical initiatives that define how the rest of the game will be played. The initial moves create a position in our industry to which the competition must respond (think digital multitracks and the proliferation of project studios).

In our industry, it takes about five “moves” to capture most of the value in the next growth cycle. You must sharpen your pencil and your wit to detect when the next critical juncture will occur, and what major moves will be necessary in order to win. For many studio owners, who pride themselves on having made “many small moves” to achieve success, it will be a great challenge to make a “few big moves” and be even more effective. With the right choices, you can create the potential to generate a great deal more profit. Five key factors are:

Move 1: Smart Pricing Policy

Apply the cost analysis concepts expressed previously in Chapter 26 to all new opportunities you consider. If you cannot afford to compete with the quality of equipment and prices charged by others in your geographical market area, then it is better to find out quickly and move on to the next opportunity.

Move 2: Trial and Error?

Don't try to reinvent the wheel. It takes a long time and almost always involves losing a lot of value along the way. Learn from the cumulative experience of your competitors how to make effective moves that will create value from a small investment of time.

Move 3: Study the Winners

If you want to be a winner, consider emulating those who already are winners. In most cases, it is the only way to really learn the craft, whether it is on the creative or the business side of the street. Simple is good, complicated is bad. Customer-guided thinking is the winner, and those who are/have been successful in our industry think about that every day. It used to be said that 20 percent of your customers brought you 80 percent of your business. Today, in our competitive world, your 20 top customers bring you 80 percent of your business. They stay with you because you think about their needs and wants and provide the optimal solutions. Remember that, and people will begin copying your moves!

Move 4: Take Chances

Your profitability enables you to take chances. If you win, you win big. If you lose, you must always be able to afford to pay the price and move on. Understanding why you made a major error after you took a chance can sometimes be as valuable as winning, because you won't make that same mistake again. Major errors include: wrong direction errors (increasing prices too much when clients are looking for more value), timing errors (making the right move after you have lost the big client), and emulation errors (not copying a competitor's strategy as soon as it proves to be successful).

Move 5: Applications Thinking

How can I use this move I am about to make? How may I do so most successfully? In our business, a small number of large successes greatly outweigh the profits to be made from a large number of minor victories (for example, the big success resulting from purchasing an SSL 9000 console requested by your clients when your major competitor has an older console). The most important point here is understanding that improved technology, for the sake of technology, is secondary to satisfying the desires of your clients. Applications thinking translates into truly understanding the essence of your client base and what you must do to satisfy them. It is a great deal like human relationships. If you care for someone and you want to keep them, you will make it your business to find out what is important to them and provide it. If you don't, you will probably lose them. Simple.

Although it is scary, business chess is also exhilarating, challenging to learn, and fun to play. Studying the games the winners have played successfully and understanding the errors they have committed (or avoided) can give the highest return on your investment of time and money. Playing business chess is an acquired skill, and if you don't compete you can't win. Your proficiency will improve with time and practice. I believe it is that acquired skill that will be a major boost to your company's profitability and will lead to continued enjoyment of the benefits of industry leadership. If you don't believe you can win the game to control your industry niche, no matter how small or large it may be, why even go to the tournament?