HMV’s demise provides a salutary tale for businesses everywhere

The failure to embrace greener and more efficient business models can only lead to one place – obsolescence

15 Jan 2013, 12:05

I love HMV. The flagship Oxford Street store is just round the corner from the office and I can't imagine how many hours I've whiled away browsing the aisles on my way home from work. Although in recent years I have to admit I've also wondered how much longer it could go on with prime West End real estate virtually empty and CDs and DVDs retailing for the price of a cup of coffee.

I started buying music in the early 1990s, back in the days when CDs were still a fairly new technology. I know music fans of an older vintage wax lyrical about vinyl, but for me it was always CDs. I loved how you had to browse the shelves for them, I loved their collectability, I loved how you could buy a cultural masterpiece for the price of a few weeks pocket money, or later a few hours working at Sainsbury's. They are the very definition of affordable luxury. After 20 years of CD purchasing I now have a fairly eclectic and sizable CD collection, not High Fidelity/amateur DJ sizable, but still pretty big. And, just like HMV, it is close to being obsolete.

Many reasons will be posited in the next few days as to the cause of HMVs demise: music and film piracy; an inability to compete with online rivals, many of whom benefit from highly questionable tax arrangements; a failure to revamp the in-store experience. But everyone knows the real reason is the company's utter powerlessness in the face of the digital revolution.

Survival of the fittest is a misnomer for Darwinian principles. The species that survive are not always the strongest, but they are always the most adaptable. HMV failed to adapt to a fast-changing environment and paid the ultimate price.

It also failed to adapt to what is an inherently greener music and film industry business model. The online, digital, rental, and dematerialised products and services pioneered by Apple, Amazon, LoveFilm, et al slashed resource use and distribution costs, cutting environmental impacts at the same time as developing delivery mechanisms for music and film that were far more compelling than HMV's 20th Century obsession with shifting boxes.

Personally, this makes me sad, but the transition to a greener and more resource efficient economy will require sacrifices as certain technologies, many of them much loved, become obsolete. The CD will continue to go the way of the steam train or the classic car - entirely unsuitable for its primary purpose, remaining the preserve of hobbyists keen to relive their youth.

More broadly, HMV should become a case study for green executives everywhere, begging the question could it happen to your company? Back in the early 90s or even the early 2000s, HMV had no idea what was coming, and when the disruptive dematerialised distribution model emerged it had no idea how to respond. As Lord Deben implied in his speech to policymakers at the GLOBE summit in London yesterday, there are plenty of businesses and industries who are staring down the barrel of precisely the same fate as the green economic transition gathers pace.

Several years ago I asked if any major firms had already gone out of business as a result of their failure to respond to green policies and consumer pressures. The answer was that the big US auto giants would (and some will argue should) have gone to the wall because of their failure to respond to consumer demand for smaller more efficient cars if it were not for the Obama administration's bailout. Now if you look at the revived auto industry it is adapting fast, accelerating the development of not just more efficient vehicles but electric and plug-in hybrid models.

This in turn poses serious questions for the oil industry, which the bulk of oil majors are choosing to ignore. What happens if electric and plug-in hybrids, already falling in price, prove as popular as the iPod? How attractive do those investments in costly tar sands and Arctic drilling look then? About as attractive as an HMV store to someone with an iTunes account.

Similar challenges are looming for energy utilities, although in fairness they are more aware of the disruptive challenge to their business model that is on the horizon. What happens as solar panels and ground source heat pumps continue to fall in price and increasingly become a normal part of our homes and offices? What happens if the government's Green Deal proves effective and UK building energy efficiency finally improves? What happens if the anticipated increase in demand for electric cars is accompanied by the rollout of smart grid technologies that ensures they are largely powered by energy generated by onsite renewables? The answer is that demand for utility provided energy will fall and firms that fail to adapt their business models will face a similar fate to HMV and other retailers who failed to adapt to the disruptive impact of the internet.

I'm sad to see HMV go and reluctant to start purchasing albums online. But for all the complaints of me and my physical music purchasing peers, we are in a distinct minority.

When products and business models emerge that are greener and better than their predecessors then companies need to adapt quickly or pay the ultimate price. All business leaders would be wise to heed the green lesson hidden in HMV's fate.

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Previously known as the BusinessGreen Blog, James' Blog features musings, observations and occasional rants from BusinessGreen editor James Murray

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