It was a classic bad news, good news situation. Back in the pre-Napster days, Saul Berman told a music industry client that some customers would soon be downloading the company's product — without paying for it. The client immediately envisioned a worst-case scenario. "They thought that it was the end of the world," Berman recalls. "They couldn't understand how they were going to make any money if customers were getting music for free."
The good news, Berman explained, was that it was still possible for the client to generate plenty of revenue even if customers were treating its products as freebees. "I reminded them that Microsoft routinely reports that 40 percent of its software is pirated, and it makes a lot more money than anyone in the music business." But to thrive in this new business environment, he cautioned, the client would have to be more open, and change the way it managed and delivered its music.
The Los Angeles–based Berman lists most of the major media companies as clients but in addition deals with other industries, including consumer goods manufacturers and telecommunications firms. This role "allows you to see what's happening in depth within a particular industry," he explains.
At the same time, Berman serves as a key player in IBM's change and strategy practice. Here, his role is to anticipate emerging technology trends and help clients prepare to take advantage of them. "There is disruptive change and there is optimal change," says Berman, whose background includes a Ph.D. in management and information systems from the Graduate School of Business at Columbia University. Disruptive change, of course, takes a company by surprise, blindsides management, and frequently spells doom and gloom. In instances of optimal change, the client has prepared itself to capitalize on coming developments.
Berman has established an enviable track record in spotting and interpreting significant shifts on the horizon. For instance, in 1999, at the height of the dot-com boom, he and some of his colleagues predicted that the term "e-business" was history; that "click-and-modem" dot-coms would soon be as outdated as traditional brick-and-mortar companies; and that the legacy players would emerge as the winners in the digital revolution by merging pre-digital and digital business models into a seamless way of doing business.
Given the impact of the Internet, technology today has become a central element in formulating corporate strategy, Berman says. He is a champion of what he calls the component business model, in which a company can refine, outsource, or reassemble its pieces in a different way to take advantage of what's coming down the pike. Before Berman can effect such a seemingly drastic change in corporate structure, however, he and his team have to alter management's mindset. "Sometimes traditional management has a tough time adjusting to these changes." Berman explains. "We usually try to work with them in an off-site environment, where we conduct brainstorming and role-playing sessions."
To date, changes that Berman and his team have facilitated have yielded impressive results. For instance, in the film industry Berman has long been a champion of shortening the time span between when a movie runs in the theaters and when it comes out as a DVD — a change that has been adopted. Now, he is promoting the idea of selling DVDs of a film in the theater at the same time it's playing. "This way, the studios are likely to make more money," he asserts. "They can sell the movie in the theater for $79 or wait six weeks and put it video stores for $29."
Still, some clients remain reluctant to blow up their core business model even if they understand the necessity of doing so. "One CEO told us, 'You guys are right, but we're currently in a pretty good place,'" Berman says. The client has no intention of making a change until he is forced to, which, of course, may well be too late. — Laton McCartney
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