Back in the early 1980′s Adam Osborne, who created the Osborne computer, made the mistake of giving a sneak preview of a newer, lighter model called the Osborne Executive. This decision cost Osborne his business, because buyers wanted the less-weighty computer (25 pounds!) so they quit buying his existing computers and waited for the new one to become available. The story goes that the company essentially died on the vine, for the cash flow from new sales dried up while customers waited for the newer model.
Osborne’s big mistake was to introduce a new piece of technology before it was available for purchase. Tech buyers will immediately cease to buy an older model and wait for the newer one once the word gets out…if you don’t have it ready to sell, your sales plummet. This became such a famous case study that it is still known today as the Osborne Effect.
It is always wise to forego advertising a new model until the model actually exists for purchase? It depends on your industry. The movie industry always advertises new movies before they are released, looking to drive up the buzz and make big hits at the box office on opening day. But that’s a different biz model, because they’ve typically already squeezed sales out of the previous releases long before the new movie is out. (Think Harry Potter or James Bond.)
Generally, though, if you sell a product (jewelry, luggage, clothing, air conditioners, etc.) you don’t want to get stuck with a lot of existing inventory because you have started to market a “new, improved” version of the same thing. And you don’t want your sales of existing inventory to tank when word gets out that in a few months the “new, improved” version will be available. A few months can be a long time to wait for cash flow!
Think about your own products and be aware of the Osborne Effect. Plan wisely for releases of newer “models” of what you sell, and don’t create a thirsty crowd if you don’t have something to sell them. Osborne eventually declared bankruptcy. You and I can learn from his mistake.
Twitter: _iaLOAp_
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Interesting Story, Sue! And, something definitely to keep in mind. Perfect timing for me to be reminded. THANK YOU! OX, Katherine.
Wow, Sue – you’ve done it again! Awesome information and something we should definitely consider when rolling out the next product or service or program!
Sue,
Thanks for writing on this topic. Such valuable information you are providing.
Mitch
Fascinating post, Sue. I think this is really interesting, ESPECIALLY with entrepreneurs, who tend to chase after bright shiny objects, routinely blow up their businesses and look for newer/better ways of doing things.
How would you see this affecting a service business, out of curiosity?
Thanks!
Phil
I’ve seen it lately, in fact, for a high end coaching biz. The owner let it be known that in 2011 her high end coaching groups were going to be smaller, due to feedback from existing clients who are in a much larger high end mastermind. Consequently, when she opened the mastermind for second half 2010 enrollments she got zippo. She asked around and found that people are hanging out waiting for the first group in 2011. So she kind of shot herself in the foot.
Very interesting. I’ve never heard that story, very interesting. At the same time, when I let readers know about a new project I was working on, I got so much support, it really encouraged me to meet my self imposed deadline.
GREAT story, Sue. Well, not so great for Osborne….
Thanks!
Love this Sue. Playing with creating curiosity without giving away the punch line!
Ok, so I won’t advertise my new iPad 2!
I’ve never heard of him before, good original story with insight!
Linda
This is great food for thought, Sue! Thanks for sharing!
hmmm….something to think about for sure!
thanks Sue
Twitter: writeoncreative
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Sue,
Sound advice!!! We can never evaluate our own products and services enough. Unfortunately many don’t give this the attention it really needs.
Write on!~
Lisa
Good information to keep in mind as we build our products and services. Poor Osborne, if he only had the opportunity to have you as his business coach, maybe he could have saved the company!!
LOL, Terri. Thanks, but he was a little before my time.
Sue
Sue – thank you for posting this. Such incredible advice and a chance to learn from others’ mistakes. I think this can be a fine balance to maintain sometimes — when to start creating buzz and when it is premature. I need to really contemplate this for my own business right now!
Thank you!
Jessica
You are such a wealth of fabulous information. It is hard not to want to share the good things coming -but what a real life reminder not to create the buzz before the products is available.
Sue, this story – and your post – is a good reminder of integrity in light of those we serve. As a service provider, it is important that I not ignore the changes my clients need in what I give.
Sue, I think I’ve actually seen this happen in the last 5 years with a very well known business. I’m glad to see they survived it but it must have been touch and go. Thanks for the awareness to all of us.
Twitter: getunstuck
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Thanks for the reminder from real life, Sue! It is hard not to share new services and products when you are so excited about them, but it is helpful to know the importance of careful timing…