In graduate school, I learned that dairy cows are sacred.
If a rancher has a cow that gives every day, she has a valuable asset because every day she can count on more milk. In 1966, the Boston Consulting Group borrowed the term from agriculture to introduce part of its new portfolio matrix. “ Cash Cows ” means products that make more money than they cost to maintain market share.
I also learned that eating like your own dairy cows was unscrupulous (simply stupid).
Most companies would not do this. Why? In a stable economy, dairy cows are profitable. Milking your cows for as long as possible is conventional wisdom.
When we go through a lot of changes, keeping the products and services that were successful in the past can be the best strategy to lose share. Or worse, lose your business. Maintaining the original strategy for a long time led to the disappearance of companies and even industries. Here are some examples. Surely, you can think of more.
- The railroad used to handle most of the freight in the United States. Trucks now carry nine times as much. ( source: US Department of Transportation )
- Taxis have lost about 50% of their market to ride-sharing services . Even medallion prices have dropped. ( source: Ridster.com )
- The Yellow Pages were the most prominent small business marketing tool. Now the product isn’t even printed and the teenagers on stage today pre-conduction don’t know what a copy of the ‘Yellow Pages’ looks like. Yelp, facebook and others are often bigger substitutes.
- Keeping dairy cows for a long time is like throwing money away.
- So when, exactly, is eating your own dairy cow a good idea?
- not to get stuck
- To find new revenue streams
- To follow up with customers
- To discover new customers
- Identify new ways to add greater value to new and existing customers
- To strengthen the way you work internally
- to learn faster
- Who is brave enough to eat their own dairy cow?
- Only a few companies have the courage to cannibalize their own dairy cows. Rev , a translation/transcription service that already employs thousands of domestic workers, is one of them. Rev, started in 2010 , creates value for its customers, jobs for its employees and profits for its shareholders. Rev uses smart routing to connect transcription work to the right person. Its workforce, 90% in North America and another 10% in English-speaking countries, is trained in speed and quality, which leads to fast response times (often within hours). Rev operates efficiently and at a low cost of $1.00/minute .
- How (more importantly, why?) is the Rev cannibalizing his own recipe?
- Starting in December 2017, Rev began to risk its core business by changing its human-only transcripts solution to include machine learning-based transcripts. I have tried the service extensively and am very pleased with its 90-95% accuracy rates, its fast returns (I am getting 60 minute transcripts in about 10 minutes) and its 10x lower price (I am currently paying $0.10 /minute ). This is a game changer for my workflow and my cash flow! The new service is operated under a separate brand called Temi .
- Machines inevitably do the work of transcription – faster, cheaper and with fewer errors than humans. But meeting these conditions is still years away. In the meantime (i.e. now), Rev is willing to change his own business model and profit structure (remember, they charge $1.00/minute and that price is dropping to $0.10/minute, a tenfold reduction) in exchange for the opportunity to be the market leader in automated transcription. Which market do you think is bigger? Transcripts for $1/minute or $0.10/minute? I’ve already made my choice and imagined that millions of other people would discover the same thing for themselves.
- But, that’s just my opinion. Here’s what Rev’s director of growth, Barron Caster, had to say.
- (The following are paraphrased comments from our conversation, not quotes.)
- Rev is playing a new game and smart.
- They see machine-based transcriptions (Temi is the name of the product) as an extension of the productivity-enhancing tools they already offer their transcribers.
- Whether the new brand succeeds or not, they will have productivity-enhancing tools they can use to improve the profitability of their current dairy cow.
- Rev is already experiencing the adoption of new customer segments (due to Temi’s lower price). It is expected that a part of them will become regular customers of Rev.
- The company expects the biggest gains from this strategy to be what it has yet to imagine.
- They certainly won’t be caught off guard by advancing technologies (such as railroads, taxis, and the Yellow Pages).
- Do you think your dairy cows are sacred?
- They are not. It doesn’t matter who you are or what you do.
- Should you euthanize your dairy cows after reading this blog? Probably not. You should consider studying the impact of losing your dairy cow(s) overnight. Probably yes. That kind of thinking can lead you to your next big thing!
- Sidebar I appreciate Rev’s new business model because of personal experience. In graduate school, I started an on-demand transcription service. Instead of working with digital recordings like Rev, we turn students’ handwritten notes into courses with spell check, proper note taking, and nightly word processing. Check-in at 20:00 – check-out at 8:00. Last minute students, who never learned to type or prefer to drink beer, would pay 3 times the normal price for our services. The company was called WordMasters: The Overnight Cure for the Term-Paper Blues. I had to pay for all the computers and I had typists in my apartment 24/7!Rev’s model is much better! I left the business at a profit after graduation😉